THE HAMMERSON DIFFERENCE

Transcription

1 INTERIM REPORT 2005

2 CONTENTS 03 Financial Highlights 05 Operational Highlights 07 Chairman s Statement 08 Operating and Financial Review 09 Balance Sheet and Financing 10 Cash Flow 11 Portfolio 13 Potential Developments 2005/ Future Developments 15 Markets and Outlook 16 Independent Review Report 17 Consolidated Income Statement 18 Consolidated Balance Sheet 19 Consolidated Statement of Recognised Income and Expense 19 Consolidated Statement of Changes in Equity 20 Consolidated Cash Flow Statement 21 Notes to the Accounts 32 Property Portfolio Information IBC Other Information IBC Glossary of Terms

3 THE HAMMERSON DIFFERENCE Hammerson is a leading European property company, with operations in the UK, France and Germany. Its high quality portfolio of around 1,300,000 m 2 of retail space and over 280,000 m 2 of prime offices is valued at 4.8 billion. The group continues to build on its excellent reputation for its approach to urban regeneration, its ability to forge strong relationships with local authorities and its skills in delivering complex development projects. Our performance in the first half of 2005 Adjusted net asset value per share rose by 9.6% to Adjusted earnings per share unchanged at 14.3 pence Interim dividend per share raised by 6.4% to 5.80 pence Underlying portfolio valuation increase of 5.1% overall Gearing reduced to 63% 1

4 HAMMERSON S RETAIL PORTFOLIO IS 11.1% REVERSIONARY OVERALL.

5 Financial Highlights Hammerson Half Year Results Six months to 30 June Restated under IFRS Change Net rental income 101.3m 96.2m +5.3% Profit before tax (1) 247.3m 203.3m +21.6% Adjusted profit before tax (2) 42.8m 42.0m +1.9% Basic earnings per share (3) 72.2p 94.5p -23.6% Adjusted earnings per share (4) 14.3p 14.3p no change Dividend per share 5.80p 5.45p +6.4% 30 Jun Dec 2004 Restated under IFRS Equity shareholders funds 2,615m 2,410m +8.5% Adjusted net asset value per share (5) % Loan to value ratio 42% 46% Gearing 63% 72% The group is reporting for the first time under International Financial Reporting Standards (IFRS). Under IFRS, Hammerson is required to include revaluation changes on investment properties in profit before tax, and to assume that the full amount of tax would be payable in the event of a sale of all properties. Notes: (1) In 2005 there was a gain on investment properties and interest rate swaps of 205 million (2004: 161 million). (2) Excluding gains on investment properties and changes in the fair value of interest rate swaps. (3) In 2005 there was a deferred tax charge of 42 million, principally relating to property revaluations (2004: 139 million credit). (4) Excluding the gains on investment properties, the gains on interest rate swaps and related tax and deferred tax. (5) Excluding deferred tax and the fair value of interest rate swaps. Portfolio Distribution Total portfolio value: 4.8 billion UK 73% France 24% Germany 3% Shopping centres 58% Retail parks 13% Offices 29% Investment portfolios 88% Developments 12% 3

6 HAMMERSON MAINTAINS AN ACTIVE DEVELOPMENT PROGRAMME WITH THE OBJECTIVES OF ACHIEVING GOOD RETURNS AND CREATING HIGH QUALITY PROPERTIES OF A TYPE NOT GENERALLY AVAILABLE IN THE OPEN MARKET.

7 Operational Highlights Increased net rental income by 8% on a like-for-like basis. Invested over 183 million and raised 217 million from property sales. Successfully completed first rent reviews at The Oracle, Reading. Advanced several future development projects, including major retail-led city centre regeneration schemes in Bristol and Leicester. Since 30 June 2005, Hammerson has acquired its first retail park in France, Villebon 2, near Paris, for 104 million. 5

8 I AM PLEASED TO REPORT A FURTHER ROBUST PERFORMANCE BY HAMMERSON IN THE FIRST SIX MONTHS OF RONALD SPINNEY, CHAIRMAN

9 Chairman s Statement I am pleased to report a further robust performance by Hammerson in Adjusted net asset value per share increased by 9.6% to 10.36, whilst adjusted earnings per share was maintained at 14.3 pence. The interim dividend has been increased by 6.4%. During the first six months of the year, the group concluded two major office lettings in London and Paris and benefited from the first rent reviews at The Oracle shopping centre in the UK and from indexation of rents from its French assets. It expanded its retail parks business with the acquisition of a scheme in Kirkcaldy, Fife and the completion of Cyfarthfa Retail Park in Merthyr Tydfil. Several future development projects were advanced, including major retail-led city centre regeneration schemes in Bristol and Leicester and the redevelopment of the former Stock Exchange buildings in the City of London. Some 217 million was raised from disposals, including 179 million from the sale of 14 boulevard Haussmann in Paris. The group s balance sheet and financing structure remain sound. The group has the resources to unlock the potential from the developments currently underway and from the projects in the pipeline. The last few years have seen the introduction in many jurisdictions of tax transparent vehicles for property ownership, commonly known as REITs. Recently, successful REITs have been trading at premiums to their underlying net asset values. The UK Government is currently reviewing proposals for the introduction of a REIT. If implemented, it should make property accessible to a wider range of investors. At the same time, it should enable the Government to achieve its stated objectives of encouraging long term savings provision, improving liquidity and transparency in the property market, facilitate improvements to the quality of the UK s stock of property and encourage urban regeneration. In France, where Hammerson has expanded the size of its business in recent years, the group continues to benefit from its entry at the beginning of 2004 into the tax transparent French SIIC regime. Recent years have seen a resurgence of property as an important asset class to investors. Indeed, returns from property investment have exceeded those from equities and bonds over each of the last three, five and ten year periods. Hammerson is well placed to take advantage of this environment. The group has an investment portfolio of the highest quality which provides a secure and growing income stream, together with the potential for capital growth. Furthermore, I consider Hammerson to have the most attractive development programme of any of Europe s major property companies. I believe Hammerson is well placed to achieve good income growth from its reversionary retail portfolio, notwithstanding some uncertainties over trends in consumer expenditure in the UK. In addition, there is an encouraging improvement in demand for office accommodation, both in central London and Paris, and this should enable the group to achieve further lettings in its office portfolio. I shall be standing down from the Board at the end of September having spent 12 years with the Company. It has been a privilege to serve first as Chief Executive and latterly as Chairman, both of them exciting and stimulating roles. I would like to place on record my appreciation to all those who have supported Hammerson and me personally our shareholders, bankers, partners, customers, advisers, suppliers and especially, my Board colleagues and the team at Hammerson. John Nelson, who succeeds me as Chairman, joined the Board as a non-executive director in May He has had a distinguished career as a senior investment banker and I am confident that Hammerson will continue to prosper under his leadership. Ronald Spinney, Chairman 30 August 2005 CHAIRMAN S STATEMENT 7

10 Operating and Financial Review INTERNATIONAL FINANCIAL REPORTING STANDARDS In common with all companies listed on European Union stock exchanges, Hammerson adopted IFRS with effect from 1 January this year. The group issued its 2004 full year financial statements restated under IFRS on 26 April That report, together with reconciliations to, and explanations of the differences from, the figures as they were reported under UK GAAP, and the group s IFRS accounting policies, are available on the Company's website, This interim report is prepared in accordance with IFRS and further details relating to the transition to IFRS are provided in the notes to the accounts. The adoption of IFRS has changed the presentation and format of the interim report. However, it has no impact on the cash flows of the business or its underlying performance. RESULTS AND DIVIDEND Net rental income for the six months to 30 June 2005 was million, compared with 96.2 million for the corresponding period in On a like-for-like basis, net rental income increased by 8%. Profit before tax was million, compared with million in the first half of In 2005, there was a profit of 31.5 million on property sales, which principally arose on the sale of Néo, 14 boulevard Haussmann, Paris 9ème. Profit before tax also included gains on the revaluation of investment properties of million. Adjusted profit before tax rose by 0.8 million compared with the equivalent period last year. Rent reviews in the UK, indexation in France and the receipt of surrender premiums increased profits by 4.6 million, although this was largely offset by income foregone in respect of properties sold in 2004 and finance and void costs at recently completed developments. Analysis of net rental income Six months to Six months to 30 June June 2004 m m Properties owned throughout Acquisitions Developments 1.6 (0.6) Properties sold 10.2 Exchange translation and other Total net rental income Hammerson s balance sheet and financing structure remain sound. The group has the resources to unlock the potential from the developments currently underway and from the projects in the pipeline. 8

11 Adjusted earnings per share was maintained at 14.3 pence, reflecting the increase in underlying profit discussed above, which was partly offset by a marginal increase in the related tax charge. There was a tax charge of 44.1 million for the six months to 30 June 2005, compared with a 58.4 million tax credit for the equivalent period of The tax credit in 2004 reflected the effects of entry into the SIIC regime in France, resulting in a current tax charge of 70.6 million and a deferred tax credit of million. Excluding the effects of the SIIC regime, the current tax charge has reduced from 10.0 million in 2004 to 1.9 million in 2005, principally due to the inclusion of tax on disposals in the charge for On the same basis, the deferred tax charge has increased from 26.5 million to 42.2 million, reflecting the investment property revaluation surplus and future dividends receivable from Hammerson France. The directors have declared an interim dividend of 5.80 pence per share payable on 21 October 2005, an increase of 6.4%. BALANCE SHEET AND FINANCING At 30 June 2005, Hammerson s property portfolio was valued at 4,767 million, compared with 4,603 million at the end of The increase arose from capital additions of 187 million, a revaluation surplus of 231 million, partly offset by the disposal of properties with a book value of 189 million and exchange translation losses of 65 million. Borrowings at the end of June stood at 1,884 million and cash and deposits at 233 million, so that net debt was 1,651 million compared with 1,746 million at 31 December The decrease in net debt over the period reflected cash received from disposals. The group s financing structure was strengthened further in May by the signing of a 370 million five year revolving credit facility. The average maturity of the group s debt is currently 10 years. Hammerson had cash, short term deposits and unutilised committed bank facilities totalling 719 million at 30 June The group s borrowings at 30 June 2005, excluding cash and deposits, but including foreign currency swaps, were equivalent to 42% of the value of the property portfolio. Analysis of profit before tax Six months to Six months to Year ended 30 June June December 2004 m m m Profit before tax Less: Profit on sale of investment properties Revaluation gains on investment properties Negative goodwill 6.2 Movement in fair value of interest rate swaps 3.8 Adjusted profit before tax OPERATING AND FINANCIAL REVIEW 9

12 Operating and Financial Review continued Equity shareholders funds increased by 205 million to 2,615 million in the six months to 30 June 2005, mainly due to the property valuation uplift, partly offset by a related provision for deferred tax. Since 30 June 2005, the Company has issued 7.1 million ordinary shares at a price of 858 pence per share in consideration for the acquisition of the share capital of a private group of companies owning the Villebon 2 Retail Park near Paris. During the first half of the year, adjusted net asset value per share increased by 91 pence, or 9.6%, to CASH FLOW The cash flow from operating activities for the six months to 30 June 2005 was 45 million, compared with 12 million for the same period last year. The increase principally reflected the timing of working capital receipts and payments, and in particular the receipt of VAT on the disposal of Néo, 14 boulevard Haussmann, in Paris which was paid to the French tax authorities in July. Capital expenditure of 183 million was more than offset by the proceeds of property sales of 217 million, most of which arose from the sale of Néo, 14 boulevard Haussmann. Overall, there was a net cash inflow, after financing, of 180 million for the first six months of the year. Analysis of net asset value As at As at 30 June December 2004 m m Basic net asset value 2, ,410.2 Effect of dilution: On exercise of options Diluted net asset value 2, ,419.0 Adjustments: Fair value of derivative financial instruments (9.5) Deferred tax on revaluation surpluses and other items Deferred tax on capital allowances Adjusted net asset value 2, ,632.4 Basic net assets per share (pence) Adjusted net assets per share (pence) 1, Basic shares in issue used for calculation (million) Diluted shares used for calculation (million) The group has an investment portfolio of the highest quality which provides a secure and growing income stream, together with the potential for capital growth. 10

13 PORTFOLIO Hammerson s property portfolio was valued at 4.8 billion at 30 June During the first six months, the retail weighting of the portfolio increased from 69% to 71%, whilst the weighting in the UK increased from 69% to 73%. A table analysing Hammerson s property valuations and movements for the six months to 30 June 2005 is shown on page 32. There was an underlying valuation increase of the group s portfolio overall of 5.1%, with the valuation of the retail and office portfolios increasing by 4.4% and 6.9% respectively. In the UK, the withdrawal of stamp duty relief in disadvantaged areas reduced the portfolio valuation by 54 million. Without this, the UK portfolio would have increased in value by 6.9% and the total portfolio by 6.2%. In the UK and France, the valuation uplifts reflected both growth in rental income and an inward yield shift. The decline in value of the group s properties in Germany reflected adverse conditions for German retailers and lower rental values. In April, Hammerson acquired the freehold interest in Fife Central Retail Park in Kirkcaldy for 75 million. The 27,000 m 2 retail park has significant reversionary potential, with further opportunities to add value through active asset management and an extension. Since 30 June 2005, the group has acquired, for 104 million, its first retail park in France, Villebon 2, near Paris. The 40,300 m 2 scheme, which adjoins an Auchan hypermarket, is one of the largest and most successful retail parks in France. It offers good rental growth prospects and has planning approval for an extension of 5,500 m 2. During the first half of the year, Hammerson disposed of two properties. Néo, 14 boulevard Haussmann, Paris 9ème, a 26,700 m 2 office property, was sold in June for 179 million, 19% above its value at 31 December Sittingbourne Industrial Estate was sold for 34 million in March. This property was acquired by Hammerson in February 2003 for 17 million. Terms have been agreed for the group to undertake the management role for the proposed redevelopment of the site as a mixed-use town centre scheme to be anchored by a major food superstore. In April, Hammerson s first retail park development was opened at Cyfarthfa in Merthyr Tydfil at a total development cost of 35 million. With three remaining units now in solicitors hands, the park is anticipated to produce an annual rental income of 4.1 million. At 30 June 2005, the scheme was valued at 33 million above cost. During the first half of the year, there was an underlying increase in retail rents in the UK of 15.3% compared with the first six months of At The Oracle shopping centre in Reading, nearly all the rent reviews have now been agreed, resulting in rents overall being approximately one third higher than the previous passing rents. In France, rents are subject to annual indexation, which contributed to an increase in retail rents of 2.2 million, or 11%, over the comparable figure for During the first half of the year, seven units became vacant in the UK shopping centre portfolio and a further 26 units were occupied by retailers which went into administration. Of these 33 units, new leases have since been agreed in respect of 27, giving rise to an increase in rents of 360,000 per annum. There is good interest in the six remaining units. In Germany, the group has recently commenced a substantial refurbishment at Forum Steglitz, its shopping centre in Berlin. This will cost some 28 million and will complete in the spring of A number of existing occupiers will be relocating within the reconfigured space and there is good interest from new retailers for representation in the centre. Currently, over 50% of the total scheme is let, under offer, or in negotiation. At Moorhouse, London EC2, a lease was signed in June with HVB Group, the international bank, for 9,300 m 2 of office accommodation in the 30,100 m 2 building. There is an encouraging level of interest from potential occupiers for the remaining space. OPERATING AND FINANCIAL REVIEW 11

14 Operating and Financial Review continued Since 30 June, the group has agreed a lease of approximately 2,300 m 2 of offices at One London Wall. Following this transaction the building is over 60% let. Hammerson has also signed a lease since 30 June in respect of 3,960 m 2 of office space for its own occupation at 10 Grosvenor Street, London W1, a building developed as a 50:50 joint venture with Grosvenor. Hammerson s relocation will provide it with modern efficient space to meet both its immediate and future requirements. Hammerson and Grosvenor, which owns the freehold of 100 Park Lane, the group s current headquarters, will jointly market the long leasehold interest in this building and share the proceeds from this sale. Seven developments, with an estimated total cost of 523 million, were in progress at 30 June, the cumulative costs to Hammerson of which were 404 million. Hammerson s share of the future rental income from these schemes, for which leases have already been signed or agreed, amounts to 39 million per annum. A further 5 million of annual rental income is anticipated when the properties are fully let. At 30 June 2005, these seven properties had produced a valuation surplus of 142 million above their cost. Since 30 June, Hammerson has reached practical completion of Bishops Square, a 75,900 m 2 scheme in the City of London, being carried out in a 75:25 joint venture with The Corporation of London. The 71,900 m 2 office element has been handed over for fitting out works to the occupier, Allen & Overy, a leading international law firm. There has been an encouraging level of interest in the 4,000 m 2 of retail space, with 18 of the 21 retail and restaurant units now let or under offer, representing 86% of the anticipated retail rental income. Hammerson s share of the estimated total development cost, which includes a fitting out contribution to Allen & Overy, is 285 million. The group s share of the projected income at the end of rent free periods is just over 25 million per annum. Practical completion of 19 Hanover Square has also been achieved since 30 June and marketing of this small office building will commence during September. Developments at 30 June 2005 Ownership Size Cost at Estimated Amount Anticipated interest m 2 30/6/05 total let or under completion % m development offer by area date cost % m Offices Bishops Square, London E , * 285 * 98 July Hanover Square, London W , nil Aug place Vendôme, Paris 1er 50 27, * 86 * 66 Apr 2006 Retail parks St Oswald s, Gloucester (Phase 1) , Sept 2005 The Avenue Retail Park, Cardiff 100 4, Jan 2006 B&Q, Dallow Road, Luton 100 8, Mar 2006 Westwood & East Kent, Thanet 100 8, Mar 2006 *Indicates Hammerson s share of the total costs At 30 June 2005, Hammerson s share of the future rental income from its developments, for which leases have already been signed or agreed, will amount to 39 million per annum. 12

15 In central Paris, work is progressing well at 9 place Vendôme, Paris 1er, a 50:50 joint venture with AXA, to create 22,200 m 2 of high quality office accommodation and 5,500 m 2 of prime retail space, with completion scheduled for April In June of this year, a pre-let agreement was signed with Clifford Chance, a major international firm of lawyers, in respect of 13,000 m 2 of the new office accommodation and 1,800 m 2 of ancillary space. Hammerson s share of the income from this lease, after the expiry of rent free periods, will amount to 3.4 million per annum. With leases for five of the eight retail units agreed, the scheme is now 66% let overall. St Oswald s in Gloucester is a mixed-use scheme, involving a retail park, leisure facilities and 450 residential units. The first phase of the scheme, which provides 20,200 m 2 of retail space and leisure facilities, was 89% let at 30 June and will officially open in September The estimated development cost of this element of the scheme is 60 million. In respect of the residential component, Hammerson has entered into a conditional contract to sell its interest to Westbury Homes, the residential developer. In March 2005, work started on the construction of a new 8,700 m 2 store for B&Q at Dallow Road, Luton. In April, work began on a 4,500 m 2 extension and refurbishment to The Avenue Retail Park in Cardiff, with completion scheduled for early The majority of the new space has been let to Homebase. At Westwood and East Kent Retail Parks in Thanet, Kent, work is now underway on an 8,400 m 2 extension to Hammerson s existing 16,600 m 2 retail park at an estimated total development cost of 17 million. Around 80% of the extension has been let or is under offer to Homebase, Sportsworld and Argos. POTENTIAL DEVELOPMENTS 2005/2006 Hammerson maintains an active development programme with the objectives of achieving good returns and creating high quality properties of a type not generally available in the open market. The group continues to build on its excellent reputation for its approach to urban regeneration, its ability to forge strong relationships with local authorities and its skills in delivering complex development projects. Potential developments 2005/2006 Ownership interest Size Indicative total % m 2 development costs m Retail schemes Broadmead, Bristol , * New Shires, Leicester 60 60, * Union Square, Aberdeen 50 50, * Offices 125 Old Broad Street, London EC , Threadneedle Street, London EC , Opéra Capucines, Paris 2ème 50 10, * Total 805 *Indicates Hammerson s share of the total costs OPERATING AND FINANCIAL REVIEW 13

16 Operating and Financial Review continued Six further development projects could start during the remainder of 2005 and These include major retail-led, mixed-use schemes in Bristol and Leicester. Broadmead in Bristol, a mixed-use retail-led scheme of around 140,000 m 2, is being developed by the Bristol Alliance, a 50:50 joint venture between Hammerson and Land Securities Group PLC. Earlier this year, the department store was let to House of Fraser. An unconditional development agreement with Bristol City Council is now in place and a start on site is imminent. Hammerson s estimated total development cost in respect of the Broadmead redevelopment is 230 million and the group s share of the projected income is around 16 million per annum. In Leicester, the group is working with Hermes in a 60:40 joint venture to carry out a major expansion of the existing shopping centre, The Shires. The New Shires scheme includes 60,000 m 2 of additional retail space, which is to be anchored by John Lewis Partnership, leisure facilities, and residential units. Demolition of existing buildings and enabling works are underway and it is anticipated that construction will begin in early 2006, with completion in Hammerson s 60% share of the estimated total development cost of New Shires is 190 million and its share of the projected income is around 12 million per annum. Union Square, Aberdeen, which was part of the portfolio acquired by Hammerson from the former Railtrack, is a 50:50 joint venture with Stannifer. The scheme has planning consent for 50,000 m 2 of mixed-use space, incorporating a retail park, retail mall and leisure facilities. Leasing is progressing well, with 39% of the scheme let or under offer. Construction is anticipated to start next year at an estimated total development cost to Hammerson of 80 million. Since purchasing the freehold of the former London Stock Exchange buildings in 2004, which had planning consent for 45,500 m 2 of office and retail accommodation, Hammerson has been successful in expanding and enhancing the potential schemes. In April 2005, a resolution to grant a revised planning consent was passed for the refurbishment of the 26-storey tower building at 125 Old Broad Street, to provide 31,400 m 2 of office accommodation and 600 m 2 of retail space. In addition, at the end of July, a resolution to grant a revised planning consent was passed for 60 Threadneedle Street, a 20,600 m 2 nine-storey building, incorporating 870 m 2 of retail space. A decision will be made shortly on the timing of the start on the first scheme, 125 Old Broad Street. Opéra Capucines, Paris 2ème, is a 50:50 joint venture with MAAF to create 5,700 m 2 of office and 4,500 m 2 of retail accommodation in a prime central Paris location. Esprit has agreed to occupy 2,500 m 2 of retail space. Construction of the new development is due to begin in the first quarter of FUTURE DEVELOPMENTS In addition to the schemes outlined above, Hammerson has invested approximately 85 million to create and advance further development opportunities. The projects currently generate an interim income of around 2 million per annum and fall into four principal categories: major retail-led, mixed-use schemes; extensions to existing shopping centres; retail parks; and offices. Firstly, the group is working in partnership with local authorities and councils to advance several major retail-led city centre schemes. These include developments in Kingston-upon-Thames, Leeds, Peterborough and Sheffield. Secondly, within Hammerson s retail portfolio there are several opportunities to extend and enhance a number of its shopping centres, including Brent Cross in north London, WestQuay in Southampton, The Oracle in Reading and four of the group s French shopping centres. The extensions to these schemes could add a substantial amount of retail and leisure space to the portfolio. Hammerson is continuing to create and advance further development opportunities. 14

17 Thirdly, Hammerson has a number of opportunities to develop and expand its existing retail parks portfolio, which include an 11,800 m 2 extension to Fife Central Retail Park in Kirkcaldy, a 6,000 m 2 extension to Berkshire Retail Park, Theale and a scheme in Nice, France. Fourthly, through its acquisition of the Railtrack portfolio at the end of 2002, Hammerson has the potential to expand its commercial portfolio in London by around 325,000 m 2, including 200,000 m 2 of offices. Hammerson is currently progressing a project in Bishopsgate, London EC1, having entered into an option agreement with Hackney Council enabling it to acquire a development site adjoining the group s existing Norton Folgate site. Hammerson intends to submit a planning application at the end of 2005 for a mixed-use development of 79,000 m 2, incorporating 43,000 m 2 of offices. The group is also advancing major mixed-use schemes at Shoreditch High Street, Bishopsgate Goodsyard and Paddington. MARKETS AND OUTLOOK Retail property In the UK, many retailers experienced a marked slowdown in sales growth in the first half of Despite this, prime retail assets continued to meet with a good level of demand from tenants. With the environment likely to remain competitive, retailers are expected to continue to focus on prime shopping centres offering high turnovers and lower cost retail parks, in both instances supporting continued rental growth. In France, retail sales continued to grow in the first half of 2005, though the rate of growth reduced during the second quarter of the year. Nonetheless, there has been demand for space in shopping centres, leading to a modest increase in rental values. In Germany there are now signs of economic recovery, but this has not yet been reflected in higher consumer spending. Demand from retailers for space remains weak. Office property In central London, take-up of office space during the first six months of 2005 was maintained at similar levels to those seen in the second half of Combined with only a limited amount of new space being added to the market, the vacancy level fell from 12.3% at the end of 2004 to 10.5% by the middle of this year. Although the level of vacancy remained higher in the City, this market also saw a reduction in available space during the first half of the year. Headline rents have so far remained stable during 2005, though there are some signs that rent free periods required to secure tenants are shortening. Looking ahead, a low level of new supply, particularly of large office buildings in the City, and further falls in vacancy during the remainder of 2005 and in 2006, are expected to lead to growth in headline rents during In central Paris, the rate of office take-up was also similar to that seen during Vacancy was stable at 5.5% and prime headline rents were unchanged during the first half of the year. Additional take-up is projected to lead to a reduction in vacancy and an increase in rents during Investment market Sentiment towards property investment in the UK and France has continued to be favourable, with strong demand from a wide range of investors, whilst in Germany there has been an awakening interest from investors. The UK market has seen a large number of transactions involving both office and retail assets. In France, the few assets that have been brought to the market have attracted strong interest. As a result, yields for prime retail and office assets in both the UK and France have fallen, leading to increased capital values. OPERATING AND FINANCIAL REVIEW 15

18 Independent Review Report to Hammerson plc Introduction We have been instructed by the Company to review the financial information for the six months ended 30 June 2005 which comprises the consolidated income statement, the consolidated balance sheet, the consolidated statement of recognised income and expense, the consolidated statement of changes in equity, the consolidated cash flow statement and related notes 1 to 19. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the financial information. This report is made solely to the Company in accordance with Bulletin 1999/4 issued by the Auditing Practices Board. Our work has been undertaken so that we might state to the Company those matters we are required to state to them in an independent review report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our review work, for this report, or for the conclusions we have formed. Directors responsibilities The interim report, including the financial information contained therein, is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the interim report in accordance with the Listing Rules of the Financial Services Authority which require that the accounting policies and presentation applied to the interim figures are consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed. International Financial Reporting Standards As disclosed in note 19, the next annual financial statements of the group will be prepared in accordance with International Financial Reporting Standards as adopted for use in the EU. Accordingly, the interim report has been prepared in accordance with the recognition and measurement criteria of IFRS and the disclosure requirements of the Listing Rules. Review work performed We conducted our review in accordance with the guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board for use in the United Kingdom. A review consists principally of making enquiries of group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with International Standards on Auditing (UK and Ireland) and therefore provides a lower level of assurance than an audit. Accordingly, we do not express an audit opinion on the financial information. Review conclusion On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June Deloitte & Touche LLP Chartered Accountants London 30 August

19 Consolidated Income Statement *Year ended Six months ended *Six months ended Audited Unaudited Unaudited m Notes m m Gross rental income Operating profit before gain on investment properties Gain on investment properties Operating profit (97.7) Finance costs (50.8) (49.5) 18.0 Finance income Change in fair value of interest rate swaps 3.8 (79.7) Net finance costs 4 (40.5) (40.8) Profit before tax (80.9) Current tax 5(a) (1.9) (80.6) Deferred tax 5(a) (42.2) Tax (charge)/credit (44.1) Profit for the period Attributable to: Equity shareholders Minority interests Profit for the period p Basic earnings per share p 94.5p 155.9p Diluted earnings per share p 94.3p Adjusted earnings per share are shown in note 7. *Restated under IFRS (see note 19). FINANCIAL REVIEW 17

20 Consolidated Balance Sheet *31 December June 2005 *30 June 2004 Audited Unaudited Unaudited m Notes m m Non-current assets 4,603.0 Investment and development properties 8 4, , Interests in leasehold properties Plant, equipment and owner-occupied property Investments Deferred tax 5(c) Loans receivable Other receivables 2.5 4, , ,116.0 Current assets 85.5 Receivables Cash and deposits ,850.7 Total assets 5, ,436.0 Current liabilities Payables Tax liabilities Borrowings Non-current liabilities 1,798.8 Borrowings 14 1, , Deferred tax 5(c) Tax liabilities Obligations under finance leases Pension deficit Other payables , , , ,398.8 Total liabilities 2, , ,451.9 Net assets 2, ,245.5 Equity 69.3 Called up share capital Share premium account Revaluation reserve Translation reserve 16 (55.6) (61.7) Hedging reserve Capital redemption reserve Other reserves ,638.6 Retained earnings 16 1, ,541.8 (1.9) Investment in own shares 17 (3.9) (1.7) 2,410.2 Equity shareholders funds 2, , Equity minority interests ,451.9 Total equity 2, , p Diluted net asset value per share 7 942p 797p 945p Adjusted net asset value per share 7 1,036p 847p *Restated under IFRS (see note 19). 18

21 Consolidated Statement of Recognised Income and Expense *Year ended Six months ended *Six months ended Audited Unaudited Unaudited m Notes m m 0.1 Foreign exchange translation differences (63.1) (12.2) Net gain on hedge of net investment in foreign subsidiaries Revaluation gains on development properties Revaluation gains on investments and owner-occupied property (4.2) Actuarial losses on pension schemes (3.5) (1.1) 1.1 Employee share options (17.7) Tax on items taken directly to equity 5(b) (16.7) (2.2) 46.8 Net gain recognised directly in equity Profit for the period Transitional adjustment on adoption of IAS Deferred tax thereon 1, 5(b) (1.7) Total recognised income and expense Attributable to: Equity shareholders Minority interests 1.6 (1.0) Total recognised income and expense Consolidated Statement of Changes in Equity *Year ended Six months ended *Six months ended Audited Unaudited Unaudited m Notes m m Opening equity shareholders funds 2,168.2 as previously reported 2, ,168.2 (193.0) effect of adopting IFRS 19 (193.0) 1,975.2 Opening equity shareholders funds restated 2, , Issue of shares Acquisition of own shares (2.3) 0.3 Amortisation of investment in own shares , , , Total recognised income and expense FINANCIAL REVIEW 2, , ,240.7 (47.4) Dividends (34.5) (32.3) 2,410.2 Closing equity shareholders funds 2, ,208.4 *Restated under IFRS (see note 19). 19

22 Consolidated Cash Flow Statement *Year ended Six months ended *Six months ended Audited Unaudited Unaudited m Notes m m Operating activities Operating profit before gain on investment properties Adjustment for non-cash items Decrease in receivables (17.4) Increase/(Decrease) in payables 16.6 (20.1) Cash generated from operations (100.1) Interest paid (89.0) (70.7) 21.0 Interest received (22.0) Tax paid (1.8) (2.2) 60.5 Cash flows from operating activities Investing activities (99.7) Purchase of property (86.7) (7.9) (223.5) Development of property (96.2) (109.8) Sale of property Purchase of own shares 17 (2.3) (221.1) Purchase of interests in joint ventures and subsidiary companies 5.6 (Increase)/Decrease in other long term receivables (0.5) (140.0) Cash flows from investing activities Financing activities 3.9 Issue of shares Increase in medium and long term borrowings (249.4) Increase/(Decrease) in short term borrowings 15.7 (80.7) (1.7) Dividends paid to minorities (47.4) Equity dividends paid (34.5) (32.3) (54.8) Cash flows from financing activities (94.9) (134.3) Net increase/(decrease) in cash and deposits Opening cash and deposits Exchange translation movement (0.2) (0.8) 53.7 Closing cash and deposits *Restated under IFRS (see note 19). 20

23 Notes to the Accounts 1 FINANCIAL INFORMATION The financial information contained in this report does not constitute statutory accounts within the meaning of section 240 of the Companies Act The full accounts for the year ended 31 December 2004, which were prepared under UK GAAP and which received an unqualified report from the Auditors, and did not contain a statement under s237(2) or (3) of the Companies Act 1985, have been filed with the Registrar of Companies. The unaudited financial information contained in this report has been prepared on the basis of the accounting policies set out in the press release issued by the group on 30 August Comparative figures for the year ended 31 December 2004 contained within this report were published in a press release on 26 April 2005, and further details and reconciliations explaining the transition to IFRS are available on the group s website, The principal exchange rate used to translate foreign currency denominated amounts in the balance sheet is the rate at the end of the period, 1 = The principal exchange rate used for the income statement is the average rate, 1 = The interim report was approved by the Board on 30 August Transitional adjustment on adoption of IAS 39 The group has taken advantage of the exemption in IFRS 1, which allows the deferral of the accounting and disclosure requirements of IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement. As such the effective date of transition to IFRS in relation to these standards is 1 January The effect of the change is to include the fair value of interest rate swaps in the balance sheet at fair value and to recognise changes in their fair value in the income statement. As at 1 January 2005, retained earnings and equity shareholders funds are increased by 5.7 million, representing the fair value of interest rate swaps, at that time, less the related deferred tax provision of 1.7 million. 2 OPERATING PROFIT Year ended Six months ended Six months ended m m m Gross rental income (4.1) Rents payable (2.4) (1.9) Gross rental income, after rents payable Service charge income (47.6) Service charge expenses (25.3) (21.4) (8.1) Net service charge expenses (4.3) (3.2) (17.9) Other property outgoings (11.6) (8.6) (26.0) Property outgoings (15.9) (11.8) Net rental income Management fees receivable (16.3) Cost of property activities (7.8) (8.8) (14.3) Corporate expenses (7.5) (6.7) (26.6) Administration expenses (14.2) (13.4) Operating profit before gain on investment properties Profit on the sale of investment properties Revaluation gains on investment properties Negative goodwill Gain on investment properties FINANCIAL REVIEW Operating profit

24 Notes to the Accounts continued 3 SEGMENTAL ANALYSIS The group operates in three countries namely United Kingdom, France and Germany. Year ended Six months ended Six months ended m m m Net rental income UK France Germany Segment result UK France (44.8) Germany (14.5) (37.8) (10.8) Unallocated corporate costs (6.3) (4.6) Operating profit NET FINANCE COSTS Year ended Six months ended Six months ended m m m 11.7 Interest on bank loans and overdrafts Interest on other loans Interest on obligations under finance leases Other interest payable Gross interest costs (19.7) Less: Interest capitalised (10.0) (8.5) 97.7 Finance costs (18.0) Finance income (6.5) (8.7) Change in fair value of interest rate swaps (3.8) 79.7 Net finance costs

25 5 TAX (a) Tax charge Year ended Six months ended Six months ended m m m Current tax 8.9 UK corporation tax Foreign tax French exit tax payable on election for SIIC status Deferred tax 61.8 Deferred tax on income and revaluations (166.0) Deferred tax released on election for SIIC status (165.5) (104.2) 42.2 (139.0) (23.3) Tax charge/(credit) 44.1 (58.4) (b) Tax recognised directly in equity Year ended Six months ended Six months ended m m m 19.0 Deferred tax charge on revaluations Deferred tax charge on interest rate swaps 1.7 (1.3) Deferred tax credit on actuarial losses on pension schemes (1.1) (0.3) 17.7 Tax recognised directly in equity (c) Deferred tax m m m UK Capital gains net of capital losses Capital allowances (2.3) Other timing differences (1.7) (3.8) 18.6 Dividends receivable from France (16.6) Revenue tax losses (19.1) (18.9) France FINANCIAL REVIEW Net deferred tax provision

26 Notes to the Accounts continued 5 TAX (continued) (d) Deferred tax movements Recognised Recognised Foreign 1 January 2005 in income in equity exchange 30 June 2005 m m m m m UK Capital gains net of capital losses Capital allowances Other timing differences (2.3) 0.6 (1.7) Dividends receivable from France (0.8) 34.9 Revenue tax losses (16.6) (2.5) (19.1) (0.8) France (0.1) 7.7 Net deferred tax provision (0.9) (e) Commentary Current tax is reduced by the French tax exemption and by capital allowances and tax relief for capitalised interest. Under IAS 12, deferred tax provisions are made for the tax that would potentially be payable on the realisation of investment properties and other assets at book value. For UK investment properties, deferred tax is calculated on the basis that properties will be realised predominantly through sale so that capital gains are reduced by indexation. Hammerson s French properties, with the exception of 9 place Vendôme, were elected into the SIIC tax exempt regime in 2004, when exit taxes totalling 70.8 million were incurred and deferred tax of million was written back. The SIIC rules require Hammerson s French subsidiaries to distribute a proportion of their profits to Hammerson plc and allowance is made within deferred tax for the UK tax that may arise when dividends are received. The tax on disposals may be reduced depending on how sales are structured. In particular, if the group retains all capital allowances on UK disposals, the liability would be reduced by 55 million (31 December 2004: 45 million). 6 DIVIDENDS The proposed interim dividend of 5.80 pence per share (30 June 2004: 5.45 pence per share) was approved by the Board on 30 August 2005 and is payable on 21 October 2005 to shareholders on the register at the close of business on 23 September The dividend has not been included as a liability as at 30 June The 2004 final dividend of 34.5 million, representing pence per share, was paid on 12 May 2005 and is included in the Consolidated Statement of Changes in Equity. 24

27 7 EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE The calculations for earnings per share, diluted earnings per share and adjusted earnings per share, based on the weighted average number of shares, are shown in the table below. The weighted average number of shares shown excludes those shares held in the Hammerson Employee Share Ownership Plan (note 17), which are treated as cancelled. Year ended 31 December 2004 Six months ended 30 June 2005 Six months ended 30 June 2004 Earnings Shares Pence Earnings Shares Pence Earnings Shares Pence m million per share m million per share m million per share Basic Adjustments: 0.6 (0.3) Dilutive share options 0.6 (0.2) 0.6 (0.2) Diluted Adjustments: Gain on investment (330.2) (119.3) properties (200.7) (72.4) (161.3) (58.3) Minority interest in gain on investment properties (0.2) Change in fair value of interest rate swaps (3.8) (1.4) Tax on property disposals SIIC exit tax (104.2) (37.6) Deferred tax (139.0) (50.3) Adjusted The calculations for basic, diluted and adjusted net asset value per share are shown in the table below: 31 December 2004 Equity 30 June June 2004 Net asset value shareholders Net asset value Net asset value per share funds Shares per share per share pence m million pence pence 869 Basic 2, Company s own shares held in Employee n/a Share Ownership Plan (0.7) n/a n/a n/a Unexercised share options n/a n/a 869 Diluted 2, n/a Deferred tax n/a n/a n/a Fair value of interest rate swaps (9.5) n/a n/a 945 Adjusted 2, , FINANCIAL REVIEW 25

28 Notes to the Accounts continued 8 INVESTMENT AND DEVELOPMENT PROPERTIES Investment properties Development properties Total Valuation Cost Valuation Cost Valuation Cost m m m m m m Balance at 1 January , , , ,506.2 Exchange adjustment (62.1) (52.6) (3.3) (3.0) (65.4) (55.6) Additions Disposals (188.6) (210.5) (188.6) (210.5) Transfers (55.7) (29.5) Capitalised interest Revaluation adjustment Balance at 30 June , , , ,427.3 All properties are stated at market value as at 30 June 2005, valued by professionally qualified external valuers. In the United Kingdom, office properties and the group s interests in the Birmingham Alliance properties were valued by DTZ Debenham Tie Leung, Chartered Surveyors, and all other retail properties were valued by Donaldsons, Chartered Surveyors. In France and Germany, the group s properties were valued by Cushman & Wakefield Healey & Baker, Chartered Surveyors. The valuations have been prepared in accordance with the Appraisal and Valuation Standards of the Royal Institution of Chartered Surveyors. At 30 June 2005 the total amount of interest included in development properties was 26.3 million (31 December 2004: 17.9 million) calculated using the group s average cost of borrowings. 9 INVESTMENTS m m m 31.4 Value Retail Investors Limited Partnerships Interests in Value Retail plc and related companies Other investments LOANS RECEIVABLE Loans receivable comprised a loan of 30.0 million (31 December 2004: 30.0 million) to Value Retail plc bearing interest based on EURIBOR and maturing on 10 October RECEIVABLES m m m 27.8 Trade receivables Other receivables Corporation tax Prepayments Fair value of interest rate swaps

29 12 CASH AND DEPOSITS m m m 23.9 Cash at bank Short term deposits Cash and deposits Analysis by currency 49.7 Sterling Euro Deposits mainly comprised funds placed on money markets with rates linked to LIBOR. 13 PAYABLES m m m 45.7 Trade payables Other payables Accruals BORROWINGS m m m Bank loans and overdrafts: Unsecured Secured ,499.3 Other loans: Unsecured 1, , , , , Exchange difference on currency swaps , , ,654.0 FINANCIAL REVIEW 27

30 Notes to the Accounts continued 14 BORROWINGS (continued) Analysis by currency m m m Sterling 1, Euro , , ,654.0 As part of the group s foreign currency hedging programme, at 30 June 2005 the group had also sold 165 million forward against sterling for value on 29 July 2005, at a spot rate of 1 = Undrawn committed facilities m m m Expiring within one year 9.0 Expiring within one to two years Expiring after more than two years FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES Book value Fair value Book value Fair value Book value Fair value m m m m m m (0.5) (0.5) Overdrafts and short term borrowings (0.5) (0.5) (157.6) (157.6) (1,816.8) (1,997.0) Long term borrowings (1,900.2) (2,113.8) (1,514.8) (1,624.6) Unamortised borrowing costs (0.2) (0.2) Currency swaps (1.4) (1.4) (0.3) (0.3) (1,799.5) (1,979.7) Total borrowings (1,884.4) (2,098.0) (1,654.0) (1,763.8) 5.7 Interest rate swaps The fair values of the group s long term borrowings have been estimated on the basis of quoted market prices. The fair values of the group s outstanding interest rate swaps have been estimated by calculating the present value of future cash flows, using appropriate market discount rates. Details of the group s cash and short term deposits are set out in note 12. Their fair values and those of other debtors and creditors equate to their book values. At 30 June 2005, the fair value of financial liabilities exceeded their book value by million (31 December 2004: million), equivalent to 77 pence per share (31 December 2004: 65 pence per share) on an adjusted net asset value per share basis. On a post tax basis, using a tax rate of 30%, the difference was equivalent to 54 pence per share (31 December 2004: 46 pence per share). 28

31 16 RESERVES Share Capital premium Revaluation Translation Hedging redemption Other account reserve reserve reserve reserve reserves m m m m m m Balance at 1 January Exchange adjustment (61.0) 53.7 Premium on issue of shares 1.7 Surplus arising on revaluation of development properties and investments 62.8 Employee share options 0.5 Transfer on completion of development properties (26.2) Deferred tax recognised directly in equity (17.8) Balance at 30 June (55.6) Retained earnings m Balance at 1 January ,638.6 Transitional adjustment on adoption of IAS Deferred tax thereon (1.7) Exchange adjustment (0.2) Transfer on completion of development properties 26.2 Actuarial losses on pension schemes (3.5) Dividends paid (34.5) Deferred tax recognised directly in equity 1.1 Retained earnings for the period Balance at 30 June , INVESTMENT IN OWN SHARES m m m 2.2 Opening balance Purchase of own shares 2.3 (0.3) Amortisation (0.3) (0.5) 1.9 Closing balance FINANCIAL REVIEW 29

32 Notes to the Accounts continued 18 ADJUSTMENTS FOR NON CASH ITEMS IN THE CASH FLOW STATEMENT m m m 1.4 Depreciation and amortisation Employee share options Unrealised foreign exchange (gains)/losses (0.6) (0.1) 2.6 Amortisation of lease incentives and other direct costs (5.5) Increase in accrued rents receivable (1.8) (2.4) EXPLANATION OF THE TRANSITION TO IFRS 2005 is the first year that the group has presented its financial statements under IFRS. The last financial statements presented under UK GAAP were for the year ended 31 December As IFRS comparative figures must be prepared for the year ended 31 December 2004, the date of transition to IFRS was 1 January 2004, with the exception of the adoption of IAS 32 and IAS 39, as explained in note 1. Reconciliations of equity at 31 December 2004 and profit for the year ended 31 December 2004 reported under UK GAAP and IFRS and the group s IFRS accounting policies have previously been published and are available on the Company s website, Reconciliations are presented in the following pages to enable a comparison of the 2005 published interim figures with those published in the corresponding period of the previous financial year and those published for the year ended 31 December IFRS 1 First-time Adoption of International Financial Reporting Standards requires an explanation of major adjustments to cash flows under IFRS. Whilst the format of the cash flow statement is different from UK GAAP, there are no material changes to cash flows from operations, investment or financing Reconciliation of equity reported under UK GAAP to equity under IFRS 30 June December June 2005 Note m m m Equity shareholders funds under UK GAAP 2, , ,844.7 IFRS adjustments: Obligations under finance leases a (33.9) (32.9) (32.9) Leasehold property interests a Exclusion of dividend b Change in pension deficit c (6.0) (8.8) (12.7) Deferred tax d (125.1) (196.2) (242.8) Fair value of interest rate swaps e 9.5 Net IFRS adjustments (116.0) (170.5) (229.9) Equity shareholders funds under IFRS 2, , ,614.8 Notes UK GAAP referred to in the tables in notes 19.1 and 19.2 is that existing at 31 December The principal reasons for the adjustments shown in the reconciliations between UK GAAP and IFRS are set out below. (a) Interests in leasehold properties are accounted for as finance leases under IFRS, and the obligation to the freeholder or superior leaseholder is included within non-current liabilities, calculated as the present value of the minimum lease payments at the inception of the lease. Investment and development properties are valued net of this obligation, so an amount equivalent to the obligation is included in the balance sheet as a non-current asset. An element of the rent payable is treated as interest and a part repayment of the obligation to the superior leaseholder or freeholder. (b) Under IFRS, unapproved dividends are not provided for. Accordingly, the UK GAAP figures for equity shareholders funds have increased to reflect the exclusion of the proposed dividends. (c) The net liabilities arising from the group s defined benefit pension schemes are included in the balance sheet under IFRS. (d) Under IFRS, deferred tax provisions are made for the tax that would potentially be payable on the sale of investment or development properties and other assets, whereas UK GAAP requires that this potential liability is disclosed as contingent tax but not provided in the balance sheet. (e) As explained in note 1, the fair value of interest rate swaps is included in the balance sheet with effect from 1 January

33 19.2 Reconciliation of profit reported under UK GAAP to profit under IFRS Six months ended Six months ended 30 June June 2004 Note m m Profit for the period under UK GAAP IFRS adjustments: Revaluation gains on investment properties f Deferred tax g (29.2) 67.0 Allocation of rent free periods h Amortisation of lease incentives and letting costs h (1.8) (0.7) Marketing costs expensed h 0.2 (0.6) Capitalised interest adjustment h (0.6) (0.1) Share options expense (0.5) (0.5) Change in fair value of interest rate swaps e 3.8 Other Net IFRS adjustments Profit for the period under IFRS Notes (f) IFRS requires that valuation changes on investment properties are included in the income statement. (g) Deferred tax arising on valuation changes and other items is included in the IFRS income statement. (h) There are a number of other adjustments which affect profit for the period: Under UK GAAP, rent free periods are allocated over the period to the first rent review. Under IFRS, rent free periods are allocated over the period to the first break option or, if the probability that the break option will be exercised is considered low, over the full lease term. Under UK GAAP, other lease incentives such as cash inducements and contributions to tenant fit out are either written off, capitalised, or capitalised and amortised, depending on their nature. Under IFRS, all such costs are capitalised and amortised over the period to the first break option or, if the probability that the break option will be exercised is considered low, over the full lease term. Letting costs are capitalised on developments and written off for investment properties under UK GAAP. Under IFRS, all such costs are capitalised and amortised over the period to the first break option or, if the probability that the break option will be exercised is considered low, over the full lease term. Under UK GAAP, marketing costs are capitalised for development properties and expensed as incurred for investment properties. IFRS requires that all marketing costs be expensed as incurred. Under UK GAAP, where an existing investment property is redeveloped, interest is capitalised on the total cost of the property, including its value prior to redevelopment. Under IFRS, interest is only capitalised on the new expenditure incurred, resulting in an increase in the net cost of finance and a reduction in interest capitalised. FINANCIAL REVIEW 31

34 Property Portfolio Information for the six months ended 30 June 2005 Rever- True Underlying sionary/ Net rental Properties equivalent valuation Vacancy Rents Estimated (Overincome at valuation yield change rate passing rental value rented) m m % % % m m % Notes (1) (2) (3) (4) United Kingdom Retail: Shopping centres , Retail parks , Office: City (20.2) West End Docklands and other (13.9) , (15.7) Total United Kingdom , France Retail Office (0.2) Total France , Germany Retail (10.6) Total Continental Europe , Group Retail , Office , (11.2) Total Group , Selected information at 31 December 2004 Group Retail 3, Office 1, (8.2) Total Group 4, Notes (1) True equivalent yield is based on rents passing and estimated rental values. The calculation excludes properties in the course of development. (2) Rents passing after deducting head and equity rents post any rent free periods. (3) Estimated rental value including vacant space and after deducting head and equity rents. (4) The amount by which the estimated rental value exceeds or falls short of the rents passing, together with the estimated rental value of vacant space. 32

35 Other Information DIRECTORS R R Spinney CBE, FRICS* Chairman retires 30 September 2005 J F Nelson FCA* Chairman elect G F Pimlott MA* Deputy Chairman R J G Richards BSc, FRICS Chief Executive R J O Barton CA, MBA* J A Bywater FRICS J C Clare CBE, BSc* P W B Cole BSc, MRICS G Devaux HEC, FRICS D A Edmonds CBE, D.Litt, BA* J R Hirst BA, FCA, ACT, CCMI* S R Melliss BA, FCA *non-executive director SECRETARY S J Haydon FCIS FINANCIAL CALENDAR Ex dividend date 21 September 2005 Record date 23 September 2005 Interim dividend payable 21 October 2005 PRINCIPAL GROUP ADDRESSES United Kingdom Hammerson plc, 100 Park Lane, London W1K 7AR Tel +44 (20) Fax +44 (20) France Hammerson SAS, Washington Plaza Immeuble Artois, 44 rue Washington, Paris CEDEX 08, France Tel +33 (1) Fax +33 (1) Registered office 100 Park Lane, London W1K 7AR Registered in England No WEBSITE The 2005 interim report, 2004 Annual Review and Summary Financial Statements, 2004 Directors Report and Financial Statements and other information are available on the Company s website, The Company operates a service whereby all registered users of the Company s website can choose to receive, via , notice of all Company announcements which can be viewed on the website. Glossary of Terms Adjusted earnings (per share) Reported earnings (per share) adjusted to exclude deferred tax, the gain on revaluation of investment properties, profits on disposal of investment properties and related tax, and the change in fair value of interest rate swaps. Adjusted net asset value (per share) Reported net asset value (per share) adjusted to exclude deferred tax and the fair value of interest rate swaps. Average cost of borrowing The cost of finance expressed as a percentage of the weighted average of borrowings during the period. Earnings per share (or EPS ) Profit for the period divided by the average number of shares in issue during the period. ERV The estimated market rental value of accommodation in a property. ESOP Employee share ownership plan. Gearing Net debt expressed as a percentage of equity shareholders funds. IAS International Accounting Standards. IFRS International Financial Reporting Standards. Interest rate and currency swap An agreement with another party to exchange an interest or currency rate obligation for a pre-determined period of time. Like-for-like/underlying net rental income The percentage change in rental income for completed properties owned throughout both current and prior periods, after taking account of exchange translation movements. Like-for-like/underlying property valuations The change in value during the period for properties held at the balance sheet date, after taking account of capital expenditure and exchange translation movements. Loan to value ratio Borrowings and foreign currency swaps expressed as a percentage of the total value of investment and development properties. Net asset value per share (or NAV ) Equity shareholders funds divided by the number of shares in issue at the balance sheet date. Over-rented The amount by which the estimated rental value falls short of the rents passing, together with the estimated rental value of vacant space. Pre-let A lease signed with a tenant prior to completion of a development. REITs Real estate investment trusts. Rents passing The annual rental income receivable from a property, after any rent free periods and after deducting head and equity rents. This may be more or less than the estimated rental value (see over-rented and reversionary or under-rented). Reversionary or under-rented The amount by which the estimated rental value exceeds the rents passing, together with the estimated rental value of vacant space. SIIC Sociétés d Investissements Immobiliers Côtées. A French tax exempt regime available to property companies listed in France. UK GAAP United Kingdom Generally Accepted Accounting Practice. Vacancy rate The area in a property, or portfolio, excluding developments, which is currently available for letting, expressed as a percentage of the total area of the property or portfolio. Designed and produced by Merchant in collaboration with Luminous. Printed by The Midas Press.

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