Hammerson plc plc Hammerson Annual Report 2012 Hammerson plc Annual Report 2012 Who we are We create HIGH-QUALITY retail property Our vision is to be the best owner-manager and developer of retail property within Europe. We focus on winning locations: prime regional shopping centres, convenient retail parks and premium designer outlet villages. Hammerson retail locations (see pages 8 to 17 for more details) EXPERIENCE CONVENIENCE LUXURY UK shopping centres UK retail parks Value Retail 1 1 1 Brent Cross, London NW4 Abbey Retail Park, Belfast Bicester Village, Oxford 2 2 2 Centrale, Croydon Central Retail Park, Falkirk La Vallée Village, Paris 3 3 3 Queensgate, Peterborough Dallow Road, Luton Kildare Village, Dublin 4 4 Bullring, Birmingham Battery Retail Park, Birmingham 5 5 Not shown Highcross, Leicester Cleveland Retail Park, Middlesbrough 6 6 Silverburn, Glasgow Drakehouse Retail Park, Sheffield Maasmechelen Village, Brussels 7 7 Wertheim Village, Frankfurt Cabot Circus, Bristol Brent South Shopping Park, London 8 8 The Oracle, Reading Cyfarthfa Retail Park, Merthyr Tydfil Ingolstadt Village, Munich 9 9 Fidenza Village, Milan Union Square, Aberdeen Elliott’s Field, Rugby 10 10 Las Rozas Village, Madrid WestQuay, Southampton Fife Central Retail Park, Kirkcaldy 11 11 La Roca Village, Barcelona Monument Mall, Newcastle Parc Tawe Retail Park, Swansea 12 12 Victoria Quarter, Leeds Westwood & Westwood Gateway, Thanet 13 Manor Walks, Cramlington France shopping centres 14 Ravenhead Retail Park, St Helens 13 Grand Maine, Angers 15 Wrekin Retail Park, Telford 14 O’Parinor, Aulnay-sous-Bois 16 St Oswald’s Retail Park, Gloucester 15 Bercy 2, Charenton-le-Pont 17 The Orchard Centre, Didcot 16 18 Italie 2, Avenue d’Italie, Paris 13ème Thurrock Shopping Park, Lakeside 17 Place des Halles, Strasbourg 19 Forge Shopping Park, Telford 18 Espace Saint Quentin, 20 Imperial Retail Park, Bristol Saint Quentin-en-Yvelines 21 Abbotsinch Retail Park, Paisley 19 Les 3 Fontaines, Cergy Pontoise 20 SQY Ouest, Saint Quentin-en-Yvelines France retail parks 21 Les Terrasses du Port, Marseille 22 Villebon, Paris Strategic review Portfolio Who we are IFC Portfolio 1 Overview At a glance 2 Chairman’s statement 4 £5.5bn Chief Executive’s report 6 Market background 8 Hammerson owns a portfolio of retail property Business model 10 Our focus areas assets in the UK and France. The portfolio, which is Experience 12 Convenience 14 valued at £5.5 billion, includes 20 prime shopping Luxury 16 centres, 22 convenient retail parks and investments Business and financial review Our people 18 in nine premium designer outlets. Business review 20 Key performance indicators 32 Financial and property returns 34 Risk management 36 Financial review 40 Property portfolio information 46 Governance Chairman’s introduction 50 Our Board 51 Leadership 54 9 Effectiveness 56 Accountability 58 10 Relations with shareholders 61 21 2 6 Remuneration report 62 13 11 Additional disclosures 78 1 5 Financial statements Directors’ responsibilities 80 12 14 6 Independent auditor’s report (Group) 81 3 15 19 4 Consolidated income statement 82 9 4 5 Consolidated statement 3 8 16 of comprehensive income 83 17 3 20 1 1 Consolidated balance sheet 84 11 7 18 8 2 7 12 Consolidated statement 10 of changes in equity 85 Consolidated cash flow statement 87 Notes to the accounts 88 Independent auditor’s report (Parent Company) 123 19 14 16 2 Company balance sheet 124 201815 22 Notes to the Company accounts 125 17 Ten-year financial summary 128 13 Other information Connected reporting framework 129 Property portfolio UK shopping centres 132 UK retail parks 134 France retail 137 Glossary of terms 138 21 Index 140 Shareholder information 141 HAMMERSON ANNUAL REPORT 2012 1 Strategic review Overview At a glance Governance Financial statements Other information At a glance Our focus Our strategy Our performance As a pure retail property business, Our strategy is to deliver industry 2012 was a year in which our we focus on winning locations that leading shareholder returns by financial and operational metrics cater to consumer preference for: maximising income from our retail demonstrated the validity of properties and development pipeline. our strategy. Experience Creating high-quality property Operational and financial highlights Prime shopping centres which offer We develop or acquire to create OCCUPANCY OF exciting brands, full-line stores, high-quality compelling retail properties in successful % catering and leisure facilities in a safe, locations which are tailored to the local 97.7 mobile-enabled environment are continuing consumer demographic. to attract significant footfall. TOTAL PROPERTY RetURN OF See pages 12 to 13 for more details. % Maximising income 5.0 We aim to maximise occupancy and Convenience footfall at our properties, which support Net RENTAL INCOME GREW BY our retail customers and enable us to % Convenient, well-managed retail parks in 2.1 out-of-town locations are securing an maximise income growth. increasing number of fashion and catering ADJUSteD EARNINGS PER SHARE* OF tenants, due to their accessibility. Capital strength % See pages 14 to 15 for more details. 20.9p, 8.3 We operate within a prudent and flexible financial structure which provides See pages 32 to 35 for more details. Luxury financial security whilst allowing us to act swiftly and decisively. * Profit before tax for the year ended 31 December 2012 was £142.2 million (2011: £346.3 million) Consumer preferences and increased See pages 4 to 5 for more details. tourism have driven impressive sales growth at premium designer outlets in major cities throughout Europe. See pages 16 to 17 for more details. 2 HAMMERSON ANNUAL REPORT 2012 Strategic review Overview At a glance Governance Financial statements Other information 2012: a year of transformation In 2012 we announced our decision to Our key investments become a pure retail property company – Sold £627 million of office property at 7% premium EXPERIENCE CONVENIENCE EXPERIENCE LUXURY Whitgift Junction Retail Parks Victoria Quarter Value Retail – Reinvested £541 million in our M† M M M targeted areas £65 £260 £136 £80 Resulting portfolio exclusively focused on winning retail locations 2013 priorities – Prepare Les Terrasses du Port for opening Spring 2014 – Deliver extensions and refurbishments in our existing portfolio – Confirm plans for major developments in Leeds and London – Continue to focus on operational efficiency – Advance customers’ multi-channel strategies – Identify successful future retail formats and brands – Implement Positive Places sustainability programme – Identify and execute selective acquisitions † Exchanged not yet completed HAMMERSON ANNUAL REPORT 2012 3 Strategic review Overview Chairman’s statement Governance Financial statements Other information Chairman’s statement Setting the STRATEGY, GOVERNANCE & VA LUES of the business Introduction Overview Results Welcome to the Annual Report for This has been an excellent year for the Company, I am pleased to report that we have grown 2012. This is my last Chairman’s in which we successfully executed our strategy of income from the portfolio in 2012, which statement after nine years, as I will focusing the business on high-quality retail assets combined with acquisitions and cost be retiring at this year’s AGM. I am in winning locations. We executed transactions management initiatives has enabled us to pleased to say that the Company worth over £1 billion, including the sale of our grow adjusted earnings by 8.3% to ended 2012 in as strong a position office portfolio and the reinvestment into retail 20.9 pence per share. assets that cater for structural consumer as it has been in many years. In conjunction with our visibility on future preferences for experience, convenience, earnings from our portfolio, this gives us the and luxury. confidence to increase the full-year dividend We have additionally made good progress by 6.6% to a total of 17.7 pence per share. with our developments, and the Company is in At the year end the portfolio was worth a strong financial position which allows us the £5.5 billion, equivalent to a net asset value flexibility to capture future opportunities. This of £5.42 per share. has been achieved against a difficult economic backdrop, which is a tribute to the experience and energy of the management team, and the Maintaining capital strength quality of our assets. We had an active year managing the costs and maturity profile of our debt, contributing to an This is a strong base from which to grow £11.6 million reduction in interest expenses in the business. 2012. We repurchased €220 million of the The Oracle, Reading 4 HAMMERSON ANNUAL REPORT 2012 Strategic review Overview Chairman’s statement Governance Financial statements Other information 63% NET ASSET VALUE: £5.42 per share COMMUNITY: 63% of our community investment is long term £5.42 +2.3% 4.875% Euro bonds, then in September issued Remuneration Outlook a seven-year €500 million 2.75% unsecured The Board’s ambition is to improve In a transformational year for our business we bond due in 2019. In December we bought transparency and better demonstrate the link have demonstrated that high-quality retail back the £100 million floating rate reset between pay and performance. For 2012 the assets combined with active management bonds from BNP Paribas, incurring a one-off Remuneration Committee determined that can deliver good income growth even in a mark-to-market charge of £42 million, and there should be no increase to base salary for challenging environment. Whilst we still remain also signed a new £175 million revolving Executive Directors. However, reflecting the cautious about the overall economic outlook credit facility. strong performance of the Company in 2012 in the UK and Europe, we have a portfolio of Borrowings were £2.1 billion at 31 December the variable element of Executive Directors’ modern, well-located retail properties which 2012 and cash balances were £66 million, to overall remuneration has increased.