REG - Hammerson PLC - Half-year Report
25/07/2024 07:00
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RNS Number : 7378X Hammerson PLC 25 July 2024
25 July 2024
HAMMERSON plc - HALF YEAR 2024 RESULTS
Building on strong first half with transformational disposal to accelerate growth and value creation
Rita-Rose Gagné, Chief Executive of Hammerson, said:
"I am pleased to report we've had a strong first half. We are realising the
benefits of our investments in recent years and with the agreed disposal of
Value Retail, we now have the capacity and capability to accelerate growth and
value creation. Our leading city centre destinations are in high demand,
supported by our ongoing investment and repositioning. This is evidenced by
another year-on-year increase in leasing, up 24%. This is driving top line
growth with more to come.
At the same time, we have delivered another outperformance on costs, down 16%
year on year. In the first half, we also completed our £500m disposals
programme, realigning our core portfolio to leading city centre destinations,
whilst further strengthening the balance sheet. We now have a strong, scalable
platform as we look to drive further operating leverage.
I am excited by the opportunity ahead and confident we will continue to grow
the top-line and earnings off our new base, reflected in the 5% increase in
the interim dividend."
Strong first half and transformational £1.5bn(1) transaction generating cash
proceeds of c.£600m
· Adjusted earnings of £50m (HY 23: £56m), reflecting impact of
disposals. Adjusted EPS 1.0p (HY 23: 1.1p)
· Disposal of non-controlling and yield dilutive interest in Value
Retail announced 22 July 2024 ensures clean exit from complex structure at an
attractive price, generating c.£600m in cash proceeds
· The Company intends to use proceeds for a combination of: immediate
significant deleveraging; reinvestment into higher yielding assets; and a
return of up to £140m to shareholders via a share buy back
· Loss for the period (IFRS) of £517m (HY 23: £(1)m), predominantly
reflecting impairment of investment in Value Retail from carrying value of
£1.1bn. Loss per share (10.4)p (HY 23: (0.0)p)
· Managed Group portfolio value of £2.6bn broadly flat excluding
disposals, with revaluation gains in UK and France due to ERV growth. Irish
revaluation loss due to yield expansion
· NTA per share 38p (FY 23: 51p)
· Headline LTV of 39% and net debt:EBITDA of 8.0x. On a pro forma
basis, reflecting the disposal of the Group's interest in Value Retail, LTV
falls to 25% with net debt:EBITDA of 5.3x
Continued operational and leasing momentum driving top line growth; costs
further reduced:
· Like-for-like ('LFL') GRI +2%, LFL NRI +2%. Excluding Cabot Circus,
in repositioning, LFL GRI +4%; LFL NRI +5%
· Leasing value up 24% year-on-year to £23m, or £13m at share, from
140 deals
· Positive leasing spreads maintained: permanent deals signed +61% vs
previous passing (+29% excluding nil previous passing rent); net effective
rent +10% vs ERV
· Robust 94% occupancy whilst undertaking proactive repositioning
· Footfall up +1% year-on-year (+2% excluding Cabot Circus); new
occupier sales densities c.20% higher than previous occupiers
· Continued cost reduction outperformance with gross administration
cost -16% year-on-year, which will deliver in excess of 30% cost reduction
since FY 20 by FY 24
Dividend
The Board today declares an interim dividend in respect of 2024 of 0.756p
pence per share, up 5% year-on-year and a payout ratio of 76% reflecting the
Board's confidence in future earnings growth and which will be paid as a
PID. The Board intends to increase the policy payout ratio from its current
policy of 60-70% to 80-85% following the completion of the sale of Value
Retail. The dividend declaration will be released as a separate announcement.
Medium-term financial framework
After three years of intensive turnaround, we have entered a new phase with
the capacity and capability to invest to accelerate growth. We have realigned
our portfolio to ten dominant city centre destinations, 93% of which are A
rated by Green Street and are highly attractive to both visitors and
best-in-class occupiers. We continue to reposition our assets, alongside
enhanced placemaking, commercialisation and digital marketing, responding both
to visitor and occupier demand and to stay ahead of evolving trends and the
competition. We have a strong platform with long-term visibility of income.
This backdrop informs our medium term financial framework(2), announced on 22
July 2024, following the disposal of the Group's interest in Value Retail:
· GRI CAGR: 4-6%
· EPS CAGR: 6-8%
· DPS CAGR: 6-8%
· Annualised TAR: c.10% (assuming stable yields)
Share consolidation and Capital Reduction to increase distributable reserves
As announced on 22 July, Hammerson is proposing to simplify its share capital
through a 1 for 10 share consolidation, and to increase distributable reserves
by reducing the Company's share premium account. A Circular with more detail,
and a notice convening a general meeting, will be sent to shareholders in due
course.
Results presentation today:
Hammerson will hold a virtual presentation for analysts and investors to
present its financial results for the six months ended 30 June 2024, followed
by a Q&A session.
Date & time: Thursday 25 July 2024 at 08.30 am (BST)
Webcast link: https://hammerson-2024-hy-results.open-
(https://hammerson-2024-hy-results.open-exchange.net) e
(https://hammerson-2024-hy-results.open-exchange.net) xchange.net
(https://hammerson-2024-hy-results.open-exchange.net)
Conference call: Quote Hammerson when prompted by the operator, access code 178798
Please join the call five minutes before the booked start time to allow the
operator to transfer you into the call by the scheduled start time
France: +33 9 7073 3958 South Africa: +27 87 550 8441
Ireland: +353 1 691 7842 UK: +44 20 3936 2999
Netherlands: +31 85 888 7233 USA: +1 646 787 9445
The presentation and press release will be available at:
https://www.hammerson.com/investors/reports-results-presentations on the
morning of results
(https://eur01.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.hammerson.com%2Finvestors%2Freports-results-presentations&data=04%7C01%7CCatrin.Sharp%40hammerson.com%7Ca8ef032d9e274070a57408d95598709b%7C22f66ba69d6948fb9f4e2f3259a62519%7C1%7C0%7C637634935469893159%7CUnknown%7CTWFpbGZsb3d8eyJWIjoiMC4wLjAwMDAiLCJQIjoiV2luMzIiLCJBTiI6Ik1haWwiLCJXVCI6Mn0%3D%7C1000&sdata=xzz%2BF53VOmeqc36lDgae3M6RODXGzuT7Gqt0q1cZiX8%3D&reserved=0)
.
Enquiries:
Rita-Rose Gagné, Chief Executive Officer Tel: +44 (0)20 7887 1000
Himanshu Raja, Chief Financial Officer Tel: +44 (0)20 7887 1000
Josh Warren, Director of Strategy, Commercial Finance and IR Tel: +44 (0)20 7887 1053 josh.warren@hammerson.com (mailto:josh.warren@hammerson.com)
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.
1 £1.5bn transaction reflects enterprise value, see separate transaction
announcement dated 22 July 2024 on www.hammerson.com
(http://www.hammerson.com) for details
2. Assuming timely reinvestment of net proceeds and completion of the share
buy back. Outcomes for shorter periods will be highly dependent on activity
levels and prevailing market conditions, with variances across different
segments of the Group's portfolio.
Index to key data
Six months ended 30 June 2024 30 June 2023 Note/Ref(1)
Income
Gross rental income(2) £94.4m £106.3m 2
Adjusted net rental income(2) £72.7m £85.1m 2
Adjusted earnings - Value Retail £11.7m £13.4m 2
Adjusted net finance costs(2) £(18.7)m £(25.1)m 2
Adjusted earnings(3) £49.5m £55.9m 2
Revaluation losses - Managed portfolio(2) £(47.8)m £(43.8)m 2
Loss for the period (IFRS) £(516.7)m £(1.2)m 2
Adjusted earnings per share(3) 1.0p 1.1p 11B
Basic loss per share (10.4)p (0.0)p 11B
Interim dividend per share (cash) 0.756p 0.72p 18
Operational
Like-for-like gross rental income change(2) 2.1% 3.1% Financial Review
Like-for-like net rental income change(2) 1.7% 2.3% Table 3
Occupancy - flagships(2) 94.3% 95.1% Table 5
Leasing value(2) £13.3m £10.7m n/a
Leasing v ERV (principal leases) (2) +10% +8% n/a
Leasing v Passing rent (principal leases) (2) +61% +20% n/a
Passing rent(2) £170.0m £184.5m Table 4
Like-for-like passing rent change(2) 0.7% 4.2% n/a
ERV(2) £178.3m £183.0m Table 4
Like-for-like ERV change - flagships(2) 0.9% 0.1% Financial Review
Capital and financing
As at 30 June 2024 31 December 2023
Valuation - Managed portfolio(2) £2,579m £2,776m 3B
Total accounting return(3) (23.4)% (2.1)% Table 15
Total property return - Managed portfolio(2) 0.6% 1.6% Table 9
Capital return - Managed portfolio(2) (2.2)% (4.1)% Table 9
Net debt(2) £1,220m £1,326m Table 13
Gearing(2) 65% 55% Table 18
Loan to value - headline(2) 39% 34% Table 20
Liquidity £1,138m £1,225m Financial Review
Interest cover(2) 4.21x 3.91x Table 17
Net debt:EBITDA (rolling 12 months) (2) 8.0x 8.0x Table 16
Net assets £1,908m £2,463m Balance sheet
EPRA net tangible assets (NTA) per share(3) 38p 51p 11C
Key pro forma metrics for Value Retail disposal(4) 30 June 2024 31 December 2023
Net debt(2) £637m n/a Financial review
Liquidity £1,721m n/a Financial review
Loan to value(2) 25% n/a Table 20
Gearing(2) 34% n/a Table 18
Net debt:EBITDA(2) 5.3x n/a Table 16
1 Note/Ref to notes in the interim financial statements, tables in
Additional Information or other sections of this release.
2 Figures presented on a proportionally consolidated basis, excluding
Value Retail, as per management reporting. See 'Presentation of financial
information' section of the Financial Review for explanation.
3 These results include discussion of alternative performance measures
(APMs) which include those described as Adjusted, EPRA and Headline. These are
described on page 9 of the Financial Review and reconciliations for earnings
and net assets measures to their IFRS equivalents are set out in note 10 to
the interim financial statements.
4 Reflects the impact of the disposal of the Group's interest in Value
Retail announced on 22 July 2024, see note 9 to the interim financial
statements for details.
Chief Executive's REVIEW
We have delivered another strong half year of operational and strategic
progress and announced on 22 July 2024 the sale of the Group's interest in
Value Retail. This disposal builds on Hammerson's track record and momentum
of the last three years to accelerate strategic and financial delivery.
Going forward, Hammerson is a retail-anchored, specialist cities business well
positioned for growth and value creation, with its entire portfolio comprising
leading city centre destinations and strategic land, 93% of which are A rated
by Green Street.
The exceptional environments we create for our occupiers and visitors is
reflected in strong operational fundamentals, which underpin continued high
demand for our destinations. Like-for-like gross rental income and net rental
income both increased by 2%. Excluding the temporary effect of the
repositioning of Cabot Circus, like-for-like gross rental income was up 4% and
like-for-like net rental income 5%.
Flagship footfall and like-for-like sales in the UK were up 1% and down -3%
respectively, predominantly reflecting the amount of activity we've undertaken
in repositioning assets in recent years where either we've proactively taken
vacant possession of space and/or new occupiers are not yet in the
like-for-like sample. Notwithstanding, the total spend, based on our banking
data, in the UK portfolio was up 1%, and around 2% points ahead of the
national footfall index (ShopperTrak). Moreover, our data shows that new
offers are performing strongly with sales densities c.20% above the prior
occupiers, so we expect this to flow through into the like-for-like figures as
the new occupiers roll into the sample. We are starting to see this, for
example in Cergy where like-for-like sales were up 5%. In France, flagship
footfall and like-for-like sales were up 4% and 3%. Footfall in Ireland was
up 1%.
Flagship occupancy remained strong at 94%, or 96% excluding Cergy which
remains in lease up. In the UK, Brent Cross, Bullring and Westquay are all
over 95% occupied, as are our three destinations in Ireland. In France, Les
Terrasses du Port is 96% occupied, whilst Les 3 Fontaines, Cergy is the only
destination currently with less than 90% as we ramp up leasing of the
extension.
We signed 140 leases representing £23m of headline rent, £13m at our share,
up 24% year-on-year. This included marquee deals with best-in-class existing
occupiers, and new entrants and concepts, all of whom in turn make significant
investments in their physical footprint. Rental levels are growing with
permanent deals signed 10% ahead of ERV on a net effective basis, and 61%
ahead of previous passing rent, or 29% ahead excluding units with nil previous
passing rent. This equates to additional annualised passing rent of £4m on
our £162m flagship rent roll. Importantly, we continue to provide solid
leasing evidence to our valuers, which is gradually being reflected in our
values where all territories now have positive reversion for the first time
since FY 18. Just over half of leasing was to best-in-class fashion occupiers
demanded by our customers, and the balance to non-fashion and services (34%)
and F&B and leisure (11%).
After three years of intensive turnaround, we have entered a new phase with
the capacity and capability to invest to drive further growth. We are in the
final stages of the implementation and embedding of our operating model,
having reshaped our organisation to focus our energies on value creation.
On-site property management and associated accounting services in the UK,
France and Dundrum have largely been consolidated with proven scale strategic
partners. The realignment of our IT and digital platform in areas where speed
and data quality is critical is materially complete. Today we are a more
agile, resilient and market facing asset-centric organisation, one that
continues to evolve and reshape our destinations to be fit for the future. We
have again reduced gross administration costs, down 16% year-on-year, and
since 2020 will see gross administration costs reduced in excess of 30% by the
end of 2024.
Net finance costs improved 25% to £19m, largely reflecting the higher
interest rates on higher cash balances. Adjusted earnings were down 11%, due
to the impact of disposals, to £50m, or 1.0p per share.
Despite ERV growth at all flagships excluding Brent Cross, which was broadly
flat, property values were slightly down due to 50bps of yield expansion in
Ireland. UK and France yields were flat.
We have completed our £500m disposal programme set out at FY 21, in doing so
realigning our portfolio to ten dominant city centre destinations in growing
catchments, 93% of which are A rated by Green Street, highly attractive to
both visitors and best-in-class occupiers. We continue to reposition our
assets, alongside enhanced placemaking, commercialisation and digital
marketing, both anticipating, and responding, to visitor and occupier demand
and to stay ahead of evolving trends and the competition.
The disposal of the Group's interest in Value Retail announced on 22 July 2024
for gross proceeds of c.£600m will accelerate the delivery of our strategy,
providing capital to maintain balance sheet strength and flexibility, further
invest for growth, and enhance distributions for shareholders. We expect the
disposal to complete in the second half of the year. At 30 June 2024, the
Group's investment had been reclassified as an asset held for sale resulting
in the recognition of an impairment of £483m. The lower property values and
Value Retail impairment resulted in an IFRS loss of £517m (HY 23 £1m loss)
and an EPRA NTA of 38p per share, 13p lower than at FY 23.
As previously announced, Hammerson intends to use the disposal proceeds from
Value Retail for a combination of:
· significant and immediate deleveraging with pro forma LTV of 25%
and net debt: EBITDA of 5.3x;
· reinvestment into higher yielding assets, with a priority on JV
consolidation and repurposing asset enhancement initiatives; and
· a return of capital to shareholders via a share buy back of up to
£140m, representing 10% of the pre-announcement market cap.
In addition, the Board of Hammerson announced its intention to adopt an
enhanced payout ratio policy for ordinary dividends of
c. 80-85% of adjusted earnings.
In the medium term, Hammerson expects to deliver an annualised total
accounting return ("TAR") of c.10% (assuming stable yields) whilst maintaining
its commitment to a sustainable capital structure and an investment grade
credit rating.
After three years of intensive turnaround, a material portion of the strategy
laid out to the market at HY 21 has been successfully implemented:
· the balance sheet has been fixed;
· the Company is focused on a core portfolio of city centre
destinations;
· ways of working have been overhauled, digitised and automated,
and costs reduced;
· and rents are increasing off a new base, while we are investing
for growth.
We still have work to do, however, and our focus remains on:
· completion of the repurposing of obsolete and underutilised
space;
· further asset repositioning and enhancement;
· the potential to consolidate JV partners, or in our core markets,
in line with strategy;
· capital light investment to unlock optionality and value on our
c.80 acres of strategic land;
· and the continued rotation of occupiers to strong, best-in-class
brands most desired by the visitors in each of our unique catchments.
As we look ahead, we are confident that we now have the capacity and
capability to drive top-line growth and continue to generate operating
leverage to grow scale, earnings, dividends and total returns.
STRATEGIC PROGRESS
We own city centre destinations and adjacent land around which we can reshape
entire neighbourhoods. Our strategy recognises the unique position that we
have in our locations and the opportunities to leverage our experience and
capabilities to create and manage vibrant 24/7, multi-use, urban 'living
spaces' that realise value for all our stakeholders, connects our communities
and delivers a positive impact for generations to come.
Our aim is simple and clear - to deliver strong income and total returns for
shareholders through consistent execution against our strategic goals. We are
investing for growth and value creation in our core assets. We are combining
targeted leasing with repurposing and redevelopment opportunities, which are
integral and complementary to our destinations, directing capital expenditure
to our core estates, where we are able to realise high returns. This asset
focus is underpinned by our now increasingly agile platform, our strong
capital structure and by our commitment to ESG.
In HY 24, we made progress towards all our goals as follows:
Investment for growth and value creation
The key source of competitive advantage for Hammerson is the quality and
location of our destinations in some of Europe's fastest-growing cities and
the focus it now has on these assets. We have some of the best assets in the
very best prime city centre catchments and transportation hubs, and strong
ties with the communities in which we operate and the local authorities.
Additionally, our strategic land represents a considerable set of unrealised
long term opportunities which we can selectively draw upon.
We continue to invest in our assets to partner with best-in-class occupiers,
increasingly employing physical space for a diverse range of uses, to cater to
the communities and catchments in which we operate, whether this be
repurposing of obsolete department store space into leisure and modern retail,
or redevelopment to residential, workspace, healthcare and lifestyle uses. Our
investments to date have attracted some of the very best global brands and
generated high returns.
Following our success at Bullring where M&S re-anchored the former
Debenhams unit alongside TOCA Social and flagship Inditex brands, we signed a
deal in HY 24 to bring M&S into former department store space in Cabot
Circus where we had secured vacant possession. This is the fourth letting
Hammerson has achieved with M&S as part of their store rotation programme
and demonstrates how we continue to work closely with key brand partners to
achieve a shared vision.
This is the latest in a string of deals that will enhance Cabot Circus by
bringing high-profile brands and new uses including entertainment, dining,
family and social concepts. Recent new openings include Stradivarius and
sportswear brand, Lids, alongside German Doner Kebab, whilst a new golf
experience at Treetop Golf is also set to open later this year. We are in
advanced negotiations to bring a fresh leisure, cinema and restaurant offer to
the former cinema box space, where we have also secured vacant possession.
Taken together, we anticipate these two major projects will add c.£4m of NRI
(at 100%) per annum to Cabot Circus, delivering double-digit IRRs above our
cost of capital and a profit on cost of more than 20%. In the medium term,
the repositioning of the Quakers Friars area also affords the opportunity to
increase the mix of uses, including cultural and healthcare, at attractive
returns.
Meanwhile, progress continues at The Oracle, where terms have been agreed with
Hollywood Bowl and TK Maxx for around two-thirds of the former House of Fraser
space, and we remain in detailed negotiations with other key brand partners
for the remainder. At the other end of the scheme, we await the outcome of a
planning application for the major regeneration of the eastern quarter,
including the former Debenhams, with the potential to develop c.450
residential units, much in demand in this strong catchment, in phases
alongside renewed landscaping and other commercial uses.
Other than those already mentioned key deals and openings in the first half of
2024 included:
· exchanges with Inditex to bring an upsized flagship Zara into
Bullring to take the remaining former Debenhams space, and to bring Pull &
Bear into Les Terrasses du Port, as the latter destination continues to
outperform our expectations whilst celebrating its ten-year anniversary since
opening;
· upsizes involving unit combinations and reconfigurations with JD
Sports at Brent Cross and Dundrum;
· renewals with River Island at Brent Cross, and Sephora at Les
Terrasses du Port, also leveraging that relationship to bring Sephora to
Bullring, alongside other key aspirational non-fashion brands such as Rituals
for Bullring whilst Space NK opened in Dundrum;
· bringing new concepts and regional firsts such as Garmin at Westquay,
and brands outside of the norm tailored to local demand like Sapphire at
Bullring and Suit Direct at Westquay;
· leveraging our success with leading bowling leisure brand, Lane 7 in
Bullring to bring them into Dundrum as they expand outside of the UK, and
increasing the leisure offer at Cabot Circus with King Pins, and at Pavilions
with virtual reality operator Zero Latency in former storage space; and
· new leases and renewals with a diverse range of F&B operators
including German Doner Kebab in Brent Cross, Honi Poke at Cabot Circus, Copper
Branch at Les Terrasses du Port, Chikin Bang in Cergy, and Rongcheng and
Zambrero in Dundrum, whilst March also saw the opening of EL&N in
Bullring, its first site outside of London.
Looking into the second half, the pipeline remains strong and reflects the
continued investment in repositioning and diversification of our offering,
with key F&B and leisure deals at advanced stages of negotiation across
our estate and forming a significant percentage of the pipeline.
Our approach to leasing works in parallel with our greater emphasis on
placemaking and commercialisation. This not only serves to enliven space and
enhance the experience and environment for customers and occupiers, but also
increasingly contributes meaningfully in its own right in terms of incremental
footfall, income, and engagement across all channels.
Key highlights in the first half included:
· Dizzee Rascal album launches at Bullring and Cabot Circus;
· the returns of Charity Super.Mkt and Big Kids Circus to Brent
Cross;
· the passing of the Olympic Flame by Les Terrasses du Port, which saw
same-day footfall up 40% year-on-year;
· a strong motoring flavour at Dundrum with a three-month Volvo pop up,
Specsavers 'crashed' van marketing stunt in the Millpond, and the Irish launch
of the Tesla Cyber Truck;
· all alongside the start of our usual series of summer pop-up events
and bars, with a particular focus this year on sport where we were delighted
to be selected for three out of ten Team GB Fan Zones in Bullring, Cabot
Circus and Westquay, whilst Cergy will host a sports village during the
Olympic Games.
We also continue to invest in data insights to provide transparent and robust
evidence of the true brand value of our high footfall destinations for both
occupiers and advertisers in an increasingly media oriented world. These
initiatives include a UK market-leading AICCTV customer engagement tracking
system to highlight the brand building value generated through impressions,
store visits, customer journeys to help grow rents and media income and
attract increasingly digitally native tenants.
Alongside this we are using the latest open banking data to track headline
sales, share of wallet and leakage to competitors to help develop more
targeted leasing and place-making strategies. This will allow us to move
towards a series of KPIs that are easier to track, benchmark and commercialise
in a multichannel world whilst evolving away from legacy single-channel
orientated KPIs (e.g. OCRs) that are increasingly less relevant or robust.
We maintain our discipline with our resourcing and capital expenditure on our
development projects and strategic opportunities; focusing on those
initiatives which give short term routes to value, and those integral projects
which have most synergy with and add most value to our wider estate. We have
continued to advance planning consents, land assembly agreements and
preparatory works across the portfolio, maintaining the potential to unlock
significant future development and value.
In Ireland, work continues at The Ironworks, a 122 unit BTR development in
Dundrum, where the concrete frame will be completed shortly, albeit with a
short delay, having recently replaced the main contractor. We remain
optimistic about the rental value when we complete in Autumn 2025, given the
continued demand across the city.
In France, we continue to progress incremental repurposing of the final
underutilised space at Les 3 Fontaines, Cergy, following the opening of the
extension in March 2022, and are in discussions on heads of terms with two
retail partners and preparing consents with the local authority.
Elsewhere in the portfolio, we continue to work with planning authorities in
both the UK and Ireland for major consents. Other than those mentioned above,
we continue to await the decisions of ABP in Ireland for our Dublin Central
and Dublin Village proposals. In the period, we have commenced the planning
process for a residential opportunity to redevelop the existing Edgbaston
Street car park on our Birmingham Estate as we anticipate the future needs of
the city.
At Martineau Galleries, part of the wider Birmingham Estate and adjacent to
the new HS2 terminus, we remain closely engaged with Birmingham City Council
and other stakeholders to ensure that we have a route to development for this
important multiuse estate, which will complement and benefit from our other
holdings in the city.
At Bishopsgate Goodsyard, we continue to prepare the development, including
the detailed planning process and the initial demolition works, which includes
obtaining vacant possession of the Boxpark site later this year. Finally, at
Eastgate, Leeds, we are working with Leeds City Council to unlock the value of
the site by updating the extant development agreement and working with
potential sources of new capital.
Agile platform
As previously reported, FY 23 was a pivotal year for the transformation of our
platform and the transition is largely complete. In the first half of 2024 we
continued to embed and benefit from new efficiencies and ways of working, both
in terms of systems and automation, and greater cross-team collaboration.
We also retain a relentless focus on fixed costs including insurance and work
space, further reducing our footprint in France in the first half. At the
same time, we continue to increase our efforts on employee engagement and
talent management as part of our strategy to retain and develop key talent and
are investing in, and promoting, key talent to be fit for the future. We are
creating a high performance, high engagement culture with an emphasis on
strategic value creation focused on asset management and delivery, placemaking
and the repositioning of our assets.
At FY 22, we committed to reduce our gross administration costs by 20% for FY
24, and delivered a 14% reduction in FY 23. We have delivered a further 16%
year-on-year reduction in HY 24 and are well on target to achieve our
guidance, which will take our cumulative reduction to over 30% since FY 20.
Sustainable and resilient capital structure
Our capital allocation framework is consistent. We will maintain a stable and
resilient capital structure, with an IG credit rating, to maintain access to
capital markets. We are committed to a sustainable and growing cash dividend,
covered by cashflow, and balanced with our total returns focus. We are mindful
of our cost of capital, but will remain opportunistic on capital deployment.
After strengthening of the balance sheet, our priority is to invest for growth
and value creation, and enhance distributions for shareholders.
Throughout FY 23 and HY 24 we have maintained our IG credit rating and strong
liquidity. In the first half of 2024, we concluded the £500m disposal
programme set out at FY 21, taking total proceeds received to date to £950m
since FY 20.
In the first half of the year, we have repaid £109m of USPP notes, and
extended the maturity of our undrawn 2022 RCF from 2026 to 2027. Following
the buy-out of the Group's defined benefit pension scheme in December 2022,
the wind-up of the scheme was completed in the first half, removing the
corporate guarantee and ongoing running costs.
The refinancing of our only secured debt, in the Dundrum JV, is in advanced
stages and we expect to sign a new facility in early August 2024.
Overall, net debt reduced 8% to £1,220m at 30 June 2024 with net debt:EBITDA
unchanged at 8.0x and LTV of 39%. The Group also had liquidity of £1.1bn in
the form of cash balances (£538m) and undrawn committed RCFs (£600m).
Reflecting the sale of Value Retail, these metrics improve with pro forma net
debt of £637m, net debt:EBITDA of 5.3x and LTV of 25%. Pro forma liquidity
increases to £1.7bn, including pro forma cash of £1,121m. The Group will
also not have any unsecured refinancing requirements until 2027 not covered by
cash balances.
Environmental, Social and Governance
In the first half of 2024 we continued to deliver against our ESG strategy and
Net Zero commitments. Following the development of our Net Zero Asset Plans
(NZAPs) in 2022, in the first half of 2024 we developed revised Physical
Climate Risk Reviews and Nature Assets Plans (NAPs). These assessments
combined to offer a holistic asset centric approach to managing Climate and
Nature risks and opportunities, the two halves of the global environmental
emergency.
We have also further progressed with the delivery of our NZAP programme and
commenced work on multiple projects including renewable energy generation in
France and improving building management systems, lighting, heating and
ventilation in the UK and Ireland. For the first half of 2024, this ongoing
commitment to energy efficiency has resulted in a 5% year-on-year reduction in
carbon emissions (scope 1, 2 and selected 3), calculated on a like-for-like
portfolio basis.
Our social value agenda and activities continue to grow with delivery through
community work, placemaking and charitable giving across all destinations. In
June, we held our annual Giving Back Day with colleagues across the Group
supporting 15 local charities and organisations. This event saw over 150
colleagues and property management partners, deliver 600+ hours of
volunteering, support 500+ beneficiaries and build stronger links to our
communities. We are proud that for the first time all corporate offices and
destinations had dedicated events and 97% of our Hammerson colleagues
participated.
In recognition of the impact of our social value activities, Bullring and
Grand Central won the Gold Award in the Health category for their mental
health support and awareness project in collaboration with Birmingham Mind at
the International CSR Excellence Awards, run by the Green Organisation. This
award demonstrates how our charitable partnerships are impactful and deliver
positive impacts for the communities we serve.
FINANCIAL REVIEW
OVERVIEW
The Group had a strong first half in which we completed our £500m disposal
programme with the sale of Union Square and benefited from the investments
made in recent years. Following the announcement on 22 July 2024 of the
disposal of the Group's interests in Value Retail for c. £600m (€705m) we
now have the capacity and capability to accelerate growth and value creation.
Adjusted earnings for the six months ended 30 June 2024 of £50m were £6m, or
11% lower than the prior year, with the impact of disposals reducing net
rental income by £7m. Net rental income on the retained portfolio was £1m
higher, equivalent to like-for-like growth of 2%. Gross administration and
net finance costs were, in total, £11m lower, this was partly offset by £3m
lower fee income due to disposals. The Group's share of adjusted earnings from
Value Retail was £2m lower with gross rental income growth offset by higher
costs, including interest following recent refinancing activity. Given
confidence in future earnings growth the directors have declared an interim
cash dividend of 0.756p per share, a 5% increase on the 2023 interim dividend.
The IFRS loss for the period was £517m (HY 23: £1m), the principal
difference to adjusted earnings being an impairment loss on the
reclassification to an asset 'held for sale' of the Group's investment in
Value Retail of £483m; revaluation losses of £73m (Managed portfolio: £48m,
Value Retail: £25m), with the most significant factor being 50bps outward
yield shift in Ireland.
Net assets at 30 June 2024 were £1,908m (FY 23: £2,463m). EPRA NTA per share
was 38p (FY 23: 51p), equivalent to a total accounting return of -23.4% (FY
23: -2.1%). Each of the measures being adversely impacted by the Value
Retail impairment loss.
Net debt of £1,220m at 30 June 2024 was £106m, or 8%, lower than at 31
December 2023 principally due to the sale of Union Square. The Group has ample
liquidity in cash and undrawn committed facilities of £1.1bn (FY23: £1.2bn).
Headline LTV was 39% (FY23: 34%) and net debt:EBITDA was unchanged at 8.0x.
Reflecting the sale of Value Retail, on a pro forma basis, these latter
metrics improve to 25% and 5.3x respectively. The transformational impact of
the Value Retail sale on the Group's net debt, liquidity and credit metrics is
set out further on the following page.
PRESENTATION OF FINANCIAL INFORMATION
IFRS vs Management reporting
The Group's property portfolio comprises properties that are either wholly
owned or co-owned with third parties. While the Group prepares its financial
statements under IFRS, the Group evaluates the performance of its business for
internal management reporting on a "proportionally consolidated" basis which
aggregates the following:
· properties, or entities, which are wholly owned or held in joint
operations(1) and hence where the results and net assets are directly
included, on a line-by-line basis, in the IFRS financial statements. These are
labelled as 'Reported Group'.
· the Group's share of properties, or entities, which are co-owned within
joint ventures or associates and are under the Group's day-to-day management.
Under IFRS each are included in separate line items in the income statement
('Share of results of joint ventures'/'Share of results of associates') and
balance sheet ('Investment in joint ventures'/'Investment in associates'). The
Group's share of results and net assets are labelled 'Share of Property
interests'. Note, that for associates, this treatment only related to the
Group's 25% share in Italie Deux until it was sold in March 2023 and not Value
Retail (see below).
The combination of properties within the Reported Group and Share of Property
interests is labelled as the "Managed portfolio".
Management do not proportionally consolidate the Group's investment in Value
Retail, in which we exercise significant influence, because it is not under
the Group's management, is independently financed and has differing operating
metrics to the Group's Managed portfolio. Accordingly, for both IFRS and
management accounting purposes the results and financial assets and
liabilities are accounted for separately and it is excluded from the Group's
proportionally consolidated key metrics such as net debt or like-for-like net
rental income growth.
If, in addition to IFRS figures, information is disclosed under management's
reporting basis in the Group's financial statements it is clearly labelled as
being 'proportionally consolidated'. Further supporting analysis and
reconciliations between management and IFRS bases are also included in this
Financial Review and in the Additional Information section.
Value Retail disposal
On 22 July 2024, the Group announced it had entered into a binding sale
agreement for the disposal of its entire interests in Value Retail to L
Catterton for gross proceeds of c.£600m (€705m). The Group accounted for
its Value Retail interests as an associated undertaking, however at the
balance sheet date the Directors concluded that, given the significant
progress made towards agreeing and signing the sale agreement, that a sale was
"highly probable" and hence the Group's interests were judged to have met the
criteria outlined in IFRS 5 to be reclassified to being "held for sale" within
current assets.
On reclassification to "held for sale", in accordance with IFRS 5, the Group's
interests have been re-measured to the lower of the carrying amount and
estimated fair value less sale costs at completion, which is expected in H2
24. The fair value was based on the contracted sale proceeds, less estimated
transaction costs, and the remeasurement resulted in a £483m impairment loss
being recognised in the period as shown in the table below:
1 See note 13B to the interim financial statements for details on the Group's
two joint operations (Pavilions, Swords and Ilac Centre, Dublin).
Value Retail impairment calculation (see note 9 to interim financial
statements)
Proportionally consolidated £m
Carrying value of Value Retail at 30 June 2024 1,087
Other assets/liabilities impacted by disposal in Reported Group (21)
Value of disposed net assets A 1,066
Gross proceeds (€705m at 30 June closing exchange rate) 598
Estimated transaction costs, including tax (15)
Net proceeds B 583
Impairment charge in HY 24 A-B (483)
The sale has a transformational impact on the Group and, on a pro forma basis
reflecting the £583m net proceeds, significantly enhances the Group's net
debt, liquidity and credit metrics. However, at 30 June 2024 the £483m
impairment loss results in an adverse impact on the Group's loan to value and
gearing metrics. These metrics are set out in the table below:
Proportionally consolidated Additional Information ref. 30 June 2024 Pro forma 31 December 2023
30 June 2024 Total
Net debt £1,220m £637m £1,326m
Liquidity £1,138m £1,721m £1,225m
Loan to value ‒ Headline Table 20 39% 25% 34%
Loan to value ‒ EPRA Table 20 50% 27% 48%
Gearing Table 18 65% 34% 55%
Net debt: EBITDA Table 16 8.0x 5.3x 8.0x
Unencumbered asset ratio Table 19 2.10x 4.84x 2.04x
In addition, the operations of Value Retail represent a separate major line of
the business and therefore has been treated as a discontinued operation and
the results for the current and prior financial periods have been separately
disclosed from the continuing segments of the business.
In addition to the disposal, the Company is proposing to simplify its share
capital through a 1 for 10 share consolidation, and to increase distributable
reserves by reducing the Company's share premium account. A circular with more
detail and a notice convening a general meeting, at which the necessary
approvals will be sought, will be sent to shareholders in due course.
Derecognition of Highcross and O'Parinor in HY 23
As explained in the Financial Review in the 2023 Annual Report, during 2023,
the Group derecognised its Highcross and O'Parinor joint ventures in which it
had 50% and 25% interests respectively. These two joint ventures had a total
of £125m of borrowings secured against their individual property interests,
which were non-recourse to the Group.
On 9 February 2023, a receiver was appointed by the lenders to administer
Highcross for the benefit of the creditors. As a result of no longer having
joint control, the Group derecognised its share of assets and liabilities,
including the property value and £80m of secured borrowings. There was no
loss on derecognition as the Group's joint venture investment in Highcross had
previously been fully impaired.
On 30 June 2023, the lenders to O'Parinor took control of the joint venture
and the Group therefore impaired its joint venture investment by £22m and
derecognised its share of assets and liabilities in HY 23, including the
property value and £45m of secured borrowings. In February 2024, the
lender subsequently sold the O'Parinor property. The Group did not receive any
recovery of its fully impaired joint venture investment.
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, with key EPRA
measures being EPRA earnings and three EPRA net asset metrics. Details on
the EPRA BPR can be found on www.epra.com and the Group's EPRA metrics are
shown in Table 1 of the Additional Information.
In addition to presenting the Group's results on an IFRS and EPRA basis, we
also presents the results on a 'Headline' and 'Adjusted' basis. The former
measure is calculated in accordance with the requirements of the Johannesburg
Stock Exchange listing requirements and the 'Adjusted' basis reflects the
underlying operations of the business and is calculated on a proportionally
consolidated basis. The Adjusted basis also excludes capital and
non-recurring items such as revaluation movements, gains or losses on the
disposal of properties or investments, as well as other items which the
Directors and management do not consider to be part of the day-to-day
operations of the business. Such items are in the main reflective of those
excluded for EPRA earnings, but additionally exclude a small number of
'Company only' adjusting items which are deemed not to be reflective of the
normal routine operating activities of the Group and have been applied
consistently in both accounting periods. 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.
For the first half of 2024, the two 'Company only' adjusting items comprised:
· The exclusion of a charge of £2.7m (HY 23: £3.2m) in respect of
business transformation costs as the Group continues its implementation of
strategic change and refining its operating model. This charge comprises
mainly non-capitalisable costs relating to digital transformation as well as
severance and other costs associated with team and operational restructuring.
· The exclusion of a £0.5m (HY 23: £nil) one-off charge associated
with fees incurred on winding up the Group's principal defined benefit pension
scheme as further explained on page 16.
An analysis of the Group's income statement on both an IFRS and Adjusted basis
is included in note 2 to the interim financial statements and a reconciliation
from loss for the year under IFRS to Adjusted, EPRA and Headline earnings is
set out in note 10A to the interim financial statements.
Other APMs used by the Group cover key operational, balance sheet and credit
related metrics, including like-for-like analysis, cost ratios, total
accounting return, net debt and associated credit metrics: net debt:EBITDA,
gearing, loan to value and interest cover. Reconciliations of these APMs to
the IFRS figures in the financial statements are included in the Additional
Information section.
INCOME STATEMENT
Analysis of adjusted earnings and loss for the period (IFRS) - six months
ended 30 June
Proportionally consolidated Six months ended 30 June 2024 Six months ended 30 June 2023 Change
£m
£m £m
Adjusted earnings analysis:
Gross rental income 94.4 106.3 (11.9)
Net service charge expenses and cost of sales (21.7) (21.2) (0.5)
Net rental income 72.7 85.1 (12.4)
Gross administration expenses (21.5) (25.7) 4.2
Other income 5.4 8.2 (2.8)
Profit from operating activities 56.6 67.6 (11.0)
Value Retail - Adjusted earnings(1) 11.7 13.4 (1.7)
Operating profit 68.3 81.0 (12.7)
Net finance costs (18.7) (25.1) 6.4
Tax charge (0.1) ‒ (0.1)
Adjusted earnings 49.5 55.9 (6.4)
Reconciliation to loss for the period (IFRS):
Revaluation losses - Managed portfolio (47.8) (43.8) (4.0)
Revaluation (losses)/gains - Value Retail (24.9) 26.0 (50.9)
Loss on sale of properties (10.8) (17.3) 6.5
Impairment of Value Retail upon reclassification to an asset held for sale(1) (483.0) ‒ (483.0)
Impairment of joint venture ‒ (22.1) 22.1
Business transformation costs (2.7) (3.2) 0.5
Costs associated with pension scheme winding up (0.5) ‒ (0.5)
Other (see note 10A to the interim financial statements) 3.5 3.3 0.2
Loss for the period (IFRS) (516.7) (1.2) (515.5)
(Loss)/earnings per share pence pence pence
Basic (10.4) (0.0) (10.4)
Adjusted 1.0 1.1 (0.1)
1 Discontinued operation, see note 9 to the interim financial statements
For the six months ended 30 June 2024, the Group reported an IFRS loss of
£516.7m (HY 23: £1.2m loss), an increased loss of £515.5m. The key factor
in the increased year-on-year loss was the £483.0m impairment charge on the
reclassification of the Group's interest in Value Retail to an asset held for
sale. Other factors were a £6.4m reduction in adjusted earnings and a net
£50.9m movement in revaluation (losses)/gains in Value Retail (HY 24:
£(24.9)m loss, HY 23: £26.0m gain), partly offset by the impairment charge
of £22.1m on the derecognition of the Group's investment in the O'Parinor
joint venture in the first half of 2023.
On an Adjusted basis, earnings reduced by £6.4m to £49.5m (HY 23: £55.9m).
Net rental income was £12.4m lower, £7.4m was due to disposals partly offset
by £1.0m higher income from the like-for-like Managed portfolio, equivalent
to 2% growth. Gross administration costs were £4.2m, or 16%, lower reflecting
reduced employee and corporate costs. The Group's share of Value Retail
earnings, now shown as a discontinued operation, fell by £1.7m. Net finance
costs were £6.4m lower, reflecting reduced debt levels and increased income
from cash deposits benefiting from higher interest rates.
A detailed reconciliation from the loss for the period under IFRS to the
Group's results presented on a management reporting basis (i.e. proportionally
consolidated) is set out in note 2 to the financial statements and further
details on reconciling items between Adjusted earnings and IFRS loss are in
note 10A to the financial statements.
Rental income
Analysis of period-on-period change in rental income - Managed portfolio
Proportionally consolidated Gross rental income Like-for-like change Adjusted net rental income Like-for-like change
Six months ended 30 June 2023 106.3 85.1
Like-for-like:
- UK 1.1 3.1% 1.0 3.5%
- France 0.7 2.4% 0.8 4.0%
- Ireland ‒ 0.1% (0.8) (4.0)%
Total like-for-like 1.8 2.1% 1.0 1.7%
Disposals (10.9) (7.4)
Developments and other (1.4) (4.9)
Foreign exchange (1.4) (1.1)
Six months ended 30 June 2024 94.4 72.7
Gross rental income decreased by £11.9m to £94.4m. Disposals reduced income
by £10.9m, principally Italie Deux and Croydon in 2023, Union Square in 2024
and the derecognition of O'Parinor with effect from 30 June 2023. This was
partly offset by growth in like-for-like income of £1.8m, or 2.1%, with the
UK having the strongest growth at 3.1% driven by Bullring and Westquay. This
reflected growth in variable income from turnover rent and car park income,
income from the Group's strong leasing performance and surrender premiums as
we have proactively recycled brands towards best-in-class occupiers. Income
in France increased by 2.4% driven by indexation while income in Ireland was
up 0.1% with growth limited by a reduction in occupancy from 96.2% to 95.7%
and the adverse impact of regearing the large overrented River Island unit at
the entrance to Ilac Centre.
Adjusted net rental income decreased by a net £12.4m to £72.7m. Disposals
reduced NRI by £7.4m, principally Italie Deux in March 2023 and Union Square
in March 2024. From a like-for-like perspective, adjusted NRI grew by 1.7%.
The UK and France increased by 3.5% and 4.0% respectively, principally due to
their strong gross rental income growth. Ireland reported a like-for-like
decrease of -4.0% due the muted gross income growth and a year-on-year change
in tenant impairment and bad debt charges. 2023 included credits due to the
reversal of prior year bad debt provisions as collection rates improved in HY
23 which resulted in like-for-like NRI growth in HY 23 of 8.6%.
NRI from the Group's Developments and other portfolio reduced by £4.9m in
2024. This reduction was due to a one-off occupier receipt in H1 23 of
£1.1m in relation to their delayed opening at the Les 3 Fontaines extension
and increased provisioning charges and void costs at Martineau Galleries and
Grand Central, both of which are being progressed towards future developments.
Cabot Circus, Bristol is undergoing major repositioning in 2024 which has a
temporary adverse impact on 2024 rental income. If Cabot Circus is excluded
from the Group's like-for-like analysis, like-for-like gross rental income
would be +3.6% and net rental income would be +4.8%. As explained on page 5,
we are making strong progress with the repositioning having recently signed
M&S to replace House of Fraser.
Further analysis of gross and net rental income by segment is provided in
Table 3 of the Additional Information.
Analysis of rental income by ownership
Rental income is further analysed below between the Group's various
ownerships.
Six months ended 30 June 2024
Share of Property interests
Reported Group Joint Associates Subtotal Total
ventures
Proportionally consolidated £m £m £m £m £m
Gross rental income 40.1 54.3 - 54.3 94.4
Net service charge expenses and cost of sales (10.0) (11.7) - (11.7) (21.7)
Net rental income 30.1 42.6 - 42.6 72.7
Change in provision for amounts not yet recognised in the income statement - - - - -
Adjusted net rental income 30.1 42.6 - 42.6 72.7
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
Administration expenses
Proportionally consolidated Six months ended Six months ended 30 June 2023
30 June 2024
£m
£m
Employee costs 13.9 17.1
Other corporate costs 7.6 8.6
Adjusted gross administration costs 21.5 25.7
Property fee income (2.9) (4.8)
Joint venture and associate management fee income (2.5) (3.4)
Other income (5.4) (8.2)
Adjusted net administration expenses 16.1 17.5
Business transformation costs 2.7 3.2
Net administration expenses 18.8 20.7
The Group's focus on transformation and cost reduction has resulted in a
£4.2m, or 16%, year-on-year reduction in adjusted gross administration costs
to £21.5m in the first half of 2024. Other income fell by £2.8m associated
with lower fee income due to disposals, particularly in relation to Italie
Deux and O'Parinor in France. Adjusted net administration expenses decreased
by £1.4m, or 8% against HY 23.
The most significant elements of the gross administration cost reduction were:
· Employee costs which were £3.2m (19%) lower reflecting the
organisational restructuring and simplification of the Group's operating
model. Average headcount, excluding employees recharged to tenants, reduced
from 209 in HY 23 to 139 in HY 24.
· Other corporate costs, comprising mainly professional fees, premises
costs and IT costs, fell by £1.0m (12%), with the most significant savings
being premises costs in the UK and France.
Business transformation costs of £2.7m in the first half of 2024 comprised
mainly fees for contractors and consultants on the Group's digitalisation
programme and office relocation costs in Paris. These transformation costs
related directly to the Group's strategic and operational review undertaken in
2021 and have been excluded from adjusted earnings as they do not reflect
underlying trading.
Loss on sale of properties
During the first half of the year, we realised gross proceeds of £117m from
property disposals, with £111m raised from the sale of Union Square, Aberdeen
and £6m raised from the disposal of ancillary units at O'Parinor. The sale
of Union Square completed the Group's £500m disposal programme announced at
FY 21, since when we have raised gross proceeds of £950m.
Compared to their 31 December 2023 valuations, and after selling costs, these
two transactions resulted in a loss on the sale of properties of £11m, and
were at an average 8% discount (based on gross proceeds) to 31 December 2023
book value.
Results - Share of Property interests
A listing of our interests in joint ventures is included in note 13 to the
interim financial statements. On an IFRS basis, the Group's share of results
in the first half of 2024 was £9.6m (HY 23: £7.6m). The £2.0m improvement
was principally due to lower revaluation losses in HY 24 of £31.0m compared
with losses of £33.5m in HY 23 and £1.5m lower year-on-year net finance
costs following the derecognition and subsequent disposal of O'Parinor.
On an Adjusted basis, our share of results from joint ventures was £40.6m (HY
23: £41.1m). The £0.5m year-on-year reduction was principally due to the
disposals of the Group's investments in Croydon in 2023 and derecognition of
O'Parinor with effect from 30 June 2023.
Given that five out of six of our UK flagship destinations and Dundrum, the
largest asset of our Ireland flagships, are held in joint ventures the
financial and operating performance of these assets is consistent with the
proportionally consolidated performance explained in this Review and shown in
the Additional Information. The two French flagship destinations are wholly
owned.
Results - Value Retail (including reclassification to an asset held for sale)
As explained above, at 30 June 2024 the Group reclassified its investment in
Value Retail to an asset held for sale and treated its results in the current
and prior financial periods as a discontinued operation. This resulted in an
impairment charge of £483.0m and further details are in note 9 to the interim
financial statements.
On an IFRS basis, the Group's share of Value Retail's results in the first
half of 2024 were a loss of £9.6m compared with a profit of £32.1m in HY 23.
The year-on-year decrease of £41.7m was principally due to revaluation losses
recognised in 2024 of £24.9m compared with gains of £26.0m in 2023.
On an Adjusted basis, our share of results from Value Retail was £11.7m
compared with £13.4m in 2023. The reduction in adjusted earnings was due to
increased property outgoings of £1.5m, administration costs of £2.3m, £1.1m
higher tax charges and, a £3.8m increase in finance costs related to the
refinancing of the loans secured against Fidenza, Wertheim and Ingolstadt
which was completed in H2 23. This was partly offset by increased gross rental
income of £7.0m associated with sales growth and the benefits from indexed
rents.
Net finance costs
Six months ended Six months ended
30 June 2024
30 June 2023
Proportionally consolidated Reported Group Share of Property interests Total Reported Group Share of Property interests Total
£m £m £m £m £m £m
Finance income 18.2 2.8 21.0 13.5 1.2 14.7
Gross interest costs (35.8) (3.9) (39.7) (35.2) (4.6) (39.8)
Adjusted net finance costs (17.6) (1.1) (18.7) (21.7) (3.4) (25.1)
Change in fair value of derivatives 0.4 (1.0) (0.6) (9.8) (0.2) (10.0)
IFRS net finance costs (17.2) (2.1) (19.3) (31.5) (3.6) (35.1)
Adjusted net finance costs were £18.7m, a decrease of £6.4m, or 25%,
compared with HY 23. This was predominately due to £6.3m higher interest
income associated with the increased cash balances following disposals and
higher interest rates in HY 24 compared with HY 23.
In April, £338m of interest rate swaps were entered into to lock in finance
income at an average rate of 4.7% on cash deposits matching the value of the
bonds maturing in October 2025.
Tax
Due to the Group having tax exempt status in its principal operating countries
the tax charge, on a proportionally consolidated basis, remained low at £0.1m
(HY 23: £nil).
The tax charge is 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 foreseeable future.
Dividends
The Board has declared an interim dividend of 0.756 pence per share, payable
as a PID on 30 September 2024 to shareholders on the register on 23 August
2024. This represents a 5% increase on the 2023 interim dividend of 0.72p per
share. There will be no scrip alternative although the dividend reinvestment
plan (DRIP) remains available to shareholders.
Following the completion of the sale of the Group's investment in Value Retail
announced on 22 July 2024, the Board intend to increase the policy payout
ratio from its current policy of 60-70% to 80-85%.
As explained on page 37, the reclassification of Value Retail to an asset held
for sale resulted in the recognition of a £483m impairment charge. This
adversely impacts Hammerson plc's distributable reserves which totalled £649m
at 31 December 2023. In addition to the disposal, the Company is therefore
proposing to increase distributable reserves by reducing the Company's share
premium account. A circular with more detail and a notice convening a general
meeting, at which the necessary approval will be sought, will be sent to
shareholders in due course.
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 2024 31 December 2023
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 properties 1,233 1,346 - 2,579 1,396 1,380 - 2,776
Investment in joint ventures 1,177 (1,177) - - 1,193 (1,193) - -
Investment in associates ‒ Value Retail - - - - 1,115 - 79 1,194
Assets/liabilities held for sale ‒ Value Retail(1) 583 - - 583 - - - -
Net trade receivables 24 20 - 44 28 13 - 41
Net debt(2) (1,069) (151) - (1,220) (1,163) (163) - (1,326)
Other net liabilities (40) (38) 1 (77) (106) (37) - (143)
Net assets 1,908 - 1 1,909 2,463 - 79 2,542
EPRA NTA per share(3) 38p 51p
1 Reflects the reclassification to an "asset held for sale" on 30 June
2024, see note 9 to the interim financial statements for details
2 See Table 13 in Additional Information for further details.
3 EPRA adjustments in accordance with EPRA best practice, principally in
relation to deferred tax, as shown in note 10B to the interim financial
statements.
During the first half of 2024, net assets decreased by £555m, or 23% to
£1,908m. Net assets, calculated on an EPRA Net Tangible Assets (NTA) basis,
were £1,909m, or 38p per share, a reduction of 13p compared to 31 December
2023 and is equivalent to a total accounting return of -23.4% (see Table 15 in
Additional Information).
The key components of the movement between IFRS net assets and EPRA NTA are
shown in the table below:
Movement in net assets
Proportionally consolidated including Value Retail EPRA EPRA NTA EPRA NTA per share
£m
Net assets adjustments
£m
£m
1 January 2024 2,463 79 2,542 51
Adjusted earnings 50 - 50 1
Property revaluation - Managed portfolio (48) - (48) (1)
Property revaluation - Value Retail (25) - (25) (1)
Disposal losses (11) - (11) -
Impairment losses on reclassification of Value Retail to asset held for sale (483) (79) (562) (11)
Dividends (39) - (39) (1)
Foreign exchange and other movements 1 1 2 -
30 June 2024 1,908 1 1,909 38
MANAGED PORTFOLIO - PROPERTY ANALYSIS
Portfolio valuation
At 30 June 2024, the majority of our UK flagship destinations have been valued
by JLL and CBRE, the French portfolio by JLL, and the Irish portfolio and
Brent Cross have been valued by C&W. C&W also valued the Value Retail
Villages with the 30 June 2024 valuation being used as the basis for the
reclassification to an asset held for sale. The valuer responsibilities are
unchanged from
31 December 2023 and the range of valuation provision provides diversification
of valuation expertise across the Group.
There continues to be a limited number of comparable transactions in the
Group's investment markets, although leasing evidence has been strong in H1
24. In the UK and France, yields have been stable in the first half of the
year as inflation and the cost of debt has fallen. Following significant
valuation falls since 2017, an increasing number of commentators are now
calling the bottom of the market in the UK highlighting the positive market
dynamics for prime assets. This is a continuation of the polarisation trend
based on asset quality from both an occupational and investment perspective
which we highlighted at FY 23. In Ireland, sentiment has weakened with a
number of aborted or stalled transactions being cited as the basis for valuers
marking market yields higher in 2024.
At 30 June 2024, the Managed portfolio was valued at £2,579m, a reduction of
£197m since 31 December 2023. This movement was primarily due to the disposal
of Union Square and net revaluation losses of £48m. The movement in the
portfolio valuation is shown in the table below.
Movements in property valuation
Proportionally consolidated UK France Ireland Total flagships Development and other Managed portfolio
£m
£m £m £m £m £m
At 1 January 2024 863 1,003 630 2,496 280 2,776
Disposals (121) (6) ‒ (127) ‒ (127)
Capital expenditure 5 7 1 13 3 16
Revaluation gains/(losses) 12 ‒ (49) (37) (11) (48)
Yield ‒ ‒ (48) (48) ‒ (48)
Income 12 ‒ (1) 11 ‒ 11
Development and other costs ‒ ‒ ‒ ‒ (11) (11)
Foreign exchange ‒ (22) (14) (36) (2) (38)
At 30 June 2024 759 982 568 2,309 270 2,579
Disposals
Disposals of £127m related to the sale of Union Square in March and ancillary
units at O'Parinor in February.
Capital expenditure
During 2024, capital expenditure on the Managed portfolio was £16m, of which
£13m was on the Group's Flagship portfolio reflecting reconfiguration works
and lease incentives associated with our strong leasing performance. The most
significant reconfiguration works were on the former House of Fraser store at
The Oracle which is being split into three new units. Two of these units have
been let to Hollywood Bowl and TK Maxx and we are in advanced discussions on
the final unit. £7m was invested in our two French destinations to support
the strong leasing performance and refreshing Les Terrasses du Port, which
celebrated its 10(th) anniversary in May.
£3m was spent on our development projects in the first half of the year. 40%
of this was at the on-site Ironworks residential scheme at Dundrum with the
balance predominately spent on advancing The Goodsyard project and the
repurposing of void space at Cergy 3 to complement the major extension at the
asset which opened in 2022. We continue to be disciplined with our
expenditure on these schemes focusing on initiatives which give short term
routes to value and those integral projects which add value to our wider
estates.
Table 11 of the Additional Information provides further analysis of capital
expenditure incurred in the first half of the year.
Revaluation gains/(losses)
In the first half of 2024, we recognised a total revaluation loss on the
Managed portfolio of £48m. UK flagships reported a £12m revaluation gain
associated with income growth, with ERVs marked up associated with the strong
leasing performance. There was no change in underlying values in France, while
Ireland reported a £49m revaluation loss, with £48m due to outward yield
shift of 50bps.
The Group's Developments and other portfolio recorded a £11m revaluation
loss. Approximately half of the loss was at Martineau Galleries in Birmingham
where valuers reduced the end value of the future office element of the
scheme. The remainder of the loss was due to additional project costs being
factored into residual appraisals.
Further valuation analysis is included in Table 9 of the Additional
Information.
Like-for-like ERV(1)
Flagship destinations Six months ended Year ended Six months ended
Proportionally consolidated 30 June 2024 31 December 2023 30 June 2023
%
%
%
UK 1.5 1.8 ‒
France 0.6 2.5 0.2
Ireland 0.5 0.2 0.1
0.9 1.7 0.1
1 Calculated on a constant currency basis for properties owned
throughout the relevant reporting periods.
Like-for-like ERVs increased by 0.9% in the first half of the year, driven by
the Group's strong leasing performance. The UK reported the highest increase
at 1.5%, with the strongest performances at Cabot Circus (2.9%) as it
undergoes repositioning and Bullring (2.8%) benefiting from the investment in
repurposing over recent years. French ERV growth has been hindered by the
higher vacancy at Les 3 Fontaines, Cergy. Ireland reported growth of 0.5%
driven by recent leasing performance.
Property returns analysis
The Group's managed property portfolio generated a total property return of
+0.6% in the first half of the year, comprising an income return of +2.8%
offset by a capital return of -2.2%.
Six months ended 30 June 2024
Proportionally consolidated UK France Ireland Flagship Developments and other Managed portfolio
% % % Destinations % %
%
Income return 3.8 2.2 2.9 2.9 1.3 2.8
Capital return 0.3 - (7.9) (1.9) (4.0) (2.2)
Total return 4.1 2.2 (5.2) 0.9 (2.7) 0.6
Year ended 31 December 2023
Proportionally consolidated UK France Ireland Flagship Developments and other Managed portfolio
% % % Destinations% % %
%
Income return 8.7 4.6 5.7 6.3 2.7 5.9
Capital return (2.4) (4.3) (5.6) (4.0) (6.2) (4.1)
Total return 6.1 0.1 (0.2) 2.0 (3.6) 1.6
INVESTMENT IN JOINT VENTURES AND ASSOCIATES
Details of the Group's joint ventures and associates are shown in notes 13 and
14, respectively, to the interim financial statements.
Joint ventures
During the year, our investment in joint ventures decreased by £16m to
£1,177m (FY 23: £1,193m). The reduction was principally due to a revaluation
loss of £31m and cash distributions paid to the Group of £31m partly offset
by adjusted earnings of £41m.
Associates
Following the sale of the Group's 25% interest in Italie Deux in March 2022,
Value Retail was the Group's sole investment in associate until its
reclassification to an asset for sale as at 30 June 2024 resulting in an
impairment charge of £483m in HY 24. In the first half of the year, prior to
reclassification, the investment reported a revaluation loss of £25m and
distributions of £14m (£12m in cash), partly offset by adjusted earnings of
£12m.
TRADE RECEIVABLES
Collection rates have been stable during 2024. At 30 June 2024, 97% of rent
due in 2023 and 94% of H1 24 rent had been collected.
On a proportionally consolidated basis, net trade receivables at 30 June 2024
were £44m (FY 23: £41m), reflecting gross trade receivables of £62m (FY 23:
£60m) against which a provision of £19m (FY 23: £19m) has been applied.
PENSIONS
In June 2024, the Group's principal pension scheme, a UK defined benefit
scheme (the 'Scheme') was wound up. This followed the purchase of a bulk
annuity policy ('buy-in') in December 2022 with Just Retirement Limited to
fully insure all future payments to members of the Scheme. The Trustees of the
Scheme triggered the winding-up of the Scheme in December 2023 allowing the
Company to terminate its liability to make further contributions to the
Scheme. In the first half of 2024, the Trustees completed the assignment of
the bulk annuity policy to individual Scheme members and transferred the
administration to Just Retirement Limited. The winding up process resulted in
a cost of £0.5m, which, given the one-off nature of this action has been
excluded from the Group's adjusted earnings.
FINANCING AND CASH FLOW
Financing strategy
Our financing strategy is to borrow predominantly on an unsecured basis to
maintain flexibility. Secured loans are occasionally used, mainly in
conjunction with joint venture partners. Value Retail also uses predominantly
secured debt in its financing strategy. All secured debt is non-recourse to
the rest of the Group.
The Group's debt is arranged to maintain access to short term liquidity and
long term financing. Short term liquidity is principally through syndicated
revolving credit facilities. Long term debt comprises the Group's fixed rate
unsecured bonds and private placement notes. At 30 June 2024, the Group also
had a secured loan in the Dundrum joint venture and Value Retail's financing
is based on secured debt. Acquisitions may initially be financed using short
term funds before being refinanced with longer term funding depending on the
Group's financing position in terms of maturities, future commitments or
disposals, and market conditions.
Derivative financial instruments are used to manage exposure to fluctuations
in foreign currency exchange rates and interest rates but are not employed for
speculative purposes.
The Board regularly reviews the Group's financing strategy and approves
financing guidelines against which it monitors the Group's financial
structure. Where there is any non-compliance with the guidelines, this should
not be for an extended period and the Group objective is to maintain an
investment grade credit rating. The key financing metrics are set out below.
Key financial metrics
Proportionally consolidated excluding Value Retail unless otherwise stated Calculation 30 June 2024 31 December 2023
in Additional Information
Net debt Table 13 £1,220m £1,326m
Liquidity £1,138m £1,225m
Weighted average interest rate - net debt 2.1% 2.4%
Weighted average interest rate - gross debt 3.4% 3.3%
Weighted average maturity of debt 2.2 years 2.5 years
FX hedging 92% 91%
Net debt : EBITDA Table 16 8.0x 8.0x
Loan to value - Headline(1) Table 20 39% 34%
Loan to value - Full proportional consolidation (of Value Retail)(2) Table 20 n/a 44%
Loan to value - EPRA Table 21 50% 48%
Metrics with associated Group unsecured financial covenants Covenant
Interest cover ≥ 1.25x Table 17 4.21x 3.91x
Gearing - Selected bonds(3) ≤ 175% Table 18 65% 55%
- Other borrowings and facilities ≤ 150% Table 18 65% 55%
Unencumbered asset ratio ≥ 1.5x Table 19 2.10x 2.04x
Secured borrowings/equity shareholders' funds ≤ 50% 13% 11%
Fixed rate debt as a proportion of total debt n/a 100% 84%
1 Headline: Loan excludes Value Retail net debt and Value includes
Value Retail net assets.
2 At 31 December 2023 Full proportional consolidation of Value Retail
('VR'): Loan includes Group's share of VR net debt and Value includes share of
VR's values. Following the reclassification of Value Retail to an asset held
for sale at 30 June 2024 this ratio is no longer relevant, see note 9 to the
interim financial statements for details.
3 Applicable to bonds maturing in 2025 and 2027 (as set out in note 16
to the interim financial statements).
As explained on page 37, the reclassification of the Group's investment in
Value Retail to an asset held for sale and subsequently announced disposal
will have a transformational impact on the Group's net debt, liquidity and
credit metrics. However, at 30 June 2024 the £483m impairment loss on
reclassification results in an adverse impact on loan to value and gearing as
shown in the table above.
Credit ratings
In March, Moody's re-affirmed the Group's senior unsecured investment grade
credit rating as Baa3 and revised the outlook from stable to positive. In
April, Fitch re-affirmed the Group's senior unsecured rating at BBB+.
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 2024, 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 financial covenants
for loan to value and interest cover. 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 2024, the value of euro-denominated liabilities as
a proportion of the value of euro-denominated assets was 92%, a 1% increase on
FY 23 (91%). 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 first half of
the year by 2%.
CASH FLOW AND NET DEBT
Movement in net debt (£m)
http://www.rns-pdf.londonstockexchange.com/rns/7378X_1-2024-7-24.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/7378X_1-2024-7-24.pdf)
On a proportionally consolidated basis, net debt decreased by 8% to £1,220m
(FY 23: £1,326m). At 30 June 2024, the Group's net debt comprised loans of
£1,757m, less cash and cash equivalents of £538m, of which £434m is held by
the Reported Group. Disposals during the year generated net proceeds of
£116m. Cash generated from operations of £41m comprised profit from
operating activities of £54m less a net £13m reduction in working capital
and other non-cash items. We also received £12m of distributions from Value
Retail. These cash inflows were partly offset by cash dividends paid of £45m,
net interest of £34m and capital expenditure of £20m.
Liquidity
The Group's liquidity at 30 June 2024, calculated on a proportionally
consolidated basis, comprising cash of £538m and unutilised committed
facilities of £600m, was £1,138m, £87m lower than at the beginning of the
year. The key cash flows resulting in this reduction were the repayment on
maturity of £109m of senior private placement notes and the maturity of £50m
of the Group's revolving credit facilities, partly offset by £117m of gross
disposal proceeds.
During the first six months of the year, we obtained lender consent to extend
£463m of the Group's revolving credit facilities by one year such that they
now mature in 2027 as shown on the chart below.
Debt and facility profile
Maturity profile of loans and facilities at 30 June 2024 (£m)
http://www.rns-pdf.londonstockexchange.com/rns/7378X_2-2024-7-24.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/7378X_2-2024-7-24.pdf)
The Group's weighted average maturity of debt is 2.2 years (FY 23: 2.5 years).
The Group's cash balance of £538m covers the £338m sterling bonds due in
2025 and approximately 75% of the 2026 maturities.
In relation to the €600m (Group's 50% share €300m) secured loan held by
the Dundrum joint venture which matures in September 2024, the JV is in
advanced stages of refinancing and we expect to sign a new loan in early
August 2024.
Maturity analysis of loans at 30 June 2024
30 June 2024 31 December 2023
Maturity £m £m
Sterling bonds 2025 - 2028 841.7 840.6
Sustainability linked euro bond 2027 588.4 600.8
Unamortised facility fees 2025 - 2026 (2.3) (2.2)
Senior notes (Private Placements) 2026 - 2031 75.1 185.3
Total loans - Reported Group 1,502.9 1,624.5
Dundrum secured debt - Share of Property interests 2024 254.5 260.0
Total loans - proportionally consolidated 1,757.4 1,884.5
Cash and cash equivalents (537.4) (569.6)
Fair value of currency swaps - 11.4
Net debt - proportionally consolidated 1,220.0 1,326.3
Risks and uncertainties
The Directors have considered the principal risks and uncertainties disclosed
in the Annual Report for the year ended 31 December 2023, which are summarised
below, and do not consider these to have materially changed in the first half
of 2024. Full disclosure of these risks, including the factors which
mitigate them, are set out within the Risk and uncertainties section of the
Annual Report 2023. As part of their formal risk review in H2 24, given the
transformational impact of the disposal of the Group's investment in Value
Retail announced on 22 July 2024, the Directors expect to amend and update a
number of the principal risks set out below.
A. Macroeconomic Adverse changes to the geopolitical landscape and macroeconomic environment in
which the Group operates have the potential to hinder the ability to deliver
Residual risk: the strategy and financial performance.
High
B. Retail market In the context of the ever-evolving retail marketplace, the Group fails to
anticipate and address structural market changes. This could impair leasing
Residual risk: performance, result in a sub-optimal occupier mix and thus impact the ability
to attract visitors, and grow footfall/spend and income at the Group's
Medium properties.
C. Investment market and valuations Investor appetite for retail led assets is reduced due to macroeconomic or
retail market factors including increased borrowing costs, economic downturn,
Residual risk: and consumer and occupier confidence. This could adversely impact property
valuations and risk hindering the liquidity of the Group's portfolio. This in
Medium turn could reduce the availability of funds for reinvestment and/or
refinancing of debt.
D. Climate Climate risks, particularly the reduction in carbon emissions and addressing
the risk of physical impacts to our assets as a result of climate related
Residual risk: incidents, are not appropriately managed. This could adversely impact
valuations and investor sentiment and may result in an increased final year
Medium bond coupon if the Group's sustainability linked bond targets are not met.
Extreme weather events may also impact our assets.
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 laws and regulations relevant to the Group. These
laws and regulations cover the Group's role as a multi-jurisdiction listed
Residual risk: Medium company; an owner and operator of property; an employer; and as a developer.
Failure to comply could result in the Group suffering reputational damage,
financial penalties and/or other sanctions. Changes or new requirements may
place administrative and cost burdens on the Group and divert resources away
from strategic objectives.
G. Non-retail/multi-use markets The Group fails to target the optimal (non-retail) property sectors for future
repurposing or developments or has insufficient access to capital and the
Residual risk: Medium skills required to deliver its urban estates vision. Occupier or investor
demand for non-retail sectors weakens or evolves such that the Group's
repurposing or development plans are sub-optimal.
H. Cyber security The Group's information technology systems fail or are subject to an attack
which breaches their technological defences. A failure could lead to
Residual risk: Medium operational disruption, financial demands or reputational damage due to assets
being brought down and/or loss of commercially sensitive data.
I. Health and safety There is a risk of serious work-related injury, death and/or ill health to the
Group's colleagues, customers or contractors, and anyone else who visits the
Residual risk: Medium Group's properties or premises. This may be due to the Group's actions or
activities, or from external threats such as terrorism. In addition, an
incident or public health issue, such as a pandemic, is likely to have an
adverse operational impact. Insufficient insight into health and safety risks
and mitigations or a failure to embed a strong safety culture could increase
the Group's exposure to reputational damage, fines and sanctions.
J. Capital structure Lack of access to capital on attractive terms could lead to the Group having
insufficient liquidity to enable the delivery of the Group's strategic
Residual risk: Medium objectives.
K. Partnerships A significant proportion of the Group's 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 2024 Results
of Hammerson plc for the six month period ended 30 June 2024 (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 2024;
· 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 2024 Results 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 2024 Results 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 2024 Results, 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 2024 Results 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 2024 Results,
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 2024 Results 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
24 July 2024
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 2024 Results 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 2024 Results 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 24 July 2024
Rita-Rose Gagné Himanshu Raja
Director Director
Consolidated income statement
Six months ended 30 June 2024 - unaudited
Note Six months ended Six months ended
30 June 2024 30 June 2023(1)
Unaudited Unaudited
£m £m
Revenue 2,4 59.4 69.1
Profit from operating activities(2) 2 11.2 18.7
Revaluation loss on properties 2 (16.8) (10.3)
Other net (losses)/gains 2 (10.8) 3.1
Share of results of joint ventures 13B 9.6 7.6
Impairment of joint ventures 8 - (22.1)
Share of results of associate 14A - 1.2
Operating loss (6.8) (1.8)
Finance income 6 18.2 13.5
Finance costs 6 (35.4) (45.0)
Loss before tax (24.0) (33.3)
Tax charge 7 (0.1) -
Loss from continuing operations (24.1) (33.3)
(Loss)/Profit from discontinued operations 9B (492.6) 32.1
Loss for the period (516.7) (1.2)
Basic and diluted loss per share
Continuing operations (0.5)p (0.7)p
Discontinued operations (9.9)p 0.7p
Total 11B (10.4)p (0.0)p
1. The results reported for the six months ended 30 June 2023 have
been reclassified to represent discontinued operations in line with the
requirements of IFRS 5 "Non-current assets held for sale and discontinued
operations". See note 9 for further details.
2 For the six months ended 30 June 2024, includes a net charge of £1.8m
(30 June 2023: net credit of £1.7m) relating to provisions for impairment of
trade (tenant) receivables as set out in note 15.
Consolidated statement of COMPREHENSIVE income
Six months ended 30 June 2024 - unaudited
Six months ended Six months ended
30 June 2024 30 June 2023
Unaudited Unaudited
£m £m
Loss for the period (516.7) (1.2)
Other comprehensive income/(expenses):
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(1) - (20.1)
Items that may subsequently be recycled through profit or loss
Foreign exchange translation differences (30.6) (48.9)
Foreign exchange translation differences of discontinued operations 0.2 (16.2)
Gain on net investment hedge 37.0 57.4
Net gain on cash flow hedge - 0.3
Share of other comprehensive (losses)/gains of discontinued operations (4.4) 9.4
2.2 2.0
Items that will not subsequently be recycled through profit or loss
Net actuarial gains/(losses) on pension schemes 0.1 (0.2)
Other comprehensive income/(loss) for the period 2.3 (18.3)
Total comprehensive loss from continuing operations (17.6) (44.8)
Total comprehensive (loss)/profit from discontinued operations (496.8) 25.3
Total comprehensive loss for the period (514.4) (19.5)
1 For the six months ended 30 June 2023 this relates to the sale of
Italie Deux and Italik and the derecognition of O'Parinor as described in note
8.
Consolidated balance sheet
As at 30 June 2024 - unaudited
Note 30 June 2024 31 December 2023
Unaudited Audited
£m £m
Non-current assets
Investment properties 12 1,232.9 1,396.2
Interests in leasehold properties 31.7 32.7
Right-of-use assets 0.7 3.9
Plant and equipment 0.5 0.9
Investment in joint ventures 13C 1,177.3 1,193.2
Investment in associate 14C - 1,115.0
Other investments 9.2 8.8
Trade and other receivables 0.6 1.9
Restricted monetary assets 21.4 21.4
2,474.3 3,774.0
Current assets
Trade and other receivables 15 62.9 74.1
Derivative financial instruments 1.1 5.2
Restricted monetary assets - 2.2
Cash and cash equivalents 433.9 472.3
497.9 553.8
Assets held for sale 9D 605.7 -
1,103.6 553.8
Total assets 3,577.9 4,327.8
Current liabilities
Trade and other payables (80.3) (129.8)
Obligations under head leases (0.2) (0.1)
Loans 16A - (108.6)
Tax (0.2) (0.3)
Derivative financial instruments (0.2) (2.3)
(80.9) (241.1)
Liabilities associated with assets held for sale 9D (22.7) -
(103.6) (241.1)
Non-current liabilities
Trade and other payables (25.8) (55.5)
Obligations under head leases (36.3) (37.3)
Loans 16A (1,502.9) (1,515.9)
Deferred tax (0.4) (0.4)
Derivative financial instruments (1.2) (15.0)
(1,566.6) (1,624.1)
Total liabilities (1,670.2) (1,865.2)
Net assets 1,907.7 2,462.6
Equity
Share capital 250.1 250.1
Share premium 1,563.7 1,563.7
Other reserves 19 112.1 105.5
Retained earnings (9.9) 549.7
Investment in own shares (8.3) (6.4)
Equity shareholders' funds 1,907.7 2,462.6
EPRA net tangible assets value per share 11C 38p 51p
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Six months ended 30 June 2024 - unaudited
Share capital Share premium Other reserves Retained earnings Investment in own shares Equity shareholders' funds
1 2 1
£m £m £m £m £m £m
At 1 January 2024 250.1 1,563.7 105.5 549.7 (6.4) 2,462.6
Foreign exchange translation differences(3) - - (30.4) - - (30.4)
Gain on net investment hedge - - 37.0 - - 37.0
Loss on cash flow hedge - - (0.2) - - (0.2)
Loss on cash flow hedge recycled to net finance costs - - 0.2 - - 0.2
Share of other comprehensive loss of associates(3) - - - (4.4) - (4.4)
Net actuarial gains on pension schemes - - - 0.1 - 0.1
Loss for the period(3) - - - (516.7) - (516.7)
Total comprehensive income/(loss) - - 6.6 (521.0) - (514.4)
Share-based employee remuneration - - - 1.9 - 1.9
Purchase of own shares and treasury shares - - - - (3.4) (3.4)
Cost of shares awarded to employees - - - (1.5) 1.5 -
Dividends - - - (39.0) - (39.0)
At 30 June 2024 250.1 1,563.7 112.1 (9.9) (8.3) 1,907.7
Six months ended 30 June 2023 - unaudited
Share capital Share premium Other reserves Retained earnings Investment in own shares Equity shareholders' funds
1 2 1
£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 net exchange gains on disposal of overseas property interests - - (20.1) - - (20.1)
Foreign exchange translation differences(3) - - (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(3) - - - 9.4 - 9.4
Net actuarial losses on pension schemes - - - (0.2) - (0.2)
Loss for the period(3) - - - (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
1 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'.
2 Other reserves comprise Translation, Net investment and Cash flow
hedge reserves.
3 Relates to continuing and discontinued operations.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Year ended 31 December 2023 - audited
Share capital Share premium Other reserves Retained earnings Investment in own shares Equity shareholders' funds
1 2 1
£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(3) - - (49.3) - - (49.3)
Gain on net investment hedge - - 39.3 - - 39.3
Loss on cash flow hedge - - (3.4) - - (3.4)
Loss on cash flow hedge recycled to net finance costs - - 3.6 - - 3.6
Share of other comprehensive loss of associates(3) - - - (8.8) - (8.8)
Net actuarial losses on pension schemes - - - (1.4) - (1.4)
Loss for the period(3) - - - (51.4) - (51.4)
Total comprehensive loss - - (29.9) (61.6) - (91.5)
Share-based employee remuneration - - - 3.6 - 3.6
Cost of shares awarded to employees - - - (2.4) 2.4 -
Dividends - - - (35.9) - (35.9)
At 31 December 2023 250.1 1,563.7 105.5 549.7 (6.4) 2,462.6
Consolidated cash flow statement
Six months ended 30 June 2024 - unaudited
Note Six months ended Six months ended
30 June 2024 30 June 2023
Unaudited Unaudited
£m £m
Profit from operating activities 11.2 18.7
Net movements in working capital and restricted monetary assets 20A (17.3) (2.1)
Non-cash items 20A 3.0 5.1
Cash (utilised in)/generated from operations (3.1) 21.7
Interest received 20.3 11.7
Interest paid (53.6) (47.6)
Debt and loan facility issuance and extension fees (0.8) (0.6)
Tax paid ‒ (0.1)
Distributions and other receivables from joint ventures 23.9 48.9
Cash flows from operating activities (10.2) 34.0
Investing activities
Capital expenditure (8.0) (10.2)
Sale of properties (including trading properties) 116.3 47.8
Sale of investments in joint ventures ‒ 69.0
Sale of investments in associates ‒ 96.7
Advances to joint ventures (4.4) (5.9)
Distributions and capital returns received from associates 12.3 42.7
Cash flows from investing activities 116.2 240.1
Financing activities
Proceeds from award of own shares ‒ 0.1
Purchase of own shares (3.4) -
Repayment of borrowings (91.9) (11.9)
Equity dividends paid 18 (45.0) -
Cash flows from financing activities (140.3) (11.8)
(Decrease)/Increase in cash and cash equivalents (37.4) 262.3
Opening cash and cash equivalents 20B 472.3 218.8
Exchange translation movement 20B (1.0) (1.5)
Closing cash and cash equivalents 20B 433.9 479.6
The cash flows above relate to continuing and discontinued operations. See
note 9 for further information on discontinued operations.
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 2024 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
2023, 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 28 February
2024 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 2024 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, or are not expected to have
a material, impact on the Group's results or net assets.
The interim financial statements have been prepared on the basis of the
accounting policies as set out in the Group's audited financial statements for
the year ended 31 December 2023 which were prepared in accordance with IFRS
(as adopted by the UK) and have been applied consistently year on year. The
only exception to this relates to the classification and measurement of assets
as 'held for sale' and the presentation of a 'discontinued operation'
associated with the disposal of the Group's interest in Value Retail as
explained in note 9. The Group's accounting policy for assets held for sale
is that a property or investment may be classed as 'held for sale' if it meets
the criteria of IFRS 5 at the balance sheet date. If an investment in a joint
venture or associate is reclassified to assets held for sale, equity
accounting ceases on the date of reclassification and any subsequent gains or
losses on remeasurement are recognised in the income statement as impairment
gains or losses and presented in Loss from discontinued operations. In the
event that assets held for sale form an identifiable business segment, the
results for both the current and prior year are reclassified as 'discontinued
operations'.
C. SIGNIFICANT JUDGEMENTS AND ESTIMATES
Estimation uncertainty
As disclosed in the Group's audited financial statements for the year ended 31
December 2023 the Group's key sources of estimation uncertainty continues to
relate to property valuations 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.
Inputs to the valuations, some of which are 'unobservable' as defined by IFRS
13, include capitalisation yields (nominal equivalent yield) and market rental
income (ERV). These 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
12A.
Significant judgements
The Group's significant accounting judgements are consistent with those
disclosed in the Group's audited financial statements for the year ended 31
December 2023 with the exception of the reclassification to assets held for
sale of the Group's investment in Value Retail as explained below.
Value Retail - Reclassification to assets held for sale and discontinued
operation
On 22 July 2024, the Group announced it had entered into a binding sale
agreement for the disposal of its entire interests in Value Retail. The
Group has accounted for its Value Retail interests as an associated
undertaking, however at the balance sheet date the Directors concluded that,
given the significant progress made towards agreeing and signing a sale
agreement, that a sale was "highly probable" and hence the Group's interests
were judged to have met the criteria outlined in IFRS 5 to be reclassified to
"held for sale" within current assets.
On reclassification to "held for sale", in accordance with IFRS 5, the Group's
interests have been re-measured to the lower of the carrying amount and
estimated fair value less sale costs at completion, which is expected in H2
24. The fair value was based on the contracted sale proceeds and the
remeasurement resulted in a £483m impairment loss being recognised in the
period.
In addition, the sale of Value Retail represents a separate major line of
business and hence has been treated as a discontinued operation and the
results for the current and prior financial periods have been separately
disclosed from the continuing segments of the business.
D. GOING CONCERN
Introduction
The interim financial statements for the period ended 30 June 2024 have been
prepared on a going concern basis. In order to determine this outcome the
Directors have undertaken a detailed assessment of the Group's projected
financial position over the period to 31 December 2025 ('the going concern
period'). This period has been selected as it coincides with the first six
monthly covenant test date for the Group's unsecured borrowing facilities
falling due after the minimum 12 months going concern period.
Financial position
The Group has a robust financial position from both a liquidity and debt
covenant perspective. At 30 June 2024, on a proportionally consolidated basis
excluding Value Retail, liquidity was £1,138m, comprising £538m of cash and
£600m of undrawn revolving committed facilities this compares to gross
unsecured debt maturing over the going concern period of £338m.
The Group has three principal unsecured debt covenants: gearing, interest
cover and unencumbered asset ratio, with the latter covenant only applicable
to the Group's private placement notes. The key variables impacting the three
principal covenants are net asset movements (due principally to property
valuation changes) for the gearing covenant; property valuations for the
unencumbered asset ratio covenant; and changes in net rental income for the
interest cover covenant. Net interest cost also impacts the interest cover
ratio, although at 30 June 2024, 100% of the Group's gross debt is at fixed
interest rates, which limits the volatility of this element of the covenant
over the going concern period.
Level of reduction ('headroom') in key variable at each date to reach covenant
threshold
Covenant 30 June 2024 Key variable(1) Headroom
Gearing 64.7% Property valuations 42%
Unencumbered assets ratio 2.10x Property valuations ‒ Unencumbered assets only 28%
Interest cover 4.21x Net rental income 70%
1 Managed portfolio calculated on a proportionally consolidated
basis
The Group also has exposure to secured borrowings in its Dundrum joint venture
and its Value Retail investment. At 30 June 2024, the Group's share of loans
which mature over the going concern period totalled £416m. 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. While the loan
secured against Dundrum matures in September 2024, the JV is in advanced
stages to refinance the loan and expects a new loan to be signed in early
August 2024. Value Retail also has two loans which mature over the going
concern period.
Assessment approach
The assessment was based on the Group's 2024 Business Plan and contained
projected earnings, balance sheet, cash flow, liquidity and covenant metrics
including headroom. The assessment also took into account the Group's
principal risks, with "Investment markets & valuations" and "Capital
structure" being the key risks from a going concern perspective due to their
intrinsic link to the Group's debt covenants and liquidity. The assessment
did not include the future proceeds from the sale of Value Retail which was
announced on 22 July and recognised as an asset held for sale at 30 June 2024
(see note 9).
The assessment included various stress tests based on valuation yields and
ERVs as at 30 June 2024 and incorporated the following modelling assumptions:
· the redemption of the Group's senior private placement notes
which totalled £75m at 30 June 2024. The Group has the right to redeem these
notes in order to avoid a breach of the unencumbered asset ratio
· the derecognition of secured borrowings and assets held by the
Dundrum joint venture and Value Retail assuming these loans were not
refinanced or repaid at maturity and lenders took enforcement action
Having reviewed the results of the stress tests, current external forecasts,
recent precedents and plausible future adverse impacts to valuations and net
rental income, the Directors are satisfied that the Group has sufficient
liquidity and covenant headroom over the going concern period.
Conclusion
The assessment process demonstrated that the Group is forecast to remain in a
robust financial position and will have adequate resources to continue in
operation over the going concern period to 31 December 2025. Accordingly, the
Directors have concluded that the interim financial statements should be
prepared on a going concern basis.
E. 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 2024 30 June 2023
Quarter 1 €1.168 €1.133
Quarter 2 €1.172 €1.150
Consolidated balance sheet (closing rate): 30 June 2024 31 December 2023
Period end rate €1.179 €1.153
2. PROFIT/(LOSS) FOR THE PERIOD
As described in the Financial Review and note 3, for management reporting
purposes the Group evaluates the performance of its business 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 with its properties or entities which are wholly owned or in joint
operations ('Reported Group').
Adjusted earnings, which are 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 the Group's loss for the period under IFRS to Adjusted earnings.
Six months ended 30 June 2024
Proportionally consolidated
Reported Group Share of Property interests Sub-total before adjustments Capital and other adjustments(1) Adjusted
Note £m £m £m £m £m
Revenue 4 59.4 63.5 122.9 - 122.9
Gross rental income(2) 3A, 4 40.1 54.3 94.4 - 94.4
Service charge income 4 14.0 9.2 23.2 - 23.2
54.1 63.5 117.6 - 117.6
Service charge expenses (16.2) (10.7) (26.9) - (26.9)
Cost of sales 5 (7.8) (10.2) (18.0) - (18.0)
Net rental income 30.1 42.6 72.7 - 72.7
Gross administration costs 5 (24.2) - (24.2) 2.7 (21.5)
Other income 4 5.3 0.1 5.4 - 5.4
Net administration expenses (18.9) 0.1 (18.8) 2.7 (16.1)
Profit from operating activities 11.2 42.7 53.9 2.7 56.6
Revaluation losses on properties 12 (16.8) (31.0) (47.8) 47.8 -
(Loss)/Profit on sale of properties 8 (11.0) 0.2 (10.8) 10.8 -
Costs associated with pension scheme wind-up (0.5) - (0.5) 0.5 -
Change in fair value of other investments 0.5 - 0.5 (0.5) -
Profit on sale of joint ventures and associates 0.2 (0.2) - - -
Other net losses (10.8) - (10.8) 10.8 -
Share of results of joint ventures 13B 9.6 (9.6) - - -
Operating (loss)/profit (6.8) 2.1 (4.7) 61.3 56.6
Net finance costs 6 (17.2) (2.1) (19.3) 0.6 (18.7)
(Loss)/Profit before tax (24.0) - (24.0) 61.9 37.9
Tax charge 7 (0.1) - (0.1) - (0.1)
(Loss)/Profit from continuing operations (24.1) - (24.1) 61.9 37.8
(Loss)/Profit from discontinued operations(3) 9B (492.6) - (492.6) 504.3 11.7
(Loss)/Profit for the period (516.7) - (516.7) 566.2 49.5
1 Adjusting items, described above as 'Capital and other adjustments',
are set out in note 10A.
2 Proportionally consolidated figure includes £5.5m (six months ended
30 June 2023: £6.2m) of contingent rents calculated by reference to
occupiers' turnover.
3 Discontinued operations reflect Value Retail, see note 9 for further
details.
Six months ended 30 June 2023
Proportionally consolidated
Reported Group Share of Property interests Sub-total before adjustments Capital and other adjustments(1) Adjusted
Note £m £m £m £m £m
Revenue 4 69.1 67.6 136.7 - 136.7
Gross rental income(2) 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 5 (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 5 (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 (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 13B 7.6 (7.6) - - -
Impairment of joint venture (22.1) - (22.1) 22.1 -
Share of results of associates 14A 1.2 (1.2) - - -
Operating (losses)/profit (1.8) 3.6 1.8 65.8 67.6
Net finance costs 6 (31.5) (3.6) (35.1) 10.0 (25.1)
(Loss)/Profit before tax (33.3) - (33.3) 57.1 42.5
Tax charge 7 - - - - -
(Loss)/Profit from continuing operations (33.3) - (33.3) 38.4 42.5
Profit from discontinued operations(3) 9B 32.1 - 32.1 18.7 13.4
(Loss)/Profit for the period (1.2) - (1.2) 57.1 55.9
3. SEGMENTAL ANALYSIS
The Group's reportable segments are determined by the internal performance
reported to the Chief Operating Decision Makers which has been determined to
be the Group Executive Committee. Such reporting is both by sector and
geographic location as these demonstrate different characteristics and risks,
are managed by separate teams and are the basis on which resources are
allocated.
As described in the Financial Review, the Group evaluates the performance of
its portfolio by aggregating its wholly owned properties and joint operations
in the 'Reported Group' with its ownership 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 from the Group's Managed portfolio.
The Group's activities presented on a proportionally consolidated basis
including Share of Property interests are:
· Flagship destinations
· Developments and other
As explained in notes 1C and 9, following the announcement by the Group on 22
July 2024 that it had entered into a binding agreement for the disposal of its
entire interests in Value Retail, this segment has been re-presented as a
discontinued operation and has been excluded from the "Investment property by
segment" table below.
Total assets are not monitored by segment and resource allocation is based on
the distribution of property assets between segments.
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 2024 30 June 2023 30 June 2024 30 June 2023
£m £m £m £m
Flagship destinations
UK 39.4 43.5 30.4 33.9
France 27.0 32.4 21.6 26.9
Ireland 19.5 20.0 17.1 18.3
85.9 95.9 69.1 79.1
Developments and other 8.5 10.4 3.6 6.0
Managed portfolio - proportionally consolidated 94.4 106.3 72.7 85.1
Less Share of Property interests - continuing operations (54.3) (58.4)
Reported Group - continuing operations 40.1 47.9
B. Investment property assets by segment
30 June 2024 31 December 2023
Property valuation Capital expenditure Revaluation gains/(losses)(1) Property valuation Capital expenditure Revaluation
losses(1)
£m £m £m £m £m £m
Flagship destinations
UK 758.9 5.1 12.1 863.1 13.9 (21.8)
France 981.4 6.6 0.1 1,003.3 14.3 (15.2)
Ireland 568.4 1.2 (49.1) 629.7 5.4 (37.5)
2,308.7 12.9 (36.9) 2,496.1 33.6 (74.5)
Developments and other 270.5 3.4 (10.9) 280.0 13.3 (44.6)
Managed portfolio - proportionally consolidated 2,579.2 16.3 (47.8) 2,776.1 46.9 (119.1)
Less Share of Property interests(2) (1,346.3) (8.3) 31.0 (1,379.9) (27.3) 73.9
Reported Group - continuing operations 1,232.9 8.0 (16.8) 1,396.2 19.6 (45.2)
1 Continuing operations
2 The property valuation of Share of Property interests comprises UK
Flagship destinations: £758.9m (2023: £741.8m); France flagship
destinations: £nil (2023: £nil), Ireland flagship destinations: £436.2m
(2023: £485.2m) and Developments and other £151.2m (2023: £152.9m).
4. REVENUE
Six months ended Six months ended
30 June 2024 30 June 2023
Note £m £m
Base rent 31.7 36.4
Turnover rent 1.1 2.0
Car park income(1) 4.5 5.3
Lease incentive recognition 1.4 1.3
Other rental income 1.4 2.9
Gross rental income 2 40.1 47.9
Service charge income(1) 2 14.0 13.0
Other income
- Property fee income(1) 2.9 4.8
- Joint venture and associate management fees(1) 2.4 3.4
5.3 8.2
Total - continuing operations 59.4 69.1
1 Revenue for these categories amounted to £23.8m (six months ended
30 June 2023: £26.5m) and is recognised under IFRS 15 'Revenue from Contracts
with Customers'. All other revenue is recognised in accordance with IFRS 16
'Leases'.
5. COSTS
Six months ended Six months ended
30 June 2024 30 June 2023
Note £m £m
Cost of sales
Ground rents payable 0.5 0.5
Inclusive lease costs recovered through rent 0.7 1.3
Other property outgoings 6.6 5.8
7.8 7.6
Gross administration costs
Employee costs 13.9 17.1
Depreciation 0.8 2.1
Other administration costs 6.8 6.4
Business transformation costs 10A 2.7 3.2
24.2 28.8
Total - continuing operations 32.0 36.4
6. NET FINANCE COSTS
Six months ended Six months ended
30 June 2024 30 June 2023
£m £m
Finance income
Interest receivable on derivatives 5.8 7.5
Bank and other interest receivable 12.4 6.0
18.2 13.5
Finance costs
Interest on bank loans and overdrafts (2.2) (2.1)
Interest on bonds and related charges (30.3) (29.1)
Interest on senior notes and related charges (2.0) (2.7)
Interest on obligations under head leases and other lease obligations (1.1) (1.2)
Other interest payable (0.2) (0.1)
Gross interest costs (35.8) (35.2)
Fair value gains/(losses) on derivatives 0.4 (9.8)
(35.4) (45.0)
Net finance costs - continuing operations (17.2) (31.5)
7. TAX CHARGE
Six months ended Six months ended
30 June 2024 30 June 2023
£m £m
Foreign current tax 0.1 -
Tax charge - continuing operations 0.1 -
The Group's tax charge remains low because it has tax exempt status in its
principal operating countries. The Group has been a REIT in the UK since 2007
and a SIIC in France since 2004. These tax regimes exempt the Group's property
income and gains from corporate taxes, provided a number of conditions in
relation to the Group's activities are met. These conditions include, but are
not limited to, distributing at least 90% of the Group's UK tax exempt profits
as property income distributions (PID) with equivalent tests of 95% on French
tax exempt property profits and 70% of tax exempt property gains. The residual
businesses in both the UK and France are subject to corporation tax as normal.
The Irish assets are held in a QIAIF which provides similar tax benefits to
those of a UK REIT but which subjects dividends and certain excessive interest
payments to a 20% withholding tax. The Group is committed to remaining in
these tax exempt regimes.
The Group operates in a number of jurisdictions and is subject to periodic
reviews and challenges by local tax authorities on a range of tax matters
during its normal course of business. Tax impacts can be uncertain until a
conclusion is reached with the relevant tax authority or through a legal
process. The Group uses in-house expertise when assessing uncertain tax
positions and seeks the advice of external professional advisors where
appropriate. The Group believes that its tax liability accruals are adequate
for all open tax years based on its assessment of many factors, including tax
laws and prior experience.
8. DISPOSALS AND IMPAIRMENT ON DERECOGNITION OF JOINT VENTURES
Six months ended 30 June 2024
Disposals
On 15 March 2024 the Group raised gross proceeds of £111m from the disposal
of its 100% interest in Union Square, Aberdeen, which was 8% below its 31
December 2023 book value. Also, in March 2024, the Group completed the sale of
the ancillary wholly owned property at O'Parinor for £6m, in line with the 31
December 2023 book value.
These disposals, in addition to other properties net credit adjustments to
selling costs of £0.2m, resulted in a total net loss on disposal of £10.8m.
Six months ended 30 June 2023
Disposals
On 31 March 2023, the Group raised gross proceeds of €164m (£144m) from the
disposal of its 25% associate stake in Italie Deux in Paris and the wholly
owned Italik extension. 75% of the Italik extension had been classified as a
trading property up to the point of disposal.
On 21 April 2023, the Group completed the sale of its 50% joint venture
investment in Centrale and Whitgift in Croydon for gross proceeds of £70m.
Also during the year the Group raised further gross proceeds of £2m from the
sale of ancillary non-core land.
In total these disposals resulted in a net loss on disposal of £17.3m.
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.
At that point the Group 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.
9. DISCONTINUED OPERATIONS AND ASSETS AND LIABILITIES CLASSIFIED AS HELD FOR
SALE
A. VALUE RETAIL DISPOSAL
On 22 July 2024, the Group announced it had entered into a binding sale
agreement for the disposal of its entire interests in Value Retail for gross
proceeds of €705m (£598m at 30 June 2024 exchange rate). The Group has
historically accounted for its Value Retail interests as an associated
undertaking, however at the balance sheet date the Directors concluded that,
given the significant progress made towards agreeing and signing the sale
agreement, that a sale was "highly probable" and hence the Group's interests
were judged to have met the criteria outlined in IFRS 5 to be reclassified to
being "held for sale" within current assets.
On reclassification to an asset "held for sale", in accordance with IFRS 5,
the Group's interests have been re-measured to the lower of the carrying
amount and estimated fair value less sale costs at completion, which is
expected in H2 24. The fair value was based on the contracted sale proceeds
less estimated transaction costs, including tax, of £15m, and the
remeasurement resulted in a £483.0m impairment loss being recognised in the
period. The fair value represents a Level 2 measurement basis as defined in
IFRS 13 (see note 17).
In addition, the sale of Value Retail represents a separate major line of the
business and hence has been treated as a discontinued operation and the
results for the current and prior financial periods have been separately
disclosed from the continuing segments of the business.
B. (LOSS)/PROFIT FOR THE PERIOD
Six months ended Six months ended
30 June 2024 30 June 2023
£m £m
Gross rental income 80.8 73.8
Net rental income 58.2 52.7
Administration expenses (28.1) (25.8)
Profit from operating activities 30.1 26.9
Revaluation (losses)/gains on properties (24.9) 26.0
Impairment recognised on reclassification to held for sale (483.0) -
Operating (loss)/profit (477.8) 52.9
Interest costs (19.4) (16.3)
Fair value losses on derivatives (2.4) (4.9)
Fair value gains on participative loans - other movement 2.4 3.4
Fair value gains on participative loans - revaluation movement 2.2 10.4
Net finance costs (17.2) (7.4)
(Loss)/Profit before tax (495.0) 45.5
Current tax charge (1.7) (0.6)
Deferred tax credit/(charge) 4.1 (12.8)
(Loss)/Profit for the period (492.6) 32.1
Adjustments for adjusted earnings (note 10A) 504.3 (18.7)
Adjusted earnings for the period 11.7 13.4
Figures above reflect the Group's share of Value Retail's results, except the
impairment recognised on reclassification to held for sale which relates to
the Reported Group.
At 30 June the Group had an interest of 40% (FY 23: 40%) calculated based on a
net asset basis (adjusted for participative loans).
C. CASH FLOWS
Six months ended Six months ended
30 June 2024 30 June 2023
£m £m
Distributions and capital returns received from associates 12.3 42.7
Cash inflows from investing activities 12.3 42.7
There were no cash flows from operating or financing activities in current or
prior periods.
D. SUMMARY OF ASSETS AND LIABILITIES ASSOCIATED WITH ASSETS HELD FOR SALE
30 June 2024
Reported Investment in associates(2) Total
£m
£m
Group(1)
£m
Non-current assets
Investment properties - 1,753.9 1,753.9
Other non-current assets 1.7 96.2 97.9
1.7 1,850.1 1,851.8
Current assets
Cash and cash equivalents - 61.7 61.7
Other current assets - 33.7 33.7
- 95.4 95.4
Total assets 1.7 1,945.5 1,947.2
Current liabilities
Loans - (192.9) (192.9)
Other payables - (54.7) (54.7)
- (247.6) (247.6)
Non-current liabilities
Loans - (557.2) (557.2)
Participative loan - (97.6) (97.6)
Other payables, including deferred tax (22.7) (166.5) (189.2)
(22.7) (821.3) (844.0)
Total liabilities (22.7) (1,068.9) (1,091.6)
Net assets (21.0) 876.6 855.6
Reverse participative loans - 210.4 210.4
Net asset value pre-impairment(3) (21.0) 1,087.0 1,066.0
Impairment recognised on reclassification to held for sale (483.0)
Net assets held for sale (as presented on the consolidated balance sheet) 583.0
Split:
Assets held for sale 605.7
Liabilities held for sale (22.7)
1 Reported Group includes a €2.0m (£1.7m) loan to an intermediate
holding company of Value Retail and £22.7m of distributions received in
advance from Value Retail, both items are included in the sale.
2 At Group share.
3 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.
The impairment loss of £483.0m was calculated based on gross proceeds in the
sale agreement, less expected transaction costs, including tax, of £15m,
compared to the value of the net assets shown above, including the investment
properties which have been remeasured to fair value at the date of
reclassification.
In addition, the cumulative other comprehensive income in relation to foreign
exchange and hedge reserve movements relating to the Group's investment in
Value Retail will be recycled to the income statement on completion of the
disposal.
10. PERFORMANCE MEASURES - (LOSS)/EARNINGS AND NET ASSETS
As explained on page 9 of the Financial Review, the Group uses a number of
alternative performance measures ('APMs'), being financial measures not
specified under IFRS, to monitor the performance of the business. In
addition to the IFRS figures, we present EPRA, Headline and Adjusted earnings
and three EPRA net asset measures. The reconciliation of each of these
measures to IFRS is presented below:
A. Earnings measures (continuing and discontinued operations)
Six months ended Six months ended
30 June 2024 30 June 2023
£m £m
Footnote
Loss for the period - total A (516.7) (1.2)
Adjustments:
Revaluation losses on managed portfolio 47.8 43.8
Disposals:
- Loss on sale of properties 1 10.8 17.3
- Recycled exchange gains on disposal of overseas property interests 2 ‒ (20.1)
Joint venture related:
- Impairment of joint venture 3 ‒ 22.1
Value Retail related (discontinued operation):
- Revaluation losses/(gains) 24.9 (26.0)
- Deferred tax 4 (4.1) 12.8
- Impairment on reclassification to an asset held for sale 5 483.0 ‒
Sub-total: Adjustments for Headline earnings B 562.4 49.9
Value Retail related (discontinued operation):
- Change in fair value of derivatives 4, 6 2.4 4.9
- Change in fair value of participative loans - revaluation movement 4, 6 (2.2) (10.4)
- Change in fair value of financial asset 4, 6 0.3 ‒
Included in net finance costs:
- Change in fair value of derivatives 6 0.6 10.0
- Change in fair value of other investments 7 (0.5) (0.3)
Sub-total: Adjustments for EPRA earnings C 563.0 54.1
Included in profit from operating activities:
- Costs associated with pension scheme wind-up 8 0.5 ‒
- Business transformation costs 9 2.7 3.2
- Change in provision for amounts not yet recognised in the income statement 10 ‒ (0.2)
Total: Adjustments for adjusted earnings D 566.2 57.1
Headline earnings A+B 45.7 48.7
EPRA earnings A+C 46.3 52.9
Adjusted earnings A+D 49.5 55.9
1 As shown in note 2, includes loss on sale of properties of £11.0m
(HY 23: £0.3m profit) and profit on sale of joint ventures and associates of
£0.2m (HY 23: £17.6m loss). Also see note 8 for further details.
2 For HY 23 exchange gains previously recognised in equity until
disposal in relation to Italie Deux and O'Parinor .
3 For HY 23 impairment resulting from derecognition of the O'Parinor
joint venture, see note 8 for details.
4 In accordance with EPRA guidance, the tax effects of EPRA adjustments
(including those for disposals) is excluded .
5 Impairment charge recognised on reclassification of Group's interests
in Value Retail at 30 June 2024, see note 9 for details.
6 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.
7 Relates to the fair value movement based on the fair value of the
underlying net assets of the Group's 7.3% investment in VIA Outlets
Zweibrücken B.V.
8 As explained on page 16, in the first half of 2024 the Group wound up
its principal defined benefit pension scheme and incurred fees of £0.5m on
this one-off activity which management have determined do not represent the
underlying activities of the Group.
9 Business transformation costs comprise:
Six months ended Six months ended
30 June 2024 30 June 2023
£m £m
Employee severance - 0.8
System related costs 2.3 1.5
Other costs (principally premises related costs) 0.4 0.9
2.7 3.2
Such costs relate to the strategic and operational review undertaken following
the change in management and which is an integral part of the Group's strategy
announced during 2021. The related costs are incremental and do not form part
of underlying trading. These costs have been incurred since the announcement
of the strategy and further transformation activities will take place in 2024.
10 Reflects 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.
B. 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 2024
Footnote Reported Group Share of Property interests Value Retail(1) Total
£m £m £m £m
Reported balance sheet net assets (equity shareholders' funds) 1,907.7 - - 1,907.7
Change in fair value of borrowings 2 30.5 - - 30.5
EPRA NDV 1,938.2
Deduct change in fair value of borrowings 2 (30.5) - - (30.5)
Deferred tax - 50% share 3 0.2 - - 0.2
Fair value of currency swaps as a result of interest rates 4 1.3 - - 1.3
Fair value of interest rate swaps 0.3 (0.4) - (0.1)
EPRA NTA 1,909.1
Deferred tax - remaining 50% share 3 0.2 - - 0.2
Purchasers' costs 5 162.5 - - 162.5
EPRA NRV 2,071.8
31 December 2023
Footnote Reported Group Share of Property interests Value Retail Total
£m £m £m £m
Reported balance sheet net assets (equity shareholders' funds) 2,462.6 - - 2,462.6
Change in fair value of borrowings 2 36.7 (0.2) - 36.5
EPRA NDV 2,499.1
Deduct change in fair value of borrowings 2 (36.7) 0.2 - (36.5)
Deferred tax - 50% share 3 0.2 0.1 100.7 101.0
Fair value of currency swaps as a result of interest rates 4 1.0 - - 1.0
Fair value of interest rate swaps 0.7 (1.3) (22.0) (22.6)
EPRA NTA 2,542.0
Deferred tax - remaining 50% share 3 0.2 - 100.7 100.9
Purchasers' costs 5 302.9 - - 302.9
EPRA NRV 2,945.8
1 Following the reclassification of the Group's investment in Value
Retail as an asset held for sale the EPRA net asset adjustments have been
excluded in the calculations as at 30 June 2024.
2 Applicable for EPRA NDV calculation only and hence the adjustment is
reversed for EPRA NTA and EPRA NRV.
3 As per the EPRA guidance we have chosen to exclude of 50% of deferred
tax for EPRA NTA purposes .
4 Excludes impact of foreign exchange .
5 Represents property transfer taxes and fees payable should the Group's
entire property portfolio be acquired at period end market rates. (June 2024
excludes Value Retail, per footnote 1 above, and December 2023 includes Value
Retail).
11. (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 the (loss)/profit for the period calculation on an IFRS,
Headline, EPRA and Adjusted basis as shown in note 10A 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.
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 metrics comprise net assets calculated in accordance with
EPRA guidelines, as set out in note 10B, divided by the number of shares in
issue at the period end.
A. Number of ordinary shares for per share calculations
Six months ended Six months ended
30 June 2023
30 June 2024
Weighted average number of shares million million
For purposes of basic EPS 4,975.7 4,969.5
Effect of potentially dilutive shares (share options) 11.5 13.4
For purposes of diluted EPS (excluding Reported Group) 4,987.2 4,982.9
31 December 2023
30 June 2024
million million
Shares in issue (for purposes of net asset per share calculations) 5,002.3 5,002.3
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
30 June 2024 30 June 2023 30 June 2024 30 June 2023 pence 30 June 2024 30 June 2023 pence
£m £m pence pence
Continuing operations (24.1) (33.3) (0.5)p (0.7)p (0.5)p (0.7)p
Discontinued operations (492.6) 32.1 (9.9)p 0.7p (9.9)p 0.7p
IFRS (516.7) (1.2) (10.4)p (0.0)p (10.4)p (0.0)p
Headline 45.7 48.7 0.9p 1.0p 0.9p 1.0p
EPRA 46.3 52.9 0.9p 1.1p 0.9p 1.1p
Adjusted 49.5 55.9 1.0p 1.1p 1.0p 1.1p
C. Net Asset Value per share
Net asset value Net asset value per share
30 June 2024 31 December 2023 30 June 2024 31 December 2023
£m £m pence pence
EPRA NDV 1,938.2 2,499.1 39p 50p
EPRA NTA 1,909.1 2,542.0 38p 51p
EPRA NRV 2,071.8 2,945.8 41p 59p
12. PROPERTIES
30 June 2024 31 December 2023
Investment properties Investment properties Trading Total
properties
£m £m £m £m
At beginning of period 1,396.2 1,461.0 36.2 1,497.2
Revaluation losses (16.8) (45.2) - (45.2)
Capital expenditure 8.0 19.6 - 19.6
Disposals (see note 8) (127.7) (11.9) (36.2) (48.1)
Exchange adjustment (26.8) (27.3) - (27.3)
At end of period 1,232.9 1,396.2 - 1,396.2
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 UK flagships, French flagships, Developments and other properties,
Cushman and Wakefield Brent Cross, Irish flagships, Development and other
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 (including
Group's share of Value Retail)
Valuation Nominal equivalent yield Estimated rental value (ERV)
Proportionally consolidated £m -100bp +100bp +10% -10%
£m £m £m £m
Flagship destinations
- UK 759 110 (85) 76 (76)
- France 982 241 (162) 98 (98)
- Ireland 568 108 (78) 57 (57)
2,309 459 (325) 231 (231)
Developments and other 270 n/a n/a n/a n/a
Managed portfolio 2,579 n/a n/a n/a n/a
B. Joint operations
Investment properties included a 50% interest in the Ilac Centre and a 50%
interest in Pavilions, totalling £132.2m (31 December 2023: £144.5m). These
properties are jointly controlled in co-ownership with Irish Life Assurance
plc.
13. INVESTMENT IN JOINT VENTURES
The Group's investments in joint ventures form part of the Share of Property
interests to arrive at management's analysis of the Group on a proportionally
consolidated basis as explained in note 3 and set out in note 2.
The Group and its partners invest principally by way of equity investment.
However, where applicable, non-equity (loan) balances have been included
within non-current other payables as a liability of the joint venture. Joint
ventures comprise prime urban real estate consisting of Flagship destinations
and Developments and other properties.
A. Investments at 30 June 2024
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%
In the first half of 2023, and as explained in note 8, the Group disposed of
its 50% interest in Croydon and also derecognised its 50% investment in
Highcross and 25% investment in O'Parinor. The results of disposals of
interests in joint ventures are included up to the point of disposal.
B. Results
Group share Six months ended Six months ended
30 June 2024 30 June 2023
£m £m
Gross rental income 54.3 57.2
Net rental income 42.6 44.8
Administration income/(expenses) 0.1 (0.1)
Profit from operating activities 42.7 44.7
Revaluation losses on properties (31.0) (33.5)
Operating profit 11.7 11.2
Finance income 2.8 1.2
Finance costs (4.9) (4.8)
Profit for the period - continuing operations 9.6 7.6
C. Assets and liabilities
Group share 30 June 2024 31 December 2023
£m
£m
Non-current assets
Investment properties 1,346.3 1,379.9
Other non-current assets 16.5 16.7
1,362.8 1,396.6
Current assets
Cash and cash equivalents 103.5 97.3
Other current assets 27.4 23.6
130.9 120.9
Current liabilities
Loans - secured (254.5) (260.0)
Other payables (44.9) (46.0)
(299.4) (306.0)
Non-current liabilities
Obligations under head leases (15.8) (15.8)
Other payables (1.2) (2.5)
(17.0) (18.3)
Net assets 1,177.3 1,193.2
D. Reconciliation of movements in investment in joint ventures
30 June 2024 31 December 2023
Note £m £m
At beginning of period 1,193.2 1,342.4
Share of results of joint ventures 9.6 9.4
Advances 4.4 8.3
Cash distributions (including interest)(1) (19.6) (55.0)
Other receivables (1.9) (6.8)
Disposals 8 ‒ (98.9)
Exchange and other movements (8.4) (6.2)
At end of period 1,177.3 1,193.2
1 Comprises distributions of £13.7m (2023: £47.7m) and interest of £5.9m
(2023: £7.3m).
14. INVESTMENT IN ASSOCIATES
As explained in note 9 the Group's investment in Value Retail was reclassified
as an "asset held for sale" with effect from 30 June 2024 and the Group's
share of results from Value Retail have been reclassified to discontinued
operations. Subsequently, on 22 July 2024 the Group announced that it had
entered into a binding agreement for the disposal of its entire interests in
Value Retail.
The Group's other associate, a 25% stake in Italie Deux, Paris was sold in
March 2023. The results of this investment, up until its disposal, formed 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.
A. Results
Six months ended 30 June 2024 Six months ended 30 June 2023
Group share Total Italie Deux
£m
£m
Gross and net rental income ‒ 1.2
Profit for the period ‒ 1.2
B. Assets and liabilities
30 June 2024 31 December 2023
Group share Value Retail Value Retail
£m
£m
Non-current assets
Investment properties ‒ 1,885.7
Other non-current assets ‒ 93.0
‒ 1,978.7
Current assets
Cash and cash equivalents ‒ 64.4
Other current assets ‒ 43.2
‒ 107.6
Total assets ‒ 2,086.3
Current liabilities
Loans ‒ (87.8)
Other payables ‒ (103.2)
‒ (191.0)
Non-current liabilities
Loans ‒ (706.1)
Participative loan ‒ (98.5)
Other payables, including deferred tax ‒ (188.1)
‒ (992.7)
Total liabilities ‒ (1,183.7)
Net assets ‒ 902.6
Reverse participative loans ‒ 212.4
‒ 1,115.0
C. Reconciliation of movements in investment in associates
30 June 2024 31 December 2023
Value Retail Value Retail Italie Deux Total
£m
£m
£m
£m
At beginning of period 1,115.0 1,189.4 107.7 1,297.1
Share of results(1) (9.6) 14.8 1.2 16.0
Distributions (14.2) (66.3) - (66.3)
Share of other comprehensive gain of associate(2) (4.4) (8.8) - (8.8)
Disposals ‒ - (108.6) (108.6)
Exchange and other movements 0.2 (14.1) (0.3) (14.4)
Transfer to assets held for sale (1,087.0) ‒ - -
At end of period ‒ 1,115.0 - 1,115.0
1 Share of results classified as discontinued operations, see note 9
for details.
2 Relates to the change in fair value of derivative financial
instruments in an effective hedge relationship within Value Retail.
15. TRADE AND OTHER RECEIVABLES
Included in the current trade and other receivables balance of £62.9m (31
December 2023: £74.1m) 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 - provisioning
30 June 2024 31 December 2023
Gross trade receivables Provision Net trade receivables Gross receivables Provision Net trade receivables
Proportionally consolidated £m £m £m £m £m £m
UK 26.6 (6.5) 20.1 25.7 (6.1) 19.6
France 31.9 (10.2) 21.7 29.5 (10.7) 18.8
Ireland 3.8 (1.8) 2.0 4.6 (1.8) 2.8
Managed portfolio 62.3 (18.5) 43.8 59.8 (18.6) 41.2
Less: Share of Property interests (24.6) 5.2 (19.4) (18.2) 4.6 (13.6)
Reported Group 37.7 (13.3) 24.4 41.6 (14.0) 27.6
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.
16. LOANS
A. Loan profile
Unsecured debt Maturity 30 June 2024 £m 31 December 2023 £m
Senior notes - shown in current liabilities 2024 - 108.6
£338.3m 3.5% sterling bonds 2025 337.5 337.3
Senior notes 2026 59.4 60.7
£211.6m 6% sterling bonds 2026 211.2 211.1
€700.0m 1.75% euro bonds(1) 2027 588.4 600.8
£300.0m 7.25% sterling bonds 2028 293.0 292.2
Senior notes 2028 10.8 11.0
Senior notes 2031 4.9 5.0
Unamortised facility fees (2.3) (2.2)
Total - shown in non-current liabilities 1,502.9 1,515.9
1,502.9 1,624.5
1 The coupon is linked to two sustainability performance targets, both
of which will be tested in December 2025 against a 2019 benchmark. If the
targets are not met, a total of 37.5 basis points per annum, or €2.625m
(£2.3m) per target, will be payable in addition to the final year's coupon.
The Group has made certain assumptions which support not increasing the
effective interest rate, as a result of the possibility of failing to meet the
targets. Planned future initiatives which will assist the Group in achieving
the targets include the introduction of energy efficient projects, the
generation of additional on or off-site energy and driving compliance with
relevant energy performance legislation. The Group continues to make steady
progress against both targets.
B. Undrawn committed facilities
The Group has the following revolving credit facilities (RCF), which are in
sterling unless otherwise indicated, expiring as follows:
Expiry 30 June 2024 31 December 2023
£m £m
£150m RCF signed June 2021 2024 - 50.0
JPY7.8bn RCF signed June 2021 2026 38.2 43.2
£150m RCF signed June 2021(1) 2026 100.0 100.0
£463m RCF signed April 2022(1) 2026 - 463.0
£463m RCF signed April 2022(2) 2027 463.0 ‒
Total(2) 601.2 656.2
1 In the 2023 interim financial statements the £150m RCF signed June
2021 and the £463m RCF signed April 2022 were amalgamated. These separate
RCFs have been split out in the current period to provide additional
disclosure.
2 In April 2024, the Group exercised its option to extend the maturity
of the £463m 2022 RCFs by one year from 2026 to 2027.
3 £0.8m (2023: £0.8m) of RCFs have been utilised (although not drawn)
to support ancillary facilities leaving £600.4m (2023: £655.4m) available to
the Group.
17. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
A. Financial risk management and strategy
The Group's financial risk management strategy seeks to set financial limits
for treasury activity to ensure they are in line with the Group's risk
appetite. The Group's activities expose it to certain financial risks
comprising liquidity risk, market risk (comprising interest rate and foreign
currency risk), credit risk and capital risk.
The Group's treasury function, which operates under treasury policies approved
by the Board, maintains internal guidelines for interest cover, gearing,
unencumbered assets and other credit ratios and both the current and projected
financial position against these guidelines is monitored regularly.
To manage the risks set out above, the Group uses certain derivative financial
instruments to mitigate potentially adverse effects on the Group's financial
performance. Derivative financial instruments are used to manage exposure to
fluctuations in foreign currency exchange rates and interest rates but are not
employed for speculative purposes.
B. Financial instruments held at fair value
Definitions
The Group's financial instruments are categorised by level of fair value
hierarchy prescribed by accounting standards. The different levels are defined
as follows:
· Level 1: quoted prices (unadjusted) in active markets for identical
assets or liabilities.
· Level 2: inputs other than quoted prices included within Level 1 that
are observable for the asset or liability, either directly (actual prices) or
indirectly (derived from actual prices).
· Level 3: inputs for the asset or liability that are not based on
observable market data (from unobservable inputs).
Fair value valuation technique
Financial instrument Valuation technique for determining fair value
Unsecured bonds Quoted market prices
Senior notes Present value of cash flows discounted using prevailing market interest rates
Unsecured bank loans and overdrafts Present value of cash flows discounted using prevailing market interest rates
Fair value of currency swaps and interest rate swaps Present value of cash flows discounted using prevailing market interest rates
Other investments including participative loans to Value Retail Underlying net asset values of the interests in Villages(1)
1 The assets of the Villages comprise mainly investment properties
held at fair value as determined by professional valuers. At 30 June 2024,
the Group's investment in Value Retail was reclassified to an asset held for
sale, see note 9 for details.
Fair value hierarchy analysis
30 June 2024 31 December 2023
Hierarchy Carrying amount Fair value £m Carrying amount Fair value £m
£m £m
Unsecured bonds Level 1 1,430.1 1,401.4 1,441.4 1,407.4
Senior notes Level 2 75.1 71.0 185.3 180.4
Unamortised facility fees Level 2 (2.3) - (2.2) -
Fair value of currency swaps Level 2 - - 11.4 11.4
Borrowings 1,502.9 1,472.4 1,635.9 1,599.2
Fair value of interest rate swaps Level 2 (0.3) (0.3) 0.7 0.7
Participative loans to associates(1) Level 3 210.4 210.4 212.4 212.4
Fair value of other investments Level 3 9.2 9.2 8.8 8.8
1 At 30 June 2024, the Group's investment in Value Retail was reclassified
to an asset held for sale, see note 9 for details.
C: Analysis of movements in Level 3 financial instruments
30 June 2024 31 December 2023
Level 3 financial instruments Participative loans(1) Other investments £m Total Participative loans Other investments £m Total
£m £m £m £m
Balance at beginning of period 212.4 8.8 221.2 205.9 9.8 215.7
Total gains/(losses)
- in share of results of associates 4.6 - 4.6 15.6 - 15.6
- in the consolidated income statement - 0.5 0.5 - (1.1) (1.1)
- in other comprehensive income (4.7) (0.1) (4.8) (4.4) 0.1 (4.3)
Other movements - advances (1.9) - (1.9) (4.7) - (4.7)
Balance at end of period 210.4 9.2 219.6 212.4 8.8 221.2
1 At 30 June 2024, the Group's investment in Value Retail was reclassified
to an asset held for sale, see note 9 for details.
18. DIVIDENDS
The Directors have declared an interim dividend of 0.756 pence per share,
payable on 30 September 2024 to shareholders on the register at the close of
business on 23 August 2024 and represents a 5% increase to the 2023 interim
dividend of 0.72 pence per share. 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.
Cash dividend per share Six months ended 30 June 2024 Six months ended 30 June 2023
£m £m
Prior period dividends
2023 final dividend 0.78p 39.0 -
Cash flow analysis:
Dividends paid(1) 39.0 -
Withholding tax - 2023 interim dividend 6.0 -
45.0 -
2024 interim dividend(2) 0.756p 37.6 -
1 Comprises cash payments after deduction of withholding tax, where
applicable.
2 The 2024 interim dividend was declared on 24 July 2024 and has
therefore not been included as a liability as at 30 June 2024.
19. OTHER RESERVES
30 June 2024 31 December 2023 £m
£m
Translation reserve 421.8 452.2
Net investment hedge reserve (309.7) (346.7)
112.1 105.5
20. NOTES TO THE CASH FLOW STATEMENT
A. Analysis of items included in operating cash flows
Six months ended 30 June 2024 Six months ended 30 June 2023
£m £m
Movements in working capital:
- Decrease in receivables 1.4 12.3
- Decrease in payables (20.9) (10.0)
(19.5) 2.3
Decrease/(Increase) in restricted monetary assets 2.2 (4.4)
Total - continuing operations (17.3) (2.1)
Six months ended 30 June 2024 Six months ended 30 June 2023
£m £m
Non-cash items - continuing operations
Increase in accrued rents receivable (1.4) (1.3)
Decrease in loss allowance provisions(1) 1.6 1.8
Amortisation of lease incentives and other costs 0.3 0.5
Depreciation 0.8 2.3
Other non-cash items including share-based payment charge 1.7 1.8
3.0 5.1
1 Comprises movement in provisions against trade (tenant) receivables
and unamortised tenant incentives.
B. Analysis of movements in net debt
30 June 2024 31 December 2023
Cash and cash equivalents £m Borrowings £m Net debt Cash and cash equivalents £m Borrowings £m Net debt
£m £m
At 1 January 472.3 (1,635.9) (1,163.6) 218.8 (1,677.0) (1,458.2)
Cash flow (37.4) (91.9) (129.3) 254.6 (15.1) 239.5
Change in fair value of currency swaps - (0.4) (0.4) - (1.9) (1.9)
Exchange and other non-cash movements (1.0) 225.3 224.3 (1.1) 58.1 57.0
At end of period 433.9 (1,502.9) (1,069.0) 472.3 (1,635.9) (1,163.6)
21. CONTINGENT LIABILITIES AND COMMITMENTS
A. Contingent liabilities
30 June 2024 31 December 2023
£m £m
Reported Group:
- guarantees given 5.8 23.1
- claims arising in the normal course of business 18.8 15.6
Share of Property Interests - claims arising in the normal course of business 12.4 12.4
37.0 51.1
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 £117m
(31 December 2023: minimum £nil and maximum £122m). 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 2024 31 December 2023
£m £m
Reported Group 2.6 0.4
Share of Property interests 43.9 45.5
46.5 45.9
22. POST BALANCE SHEET EVENTS
On 22 July 2024, the Group announced it had entered into a binding sale
agreement for the disposal of its entire interests in Value Retail to L
Catterton for gross proceeds of c. £600m (€705m). The disposal is subject
to customary antitrust approvals and completion of the sale is expected in H2
24.
In addition to the disposal, the Company is proposing to simplify its share
capital through a 1 for 10 share consolidation, and to increase distributable
reserves by reducing the Company's share premium account. A circular with more
detail and a notice convening a general meeting, at which the necessary
approvals will be sought, will be sent to shareholders in due course.
ADDITIONAL INFORMATION
Table Table
Summary EPRA performance measures 1 Balance sheet information
Balance sheet 12
Managed portfolio analysis Net debt 13
Adjusted net rental income 2 Movement in net debt 14
Rental income (GRI and NRI) 3 Total accounting return ('TAR') 15
Rental data 4
Vacancy 5 Financing metrics
Lease expires and breaks 6 Net debt:EBITDA 16
Top ten tenants 7 Interest cover 17
Cost ratio 8 Gearing 18
Valuation analysis 9 Unencumbered asset ratio 19
Net initial yield 10 Loan to value 20
Capital expenditure 11 EPRA loan to value 21
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 2023. Further information on EPRA
and the EPRA BPR can be found on their website www.epra.com. A summary of our
EPRA metrics are shown in Table 1.
SUMMARY EPRA PERFORMANCE MEASURES
Table 1
Performance measure Note /Table(1)
Six months ended Six months ended
30 June 2023
30 June 2024
Earnings 10A £46.3m £52.9m
Earnings per share (EPS) 11B 0.9p 1.1p
Cost ratio (including vacancy costs) Table 8 41.1% 36.6%
30 June 2024 31 December 2023
Net Disposal Value (NDV) per share 11C 39p 50p
Net Tangible Assets value (NTA) per share 11C 38p 51p
Net Reinstatement Value (NRV) per share 11C 41p 59p
Net Initial Yield (NIY) Table 10 5.9% 5.9%
Topped-up Net Initial Yield Table 10 6.1% 6.3%
Vacancy rate Table 5 6.3% 5.8%
Loan to value Table 20 49.8% 48.1%
1 Note reference is to notes in the interim financial statements and
Table reference is to tables in the Additional Information section.
MANAGED PORTFOLIO ANALYSIS
The information presented in this section is on a management reporting basis
(i.e. proportionally consolidated) for the Group's Managed portfolio.
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 page 63 for the key properties in this segment.
Adjusted net rental income
Table 2
Proportionally consolidated Six months ended Six months ended
30 June 2023
30 June 2024
£m
£m
Base rent 70.1 78.8
Turnover rent 5.5 6.2
Car park income 12.2 12.9
Commercialisation income 3.1 4.8
Surrender premiums 1.7 0.1
Lease incentive recognition 1.2 1.5
Other rental income 0.6 2.0
Gross rental income 94.4 106.3
Ground rents payable (0.8) (0.8)
Inclusive lease costs recovered through rent (2.1) (3.9)
Other property outgoings (18.8) (16.5)
Cost of sales (21.7) (21.2)
Adjusted net rental income 72.7 85.1
Rental income (GRI and NRI)
Table 3
Like-for-like rental income is calculated as the percentage change in GRI/NRI
for investment properties owned throughout both the current and prior periods,
after taking account of exchange translation movements.
A. Gross Rental Income
Six months ended 30 June 2024
Proportionally consolidated Properties Change in Disposals Developments Total
owned throughout 2023/24
like-for-like GRI
£m
and other
%
£m GRI
£m
£m
UK 36.3 3.1 3.1 - 39.4
France 28.0 2.4 0.1 (1.1) 27.0
Ireland 19.5 0.1 - - 19.5
Flagship destinations 83.8 2.1 3.2 (1.1) 85.9
Developments and other - n/a - 8.5 8.5
Managed portfolio(1) 83.8 2.1 3.2 7.4 94.4
Six months ended 30 June 2023
Properties Exchange Disposals Developments Total
owned throughout 2023/24
£m
and other
£m
£m GRI
£m
£m
UK 35.2 - 8.2 - 43.5
France 27.3 0.9 4.3 - 32.4
Ireland 19.5 0.5 - - 20.0
Flagship destinations 82.1 1.4 12.5 - 95.9
Developments and other - - 1.6 8.8 10.4
Managed portfolio 82.1 1.4 14.1 8.8 106.3
1 Managed portfolio value on which like-for-like growth is based was
£2,309m at 30 June 2024.
B. Net Rental Income
Six months ended 30 June 2024
Proportionally consolidated Properties Change in Disposals Developments Total Change in provision Total
owned throughout 2023/24
like-for-like NRI
£m
and other
£m
%
£m adjusted NRI
£m
£m
NRI
£m
UK 28.4 3.5 2.7 (0.7) 30.4 - 30.4
France 22.4 4.0 0.1 (0.9) 21.6 - 21.6
Ireland 17.1 (4.0) - - 17.1 - 17.1
Flagship destinations 67.9 1.7 2.8 (1.6) 69.1 - 69.1
Developments and other - n/a - 3.6 3.6 - 3.6
Managed portfolio(1) 67.9 1.7 2.8 2.0 72.7 - 72.7
Six months ended 30 June 2023
Properties Exchange Disposals Developments Total Change in provision Total
owned throughout 2023/24
£m
and other
(see note 10A)
£m
£m adjusted
£m NRI
£m
£m
NRI
£m
UK 27.4 - 6.7 (0.2) 33.9 0.1 34.0
France 21.6 0.7 3.5 1.1 26.9 - 26.9
Ireland 17.9 0.4 - - 18.3 - 18.3
Flagship destinations 66.9 1.1 10.2 0.9 79.1 0.1 79.2
Developments and other - - - 6.0 6.0 0.1 6.1
Managed portfolio 66.9 1.1 10.2 6.9 85.1 0.2 85.3
1 Managed portfolio value on which like-for-like growth is based was
£2,309m at 30 June 2024
Rental data
Table 4
Six months ended 30 June 2024 30 June 2024
Proportionally consolidated Gross rental Adjusted net rental Average Rents Estimated rental value Rents passing for reversion Reversion/
income
income
rents
passing ( )
£m
£m
(over-rented)
£m
£m Vacancy
passing
£m
%
rate
£/m(2)
%
1 2 3 4 5 6
UK 39.4 30.4 4.8 440 70.9 69.8 68.5 2.1
France 27.0 21.6 7.5 470 53.8 59.7 53.9 10.7
Ireland 19.5 17.1 4.3 460 36.9 38.8 35.1 10.4
Flagship destinations 85.9 69.1 5.7 450 161.6 168.3 157.5 6.9
Developments and other 8.5 3.6 15.9 200 8.4 10.0 8.8 13.7
Managed portfolio 94.4 72.7 6.3 420 170.0 178.3 166.3 7.3
Six months ended 30 June 2023 31 December 2023
UK 43.5 33.9 4.9 400 87.3 82.3 83.7 (1.8)
France 32.4 26.9 6.9 450 53.0 61.3 54.2 13.2
Ireland 20.0 18.3 3.8 480 39.0 39.5 37.1 6.4
Flagship destinations 95.9 79.1 5.4 430 179.3 183.1 175.0 4.6
Developments and other 10.4 6.0 13.6 190 8.5 10.0 9.2 8.9
Managed portfolio 106.3 85.1 5.8 400 187.8 193.1 184.2 4.8
1 See Table 5 for analysis of vacancy.
2 Average rents passing at the period end before deducting head rents
and excluding rents from anchor units, car parks and commercialisation.
3 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 £9.8m (FY 23: £12.6m).
4 The estimated rental value (ERV) at the period end calculated by the
Group's valuers. At 30 June 2024, includes ERV for vacant space of £10.0m (FY
23: £9.9m) as per Table 5 and ERV for space undergoing reconfiguration of
£2.5m - UK £1.8m, Ireland £0.7m (FY 23: £2.6m - UK £2.3m, Ireland
£0.3m). ERVs in the above table are included within the unobservable inputs
to the portfolio valuations as defined by IFRS 13.
5 Rents passing for reversion is adjusted for tenant incentives and
inclusive costs to give a better comparison to ERV which is on a net effective
basis.
6 The reversion/(over-rented) figures show a direct comparison between
the valuers' ERV and rents passing for reversion, with both sets of figures
being on a net effective basis. The reversion/(over-rented) figures therefore
show the future change in the Group's rental income from the settlement of
review rents or a combination of letting:
- units at prevailing ERVs at the next lease event i.e. break or expiry (see
Table 6)
- vacant units (see Table 5)
- units undergoing reconfiguration (see note above).
Vacancy
Table 5
30 June 2024 31 December 2023
Proportionally consolidated ERV of vacant space Total ERV for vacancy(1) Vacancy ERV of vacant space Total ERV for vacancy(1) Vacancy
£m
£m
rate
£m
£m
rate
%
%
UK 2.7 57.0 4.8 3.2 65.9 4.9
France 4.4 58.9 7.5 4.2 60.6 6.9
Ireland 1.5 34.3 4.3 1.3 35.2 3.8
Flagship destinations 8.6 150.2 5.7 8.7 161.7 5.4
Developments and other 1.4 8.5 15.9 1.2 8.5 13.6
Managed portfolio 10.0 158.7 6.3 9.9 170.2 5.8
1 Total ERV differs from Table 4 due to the exclusion of car park ERV
and head rents payable which distort the vacancy metric.
Lease expiries and breaks (at 30 June 2024)
Table 6
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 2024 2025 2026 Total Holding over 2024 2025 2026 Total to break years to expiry years
£m
£m
£m
£m
£m
£m
£m
£m
£m
£m
UK 3.7 7.5 7.4 9.1 27.7 4.1 6.7 6.3 8.1 25.2 5.9 7.7
France 3.5 0.4 1.5 1.5 6.9 2.8 0.3 2.0 1.8 6.9 3.0 6.7
Ireland 0.9 2.3 2.4 2.8 8.4 1.5 2.4 2.6 2.7 9.2 5.2 6.7
Flagship destinations 8.1 10.2 11.3 13.4 43.0 8.4 9.4 10.9 12.6 41.3 4.7 7.1
Developments and other 1.0 0.6 2.0 0.8 4.4 1.0 0.6 1.4 0.6 3.6 6.4 7.7
Managed portfolio 9.1 10.8 13.3 14.2 47.4 9.4 10.0 12.3 13.2 44.9 4.8 7.1
The table above compares rents passing (as per Table 4) on a headline basis
for those units with leases expiring or subject to a tenant break in each year
compared to the ERV of those units determined by the Group's valuers on a net
effective basis (as per Table 4).
Top ten tenants (ranked by passing rent at 30 June 2024)
Table 7
Proportionally consolidated Passing rent % of total
£m
passing rent
Inditex 11.5 6.8
H&M 5.6 3.3
Next 4.8 2.8
JD Sports 3.8 2.2
Watches of Switzerland 3.2 1.9
River Island 2.8 1.6
Selfridges 2.4 1.4
Superdry 2.2 1.3
CK Hutchison 2.1 1.3
Boots 1.9 1.1
40.3 23.7
Cost ratio
Table 8
Proportionally consolidated Six months ended Six months ended
30 June 2024 30 June 2023
£m
£m
Adjusted gross administration costs 21.5 25.7
Business transformation costs A 2.7 3.2
Gross administration costs 24.2 28.9
Property fee income (2.9) (4.8)
Management fee receivable (2.5) (3.4)
Property outgoings 20.9 20.4
Less inclusive lease costs recovered through rent (2.1) (3.9)
Total operating costs B 37.6 37.2
Less vacancy costs (5.8) (4.3)
Total operating costs excluding vacancy costs C 31.8 32.9
Gross rental income 94.4 106.3
Ground rents payable (0.8) (0.8)
Less inclusive lease costs recovered through rent (2.1) (3.9)
Gross rental income for cost ratio D 91.5 101.6
Cost ratio including vacancy costs B/D 41.1% 36.6%
Cost ratio excluding vacancy costs C/D 34.8% 32.4%
Cost ratio including vacancy costs (excluding business transformation costs) (B-A)/D 38.1% 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 £0.2m (2023: £nil) were capitalised as
development costs and are not included within 'Gross administration costs'.
Valuation analysis
Table 9
30 June 2024
Proportionally consolidated Properties Revaluation gains/(losses) Income Capital Total Initial Nominal
at valuation
in the year
return
return
return
yield
equivalent
yield(1)
£m £m % % % %
%
UK 758.9 12.2 3.8 0.3 4.1 7.3 7.9
France 981.4 0.1 2.2 - 2.2 4.5 5.1
Ireland 568.4 (49.1) 2.9 (7.9) (5.2) 5.9 6.3
Flagship destinations 2,308.7 (36.9) 2.9 (1.9) 0.9 5.7 6.3
Developments and other 270.5 (10.9) 1.3 (4.0) (2.7) 9.2 9.6
Managed portfolio 2,579.2 (47.8) 2.8 (2.2) 0.6 5.9 6.4
31 December 2023
Properties Revaluation losses Income Capital Total Initial Nominal
at valuation
in the year
return
return(2)
return(2)
yield
equivalent
yield(1)
£m £m % % % %
%
UK 863.1 (21.8) 8.7 (2.4) 6.1 7.8 8.1
France(3) 1,003.3 (15.2) 4.6 (4.3) 0.1 4.4 5.1
Ireland 629.7 (37.5) 5.7 (5.6) (0.2) 5.4 5.8
Flagship destinations 2,496.1 (74.5) 6.3 (4.0) 2.0 5.8 6.3
Developments and other 280.0 (44.6) 2.7 (6.2) (3.6) 8.2 9.6
Managed portfolio 2,776.1 (119.1) 5.9 (4.1) 1.6 5.9 6.4
1 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 5.4% (31 December 2023: 5.7%).
2 Capital and Total return figures in 2023 include the losses on
disposals and impairment charges on derecognised assets (Highcross and
O'Parinor).
3 Returns included 100% of Italik (75% of which was classified as a
trading property) until its sale in March 2023.
Net Initial Yield
Table 10
Proportionally consolidated Note/Table 30 June 2024 31 December 2023
£m
£m
Reported Group (Wholly owned and joint operations) 3B 1,232.9 1,396.2
Share of Property interests 3B 1,346.3 1,379.9
Net investment portfolio valuation on a proportionally consolidated basis 3B 2,579.2 2,776.1
Less: Developments(1) (188.1) (192.3)
Completed investment portfolio 2,391.1 2,583.8
Purchasers' costs(2) 158.3 171.9
Grossed up completed investment portfolio A 2,549.4 2,755.7
Annualised cash passing rental income 166.2 182.4
Non recoverable costs (13.1) (15.5)
Rents payable (3.8) (4.1)
Annualised net rent B 149.3 162.8
Add:
Notional rent on expiration of rent-free periods(3) 5.0 7.8
Future rent on signed leases 2.6 1.7
Topped-up annualised net rent C 156.9 172.3
Add back: Non recoverable costs 13.1 15.5
Passing rents Table 4 170.0 187.8
Net initial yield B/A 5.9% 5.9%
'Topped-up' net initial yield C/A 6.1% 6.3%
1 Included within the Developments and other portfolio.
2 Purchasers' costs equate to 6.6% (31 December 2023: 6.7%) of the value
of the completed investment portfolio.
3 Weighted average remaining rent-free period is 0.4 years (31 December
2023: 0.5 years).
Capital expenditure
Table 11
Six months ended 30 June 2024 Six months ended 30 June 2023
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 1 4 5
Capital expenditure - creating area - - - 1 - 1
Capital expenditure - no additional area 5 3 7 3 7 10
Tenant incentives 2 3 5 2 - 2
Total 3B 8 8 16 7 11 18
Conversion from accruals to cash basis - 4 4 (1) (1) (2)
Total on cash basis 8 12 20 6 10 16
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 2024 31 December 2023
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 1,232.9 1,346.3 2,579.2 1,396.2 1,379.9 2,776.1
Interests in leasehold properties 31.7 15.4 47.1 32.7 15.4 48.1
Right-of-use assets 0.7 - 0.7 3.9 - 3.9
Plant and equipment 0.5 - 0.5 0.9 - 0.9
Investment in joint ventures 1,177.3 (1,177.3) - 1,193.2 (1,193.2) -
Investment in associates - - - 1,115.0 - 1,115.0
Other investments 9.2 - 9.2 8.8 - 8.8
Trade and other receivables 0.6 1.1 1.7 1.9 1.3 3.2
Restricted monetary assets 21.4 - 21.4 21.4 - 21.4
2,474.3 185.5 2,659.8 3,774.0 203.4 3,977.4
Current assets
Trade and other receivables 62.9 26.7 89.6 74.1 22.0 96.1
Derivative financial instruments 1.1 0.3 1.4 5.2 1.4 6.6
Restricted monetary assets - 0.4 0.4 2.2 0.2 2.4
Cash and cash equivalents 433.9 103.5 537.4 472.3 97.3 569.6
497.9 130.9 628.8 553.8 120.9 674.7
Assets held for sale 605.7 - 605.7 - - -
Total assets 3,577.9 316.4 3,708.8 4,327.8 324.3 4,652.1
Current liabilities
Trade and other payables (80.3) (44.9) (125.2) (129.8) (46.0) (175.8)
Obligations under head leases (0.2) - (0.2) (0.1) - (0.1)
Loans - (254.5) (254.5) (108.6) (260.0) (368.6)
Tax (0.2) - (0.2) (0.3) - (0.3)
Derivative financial instruments (0.2) - (0.2) (2.3) - (2.3)
(80.9) (299.4) (380.3) (241.1) (306.0) (547.1)
Liabilities associated with assets held for sale (22.7) - (22.7) - - -
(103.6) (299.4) (403.0) (241.1) (306.0) (547.1)
Non-current liabilities
Trade and other payables (25.8) (1.2) (27.0) (55.5) (2.4) (57.9)
Obligations under head leases (36.3) (15.8) (52.1) (37.3) (15.8) (53.1)
Loans (1,502.9) - (1,502.9) (1,515.9) - (1,515.9)
Deferred tax (0.4) - (0.4) (0.4) (0.1) (0.5)
Derivative financial instruments (1.2) - (1.2) (15.0) - (15.0)
(1,566.6) (17.0) (1,583.6) (1,624.1) (18.3) (1,642.4)
Total liabilities (1,670.2) (316.4) (1,986.6) (1,865.2) (324.3) (2,189.5)
Net assets 1,907.7 - 1,907.7 2,462.6 - 2,462.6
EPRA adjustments 10B 1.4 79.4
EPRA NTA 11C 1,909.1 2,542.0
EPRA NTA per share 11C 38p 51p
Net debt
Table 13
30 June 2024 31 December 2023
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 ( ) ( ) 433.9 103.5 537.4 472.3 97.3 569.6
Loans (1,502.9) (254.5) (1,757.4) (1,624.5) (260.0) (1,884.5)
Fair value of currency swaps - - - (11.4) - (11.4)
Net debt (1,069.0) (151.0) (1,220.0) (1,163.6) (162.7) (1,326.3)
Movement in net debt
Table 14
Proportionally consolidated Six months ended Year ended Six months ended
30 June 2024 31 December 2023 30 June 2023
£m
£m
£m
Opening net debt (1,326.3) (1,732.1) (1,732.1)
Profit from operating activities 53.9 117.3 64.6
(Increase)/Decrease in receivables and restricted monetary assets (1.6) 16.5 2.1
Decrease in payables (15.0) (31.0) (8.6)
Adjustment for non-cash items 3.4 0.7 1.7
Cash generated from operations 27.7 103.5 59.8
Interest received 23.3 43.6 13.1
Interest paid (57.1) (93.5) (51.4)
Redemption premiums and fees from early repayment of debt (0.8) 4.3 -
Debt and loan facility issuance and extension fees - (0.6) (0.6)
Operating distributions received from Value Retail 12.3 73.6 42.7
Tax paid - (0.4) (0.4)
Cash flows from operating activities 18.6 130.5 63.2
Capital expenditure (20.1) (42.9) (16.0)
Derecognition of JV cash - (15.6) (15.6)
Derecognition of joint venture secured debt - 125.0 125.0
Cash held within sold or derecognised entities - (8.4) (8.4)
Sale of properties 116.3 216.4 215.3
Cash flows from investing activities 96.2 274.5 300.3
Purchase of own shares (3.4) - -
Proceeds from awards of own shares - 0.1 0.1
Equity dividends paid (44.9) (30.0) -
Cash flows from financing activities (48.3) (29.9) 0.1
Exchange translation movement 39.8 30.7 50.9
Closing net debt (1,220.0) (1,326.3) (1,317.6)
Total accounting return ('TAR')
Table 15
30 June 2024 31 December 2023
NTA NTA per share NTA NTA per share
£m pence £m pence
EPRA NTA at 1 January A 2,542.0 50.8 2,633.7 52.7
EPRA NTA at period end 1,909.1 38.2 2,542.0 50.8
Movement in NTA (632.9) (12.6) (91.7) (1.9)
Cash dividends in the period 39.0 0.8 35.9 0.7
B (593.9) (11.8) (55.8) (1.2)
Total accounting return B/A (23.4)% (2.1)%
FINANCING METRICS
Net debt:EBITDA
Table 16
Proportionally consolidated Note / Table 30 June 2024 December 2023
£m
£m
Net debt A Table 13 1,220.0 1,326.3
Net debt (pro forma for sale of Value Retail) B 637.0 n/a
Adjusted operating profit 150.3 163.0
Amortisation of tenant incentives and other items within net rental income (3.5) (3.6)
Share-based remuneration 3.8 3.6
Depreciation 1.6 3.0
EBITDA ‒ rolling 12 month basis C 152.2 166.0
EBITDA ‒ rolling 12 month basis (pro forma for sale of Value Retail) D 121.8 n/a
Net debt:EBITDA A/C 8.0x 8.0x
Net debt:EBITDA (pro forma for sale of Value Retail) B/D 5.3x n/a
Interest cover
Table 17
Proportionally consolidated Note Six months ended Year ended
30 June 2024 31 December 2023
£m
£m
Adjusted net rental income 2 72.7 167.5
Less net rental income in associates: Italie Deux 14A ‒ (1.1)
A 72.7 166.4
Adjusted net finance costs 2 18.7 45.9
Less interest on lease obligations and pensions (1.4) (3.3)
B 17.3 42.6
Interest cover A/B 4.21x 3.91x
Gearing
Table 18
Proportionally consolidated Note / Table 30 June 2024 31 December 2023
£m
£m
Net debt Table 13 1,220.0 1,326.6
Unamortised borrowing costs -- 15.8 18.4
Net debt for gearing A 1,234.6 1,344.7
Net debt for gearing (pro forma for sale of Value Retail) B 651.6 n/a
Equity shareholders' funds - 'Consolidated net tangible worth' C 1,907.7 2,462.6
Gearing A/C 64.7% 54.6%
Gearing (pro forma for sale of Value Retail) B/C 34.2% n/a
Unencumbered asset ratio
Table 19
Proportionally consolidated Note / Table 30 June 2024 31 December 2023
£m
£m
Managed property portfolio 3B 2,579.2 2,776.1
Less encumbered assets(1) (437.6) (487.7)
Total unencumbered assets A 2,141.6 2,288.4
Net debt Table 13 1,220.0 1,326.3
Unamortised borrowing costs 15.8 18.4
Cash held within investments in encumbered entities(1) 44.9 39.4
Less encumbered debt(1) (254.4) (260.2)
Total unsecured debt B 1,025.1 1,123.9
Total unsecured debt (pro forma for sale of Value Retail) C 442.1 n/a
Unencumbered asset ratio A/B 2.10x 2.04x
Unencumbered asset ratio (pro forma for sale of Value Retail) A/C 4.84x n/a
1 At 30 June 2024 and 31 December 2023 encumbered assets, cash and
debt relate to Dundrum Town Centre.
Loan to value
Table 20
Proportionally consolidated Note / Table 30 June 2024 31 December 2023
£m
£m
Net debt - 'Loan' A Table 13 1,220.0 1,326.3
Managed property portfolio B 3B 2,579.2 2,776.1
Investment in Value Retail(1) C 9D/14B 583.0 1,115.0
'Value' D 3,162.2 3,891.1
Loan to value - Headline A/D 38.6% 34.1%
Loan to value - Headline (pro forma for sale of Value Retail) (A-C)/B 24.7% n/a
Net debt - Value Retail E - 729.6
Property portfolio - Value Retail F 14B - 1,885.7
Loan to value - Full proportional consolidation of Value Retail(2) (A+E)/(B+F) n/a 44.1%
Net payables - Group G 64.7 187.3
Loan to value - EPRA (Table 21) (A+E+G)/(B+F) 49.8% 48.1%
Loan to value - EPRA (pro forma for sale of Value Retail) (A-C+G)/B 27.2% n/a
1 Investment at 30 June 2024 reflects impaired carrying value as an asset held for sale, see note 9 for details.
2 Following the reclassification of Value Retail to an asset held for sale at 30 June 2024 this ratio is no longer relevant, see note 9 to the interim financial statements for details.
EPRA Loan to value
Table 21
30 June 2024
Proportionally consolidated Reported Share of Share of associates(2) Non-controlling interests Total
Group
joint ventures
£m
£m
£m £m £m
Include: ( ) ( )
Loans ( ) ( ) 1,502.9 254.5 - - 1,757.4
Foreign currency derivatives - - - - -
Net payables(1) 46.7 18.0 - - 64.7
Exclude:
Cash and cash equivalents (433.9) (103.5) - - (537.4)
Net debt A 1,115.7 169.0 - - 1,284.7
Include:
Investment properties at fair value 1,232.9 1,346.3 - - 2,579.2
Total property value B 1,232.9 1,346.3 - - 2,579.2
EPRA LTV A/B 49.8%
31 December 2023
Proportionally consolidated Reported Share of Share of associates Non-controlling interests Total
Group
joint ventures
£m
£m
£m £m £m
Include: ( ) ( )
Loans ( ) ( ) 1,624.5 260.0 793.9 - 2,678.4
Foreign currency derivatives 11.4 - - - 11.4
Net payables(1) 87.0 23.9 76.4 - 187.3
Exclude:
Cash and cash equivalents (472.3) (97.3) (64.4) - (634.0)
Net debt A 1,250.6 186.6 805.9 - 2,243.1
Include:
Investment properties at fair value 1,396.2 1,379.9 1,885.7 - 4,661.8
Total property value B 1,396.2 1,379.9 1,885.7 - 4,661.8
EPRA LTV A/B 48.1%
Rows with zero balances have intentionally been excluded from the EPRA
specified format in the above tables.
1 Net payables includes the following balance sheet accounts:
interests in leasehold properties, right-of-use assets, trade and other
receivables (current and non-current), restricted monetary assets (current and
non-current), trade and other payables (current and non-current), obligations
under head leases (current and non-current), tax and deferred tax (at 50%),
including those that have been reclassified for sale.
2 As the Group's investment in Value Retail has been reclassified as an
asset held for sale at 30 June 2024 it has been excluded from the EPRA Loan to
value calculation at 30 June 2024. See note 9 for further details.
KEY PROPERTIES
Managed portfolio Location Accounting classification where not wholly-owned Ownership Area No. of tenants Passing rent
m(2) £m
Flagship destinations
UK
Brent Cross London Joint venture 41% 105,400 112 12.0
Bullring(1) Birmingham Joint venture 50% 120,300 149 24.6
Cabot Circus(2) Bristol Joint venture 50% 106,100 105 10.2
The Oracle Reading Joint venture 50% 71,600 98 10.3
Westquay Southampton Joint venture 50% 94,200 107 13.8
France
Les 3 Fontaines(3) Cergy 100% 76,600 197 23.5
Les Terrasses du Port Marseille 100% 62,800 166 30.4
Ireland
Dundrum Town Centre Dublin Joint venture 50% 124,800 151 26.4
Ilac Centre Dublin Joint operation 50% 28,200 63 3.2
Pavilions Swords Joint operation 50% 44,400 93 7.3
Developments and other (key properties)
Bristol Broadmead(2) Bristol Joint venture 50% 34,800 60 2.6
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(1) Birmingham Joint venture 50% 38,400 50 3.5
Eastgate Leeds 100% n/a n/a n/a
Martineau Galleries(1) Birmingham 100% 35,200 38 2.2
Pavilions land Swords 100% n/a n/a n/a
The Goodsyard London Joint venture 50% n/a n/a n/a
Asset held for sale(5)
Value Retail(4)
Bicester Village Bicester 50% 28,000 159 79.9
La Roca Village Barcelona 41% 25,900 145 23.4
Las Rozas Village Madrid 38% 16,600 98 14.7
La Vallée Village Paris 26% 21,600 109 25.3
Maasmechelen Village Brussels 27% 20,000 103 6.2
Fidenza Village Milan 34% 21,100 117 7.2
Wertheim Village Frankfurt 45% 20,900 113 10.5
Ingolstadt Village Munich 15% 21,000 112 3.8
Kildare Village Dublin 41% 21,600 119 11.9
1 Collectively known as the Birmingham Estate.
2 Collectively known as the Bristol Estate.
3 Property includes areas held under co-ownership, figures above reflect
Hammerson's ownership interests only.
4 Passing rent for Value Retail represents annualised base and turnover
rent at Hammerson's ownership share.
5 Held as an asset held for sale at 30 June 2024, see note 9 for
details.
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 value/volume Comprises new lettings and renewals exchanged in the period. Value reflects
passing rent and volume reflects number of leases signed.
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 which are shown in Table 20 of the Additional
Information section.
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.
REIT Real Estate Investment Trust. A tax regime which in the UK exempts
participants from corporation tax both on UK rental income and gains arising
on UK investment property sales, subject to certain requirements.
Rent collection Rent collected as a percentage of rent due for a particular period after
taking account of any rent concessions granted for the relevant period.
Reported Group The financial results as presented under IFRS.
Rents passing for reversion Passing rent adjusted for tenant incentives and inclusive costs to be on a net
effective basis. This will increase or decrease due to changes to rents
passing at rent review or the next lease event (i.e. expiry or break), or by
leasing vacant space or space undergoing reconfiguration.
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 accounting return (TAR) The growth in EPRA NTA per share plus dividends paid, expressed as a
percentage of EPRA NTA per share at the beginning of the period. The return
excludes the dilution impact from scrip dividends.
Total development cost All capital expenditure on a development or other major project, including
capitalised interest.
Total property return (TPR) (or total return) NRI, excluding the change in provision for amounts not yet recognised in the
income statement, and capital growth expressed as a percentage of the opening
book value of property adjusted for capital expenditure, calculated on a
monthly time-weighted and constant currency basis.
Total shareholder return (TSR) Dividends and capital growth in a Company's share price, expressed as a
percentage of the share price at the beginning of the period.
Turnover rent Rental income which is linked to an occupier's revenues.
Vacancy rate The ERV of the area in a property, or portfolio, excluding developments, which
is currently available for letting, expressed as a percentage of the ERV of
that property or portfolio.
WAULB/WAULT Weighted Average Unexpired Lease to Break/Term.
Yield on cost Passing rents expressed as a percentage of the total development cost of a
property.
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