Final Results

25th Feb 2008 07:00

Hammerson PLC25 February 2008 Hammerson plc - Unaudited results for the year ended 31 December 2007 Financial Highlights 2007 2006 ChangeNet rental income £275.7m £237.4m +16.1%Profit before tax £110.4m £792.4mAdjusted profit before tax(1) £117.3m £94.5m +24.1% Basic earnings per share 34.9p 357.5pAdjusted earnings per share(1) 40.3p 32.8p +22.9%Dividend per share(2) 27.30p 21.68p +25.9% Equity shareholders' funds £4,355m £4,165m +4.6%Net asset value per share, EPRA basis(1) £15.45 £15.00 +3.0%Return on shareholders' equity(3) 4.5% 25.3% Gearing 57% 54% Key Points • A strong operating performance saw like-for-like rental income growth of 7.4% leading to increases of 24.1% in adjusted profit before tax and of 22.9% in adjusted earnings per share. • Over 70 new leases were signed generating additional annual rents of £8.3 million, whilst some 120 expiring leases were renewed. The vacancy rate reduced to 1.8% at 31 December 2007, compared with 3.4% at the end of 2006. • Adjusted NAV increased by 3.0% for the full year. An increase of 9.0% in the first six months was partially offset by a reduction of 5.5% in the second half of the year. • In the UK, following a capital return of 4.0% in the first six months of 2007, the second six months saw a negative capital return of 7.0%. The overall adverse yield change of 52 basis points in the second half was mitigated by the benefit of additional rents and higher rental values. • In France, values increased throughout the year, giving rise to a capital return for 2007 of 16.5%. • Capital expenditure amounted to £824 million, whilst £537 million was raised from disposals. • Six principal developments currently underway have an estimated total cost of £950 million and are projected to generate annual income following completion and letting of £75 million, of which £27 million has been contracted. • The group has a strong balance sheet and had cash and undrawn committed facilities of around £600 million at the year end. Notes (1) The calculations for basic and adjusted figures are shown on pages 17 and 20 and in note 6 on pages 31 and 32.(2) Recommended final dividend of 15.3 pence per share (2006: 15.3p) making a total for 2007 of 27.3 pence. It is intended that 7.7 pence per share will be paid as a PID, net of withholding tax where appropriate, and the remainder of 7.6 pence paid as a normal dividend. Further details are shown in note 5 on page 31.(3) Excluding deferred tax. John Nelson, Chairman of Hammerson, said: "In the face of the most difficult conditions in financial and UK propertyinvestment markets in recent years, I am very pleased to report a strongoperational performance by Hammerson in 2007 with good growth in rental incomeand earnings. The group's adjusted earnings per share increased by 23%, or 7.5pence, to 40.3 pence, reflecting new lettings, rent reviews, rent indexation inFrance and the completion of developments. The proposed full year dividend for2007 is increased by 25.9%. Our retail and office portfolio is of the highest quality and we benefit fromour substantial investment in France. This provides the potential for furthergood income growth over the next three years, both from the existing investmentassets and the current development projects as they are completed and let.Notwithstanding the current uncertain market conditions, I am confident that weshall maintain Hammerson's progress in the future." Enquiries: John Richards, Chief Executive Tel: 020 7887 1000Simon Melliss, Group Finance Director Tel: 020 7887 1000Christopher Smith, Director of Corporate Affairs Tel: 020 7887 1019 [email protected] Results presentation today: Time 9.30 a.m.Venue City Presentation Centre: 4 Chiswell Street, Finsbury Square, London EC1Y 4UP Webcast: There will be a webcast of Hammerson's results presentation broadcast live todayat 9.30a.m via the Company's website at www.hammerson.com. Financial calendar: Ex-dividend date 9 April 2008Record date for the dividend 11 April 2008Annual General Meeting 1 May 2008Interim management statement 1 May 2008Final dividend payable 23 May 2008Proposed half-year results announcement 7 August 2008Anticipated 2008 half-year dividend October 2008 Copies of the Chairman's statement, preliminary results statement, incomestatement, balance sheet, statement of recognised income and expense,reconciliation of equity, cash flow statement and notes are attached. The terms in this document are defined in the glossary on pages 41 and42. CHAIRMAN'S STATEMENT Results and Dividend Last September, I made reference to the slowdown in activity in the UKcommercial property market and the emerging weaknesses in global financialmarkets. Since then the problems within the international banking sector haveincreased markedly. These have exacerbated the weaker demand from investors forcommercial property in the UK and been reflected in falls in real estate values. Against this background, I am pleased to report strong growth in rental incomeand earnings by Hammerson in 2007. The group's adjusted earnings per shareincreased by 23% or 7.5 pence to 40.3 pence, reflecting new lettings, rentreviews, rent indexation in France and the completion of developments. Hammerson's adjusted NAV increased by 3.0% to £15.45 in 2007. An increase of9.0% in the first six months of the year was partly offset by a decline of 5.5%in the second half, the latter reflecting the decline in real estate values inthe UK in the last few months of the year. The Board is recommending a final dividend of 15.3 pence per share, making atotal for 2007 of 27.3 pence, an increase of 25.9% on last year. Market Background Following 11 years of increasing real estate values in the UK, there was aweakening of sentiment in the first half of 2007. The deterioration ininternational banking markets in the summer resulted in a shortage of capital inthe UK commercial property market and contributed to a reduction in values inthe last quarter. Nevertheless, prime properties of the type owned by Hammerson,let on long leases to occupiers with strong covenants, have shown greaterresilience than secondary assets. With regard to occupational markets, retailers in the UK are continuing to facechallenging conditions. Weakening consumer confidence, a reflection of softeninghouse prices and high personal debt levels, has recently resulted in slowergrowth in consumer spending. Nevertheless, retailers continue to take space inmajor new schemes and existing prime retail locations are generally experiencinglow vacancy levels. In the City of London office market, the buoyant demand seen for much of 2007slowed during the last few months of the year. There is continuing demand forwell configured prime office space in central London in a market where availablespace is currently limited. However, in view of the level of developmentcompletions over the next two years and reflecting the reduced levels ofactivity in the financial services sector, the City occupational market maysoften. For the time being, it appears likely that the UK investment market forcommercial property will remain subdued. However, as and when the banking marketstabilises, and with the prospect of lower interest rates, conditions in thereal estate investment market should improve. In France, which accounts for nearly 30% of our business, demand from retailersfor space in shopping centres remained healthy. The office occupational marketin central Paris also remained strong with demand from a broad spread ofoccupiers. There was continued good investor interest in both these key marketswith a further general increase in values in 2007. Whilst the current problemswithin international financial markets are likely to have an impact on Frenchreal estate values, I anticipate that the effects will be less than in the UK,with the retail sector showing more resilience than offices. Portfolio and Operations We continued to make good progress in all areas of our business in 2007. At thebeginning of the year we became a REIT and now have substantial tax-exemptbusinesses both in the UK and France. This is of benefit to Hammerson's businessmodel, which places emphasis on the disposal of mature assets as part of astrategy of active asset management and development. We invested a total of £824 million and raised £537 million from disposalsduring 2007. Capital investment included the acquisitions of Ravenhead RetailPark in St Helens; Stockley House, an office building in London SW1; and anincrease from 75% to 100% in our interest in Bishops Square, London E1. InFrance, we acquired the Grand Maine Shopping Centre in Angers and invested intwo new retail park development schemes. The principal disposals were ourinterest in 9 place Vendome in Paris for £207 million and 50% of the WestQuayShopping Centre in Southampton for £299 million. During 2007, 190 leases in respect of some 80,000m(2) of space were signed orrenewed. New leases will generate additional annual rents of £8.3 million,whilst the re-letting of expiring leases will add a further £1.4 million perannum. The overall vacancy rate reduced from 3.4% at the beginning of the yearto 1.8% at 31 December 2007. Hammerson's portfolio showed a total return of 5.4% for the year as a whole, forwhich the capital return was 1.6%. However, there were contrasting performancesbetween the first and second halves of the year. In the six months to 30 June,the portfolio showed a capital return 5.9%, whilst in the second half there wasa negative return of 4.1%. In the UK, the valuers appraised the investment portfolio at 31 December 2007based on an overall equivalent yield of 5.4%, some 52 basis points higher thanthat used for the valuation at 30 June. However, the group's success inincreasing income and rental values throughout the year offset around half ofthe potential reduction in value attributable to general market weakness. In France, the group's portfolio continued to increase in value in the secondhalf of the year with a capital return of 4.8% in the six months to 31 December2007, making a total for the year of 16.5%. Around two thirds of the increase invalue was due to lower valuation yields and one third to increased income andrental values. Good progress was made on the current development programme. Five of the sixmajor projects underway are due for completion during 2008 and we continue tosecure occupiers for them. The estimated cost of these schemes is around £950million of which £541 million has already been incurred. Following completion and letting, these schemes are projected to generate incomeof some £75 million, of which £27 million has already been contracted. This willprovide a further boost to income, particularly in 2009 and 2010. The capitalsurplus from these schemes amounted to £227 million at 31 December 2007. Hadthese schemes been completed and fully let at the year end, an estimatedadditional surplus of £100 million would have been recorded. Hammerson has been successful in recent years in having built up a veryattractive pipeline of future development opportunities. Decisions to startindividual projects will be based on projected financial returns, the marketoutlook and, where appropriate, the level of pre-letting. The cost of securingthese opportunities has been of the order of £240 million and the assetsacquired provide a current income of around £4 million. In total the pipelinecould involve investment of some £6 billion over the next decade in retail andoffice schemes both in the UK and France. Balance Sheet and Financing Hammerson has followed a policy for many years of maintaining a strong balancesheet and avoiding undue concentration of debt maturities in a particular year.Gearing at the year end was 57%, compared with 54% at the end of 2006. During2007 we arranged a new £340 million committed bank facility. At the year endthe weighted average maturity of the group's debt was 9 years and it had cashand undrawn facilities of £590 million. Senior Management Gerard Devaux, an Executive Director of Hammerson plc since 1999 and ManagingDirector of Hammerson Europe, will be retiring later this year. Gerard joinedHammerson France as General Manager in 1986. Under his leadership the Frenchbusiness has increased in size from under £100 million to over £2 billion todayand has consistently generated attractive returns for shareholders. I would liketo record the Board's appreciation to Gerard for his distinguished service. Hisresponsibilities as Managing Director in France will be assumed by ChristopheClamageran who will join Hammerson France in March this year, following asuccessful 20 year career in real estate in Paris. For the last 10 years he hasheld senior positions with BNP Paribas Real Estate, most recently as Deputy CEO. Conclusion Hammerson has a robust business model and strong balance sheet. Our retail andoffice portfolio is of the highest quality and we benefit from our substantialinvestment in France. This provides the potential for further good income growthover the next three years, both from the existing investment assets and thecurrent development projects as they are completed and let. Our management team has an excellent record of delivering good returns from ourreal estate activities. Notwithstanding the current uncertain market conditions,I am confident that we shall maintain Hammerson's progress in the future. John Nelson, Chairman25 February 2008 BUSINESS REVIEW Real estate strategy Our real estate strategy, which is aimed at maximising the total returns fromthe portfolio, has three strands: • the allocation of our portfolio between the markets and sectors in which we operate by appropriate investment and disposal decisions; • management of our properties so that they remain attractive to our occupiers enabling us to increase the group's rental income and other revenues; and • the development of properties that will generate attractive income and capital returns. This Business Review provides more detail on how we performed in these areasduring 2007 and the potential future growth in income and value in theportfolio. Property portfolio and allocation We base our decisions on the overall portfolio allocation by detailed analysisof the markets in which we are represented, using both internal and externalresearch. We review and project the performance of each of our existingproperties as part of our annual business planning process, enabling us toidentify assets for disposal. In the last five years we have raised £2.3 billionfrom disposals and invested £2.4 billion in acquisitions and new developments. Hammerson owns and manages 14 major shopping centres and 19 retail parks,principally in the UK and France, which provide 1.3 million m2 of retail space.Our office portfolio includes nine prime buildings, most of which are located inand around the City of London and in central Paris, which provide 255,000 m2 ofaccommodation. Our property portfolio was valued at £7.3 billion at the end of 2007, withinvestments totalling £6.3 billion and developments £1.0 billion. Joint venturesaccounted for 35% of the portfolio value, including seven major shopping centresin the UK. During 2007, the weighting of the UK portfolio decreased slightly to 71% of thetotal, whilst the retail and office weightings were unchanged at 72% and 28%respectively. Data prepared by IPD shows that, in the UK, shopping centres and London officeshave produced average annual total returns of 13.3% and 13.1% respectively overthe last ten years. However, the volatility of the latter is around twice thatof the former. These statistics support Hammerson's strategy of investing themajority of the portfolio in dominant shopping centres and retail parks whichdemonstrate sound performance over the longer term. The volatility in the officesector, which comprises the balance of the portfolio, provides opportunities togenerate high returns by exploiting market cycles. The value of the portfolio increased by £0.6 billion during 2007 and thecomponents of the movement are analysed in the table on the following page. Movement in portfolio value in 2007 £mPortfolio value at 1 January 2007 6,716Valuation uplift 70Capital expenditure Acquisitions 372 Development programme 380 Expenditure on existing portfolio 44Capitalised interest 28Disposals (494)Exchange 159________________________________________________________________________________Portfolio value at 31 December 7,275________________________________________________________________________________ The table below shows the capital returns from the total portfolio for the yearended 31 December 2007. Capital returns - total portfolioFor the year ended 31 December 2007 Shopping centres Retail parks Offices Total Capital Capital Capital Capital return return return return Value Value Value Value £m % £m % £m % £m %UK 2,280 (2.6) 1,225 (5.1) 1,625 (2.2) 5,130 (3.2)France 1,527 19.4 135 (11.9) 395 14.6 2,057 16.5Germany 88 8.3 - - - - 88 8.3_________________________________________________________________________________________________Total 3,895 4.8 1,360 (5.8) 2,020 1.0 7,275 1.6_________________________________________________________________________________________________ During 2007, the capital return for the portfolio overall was 1.6%, reflectingan uplift in value of £70 million in the year. However, following an increase invalue of £407 million in the first half of 2007, there was a decline of £337million in the second half. The chart below shows the components of thevaluation change. 2007 Components of valuation changehttp://www.rns-pdf.londonstockexchange.com/rns/6075o_-2008-2-22.pdf In the first six months of 2007, investment yields reduced in France, and to alesser extent in the UK, resulting in a valuation increase of £227 million.Income growth, resulting from increased rental values, development surpluses andasset management initiatives, both in the UK and France, generated a further£158 million increase. By contrast, in the second half of the year, and reflecting weaker generalmarket conditions, investment yields increased in the UK. France saw a furthermodest reduction in yields. The net effect was a fall in values of £457 million.However, income growth and improved rental values in both countries offset £183million of this reduction. Exchange and other items, including properties soldin the year, accounted for the other movements in valuation. Investment portfolio Valuation Data for Investment Portfoliofor the year ended 31 December 2007 True Properties at Revaluation in Capital Total Initial equivalent valuation the year return return yield yield £m £m % % % %Notes (1) (2)United KingdomRetail: Shopping centres 1,731 (53) (3.1) 1.2 4.6 5.1 Retail parks 1,178 (71) (5.6) (1.8) 4.2 5.2_____________________________________________________________________________________________________ 2,909 (124) (4.1) - 4.4 5.2_____________________________________________________________________________________________________ Office: City 1,050 (94) (8.5) (4.0) 4.9 5.7 Other 294 11 6.6 10.9 4.5 6.0_____________________________________________________________________________________________________ 1,344 (83) (5.4) (0.9) 4.8 5.8_____________________________________________________________________________________________________Total United Kingdom 4,253 (207) (4.6) (0.4) 4.5 5.4_____________________________________________________________________________________________________ Continental EuropeFranceRetail 1,532 177 13.4 18.3 4.2 4.6Office 395 44 14.6 18.6 4.2 4.4_____________________________________________________________________________________________________Total France 1,927 221 14.5 19.2 4.2 4.5____________________________________________________________________________________________________ GermanyRetail 89 7 8.3 10.0 4.4 5.7_____________________________________________________________________________________________________Total Continental Europe 2,016 228 14.2 18.8 4.2 4.5_____________________________________________________________________________________________________ GroupRetail 4,530 60 1.1 5.2 4.4 4.8Office 1,739 (39) (1.1) 3.2 4.7 5.4_____________________________________________________________________________________________________Total investment portfolio 6,269 21 0.5 4.6 4.3 5.1______________________________________________________________________________Developments 1,006 49 12.5 13.0______________________________________________________________________________Total group includingdevelopments 7,275 70 1.6 5.4 Notes (1) Annual cash rents receivable, net of head and equity rents and the cost of vacancy, as a percentage of property value. (2) The average income return, reflecting the timing of future rental increases, based on current ERV, resulting from lettings, lease renewals and rent reviews, assuming rents are received quarterly in advance. Our strategy of recycling assets continued in 2007 with some £537 million raisedfrom the disposal of mature assets during the year. In July, we completed thesale of our 50% interest in 9 place Vendome, Paris 1er, the major officebuilding developed jointly with AXA REIM France. Hammerson's net proceeds fromthe sale were £207 million, realising a profit of £117 million on our totaldevelopment costs of £90 million. Also in July, we sold a 50% interest in WestQuay Shopping Centre, Southampton,for £299 million. WestQuay was opened in 2000, following its development in a50:50 joint venture with Barclays, and we purchased their 50% interest inDecember 2004 for £203 million. The scheme is anchored by John Lewis and Marks &Spencer and provides 76,200m2 of high quality retail space. Hammerson and itsnew partner, GIC Real Estate, each hold their respective 50% interests inWestQuay in a joint venture partnership, with Hammerson retained as assetmanager. During 2007, the group invested a total of £824 million of which £407 millionwas accounted for by expenditure on the current development programme. In March,we acquired Ravenhead Retail Park, located near St Helens town centre, for £120million. It provides 27,500m2 of retail accommodation with a current passingrent of £4.6 million. Plans are well advanced for a £12 million extension to thepark. The freehold of Stockley House, London SW1 was acquired in May for a total of£71 million. Built in 1985, the 6,500m2 eight-storey office building generatesannual net rental income of £3.1 million from leases expiring in 2010 and 2011.The building is adjacent to Victoria Station where we have existing ownerships.Hammerson has been selected as preferred development partner by Network Rail forthe regeneration of the station, to include a major mixed-use development of upto 100,000m(2). The proposals for Stockley House would be incorporated into ourbroader masterplan for the area. In November we agreed final terms for the acquisition of the City of London's25% long leasehold interest in Bishops Square, London E1. Hammerson entered intoa joint venture agreement with the City in 2002 to develop the scheme, with thefinal payment to be made following completion of the building and theconfirmation of all costs. The payment of £130 million has been accrued in theaccounts and will be paid in May 2008. The City retains the freehold interest inthe scheme, with Hammerson holding an effective 95% economic interest. BishopsSquare is fully let, principally to Allen & Overy, the international law firm,and the total passing rent from the scheme is £35.9 million. We expanded our French retail portfolio in 2007 with the acquisition of tworetail park developments and The Grand Maine shopping mall, Angers, Maine etLoire. The latter was purchased in October for £46 million, including costs. Thecentre is anchored by a Carrefour hypermarket and produces an annual rentalincome of £2.2 million. There are opportunities to extend and enhance thescheme. Rental income Net rental income totalled £276 million in 2007, whilst passing rents from theinvestment portfolio were £308 million at 31 December 2007. Following expiries in 2007, 119 leases with rents passing of £10.0 million wererelet, securing additional annual income of £1.4 million. The leasing of vacantunits secured a further £8.3 million of annual income. In the UK, we agreed 114 rent reviews in 2007, resulting in increased annualrents of £2.3 million in respect of leases which had passing rents of £15.9million. Reviews remaining to be settled from 2007 could increase annual rentsby a further £3.5 million. In France, shopping centre rents are indexed annually according to aconstruction cost index. The index applicable for most leases in 2007 was 7.1%and the comparable figure from 1 January 2008 is 5.05%. The basis of indexationfor retail leases is being amended with effect from 2009 and will change to anindex partly based on changes in retail prices. Rental Data for Investment Portfoliofor the year ended 31 December 2007 Gross Net Reversion/ rental rental Vacancy Rents Estimated (over- income income rate passing rental value rented) £m £m % £m £m % Notes (1) (2) (3) (4)United KingdomRetail: Shopping centres 102.3 90.0 1.0 84.5 91.6 7.4 Retail parks 50.7 48.3 2.2 50.6 60.0 15.5_________________________________________________________________________________________________ 153.0 138.3 1.5 135.1 151.6 10.5_________________________________________________________________________________________________ Office: City 57.1 49.7 - 63.5 62.3 (1.9) Other 13.1 11.6 1.3 17.6 21.6 20.9_________________________________________________________________________________________________ 70.2 61.3 0.3 81.1 83.9 3.1_________________________________________________________________________________________________Total United Kingdom 223.2 199.6 1.0 216.2 235.5 7.7_________________________________________________________________________________________________ Continental EuropeFranceRetail 61.4 54.4 1.8 75.1 80.7 5.6Office 15.7 14.1 10.3 13.0 13.9 (4.0)_________________________________________________________________________________________________Total France 77.1 68.5 3.1 88.1 94.6 4.1_________________________________________________________________________________________________ GermanyRetail 3.5 1.2 15.5 4.0 4.9 3.4_________________________________________________________________________________________________Total Continental Europe 80.6 69.7 3.7 92.1 99.5 4.1_________________________________________________________________________________________________ GroupRetail 217.9 193.9 1.9 214.2 237.2 8.6Office 85.9 75.4 1.6 94.1 97.8 2.1_________________________________________________________________________________________________Total investment 303.8 269.3 1.8 308.3 335.0 6.6portfolio_________________________________________________________________________________________________Income from developmentsand other sources notanalysed above 7.7 6.4_________________________________________________ As disclosed in note 1 tothe accounts 311.5 275.7_________________________________________________ Selected data for the year ended 31 December 2006_________________________________________________________________________________________________Total investment 272.8 235.3 3.4 288.6 317.6 5.2portfolio_________________________________________________________________________________________________ Notes (1) The ERV of the area in a property, or portfolio, excluding developments, which is currently available for letting, expressed as a percentage of the total ERV of the property or portfolio. (2) The annual rental income receivable from an investment property, after any rent-free periods and after deducting head and equity rents. (3) The estimated market rental value of lettable space in a property after deducting head and equity rents, calculated by the group's valuers. (4) The percentage by which the ERV exceeds, or falls short of, rents passing together with the estimated rental value of vacant space. Occupancy The occupancy rate in the investment portfolio at 31 December 2007 was 98.2%,compared with 96.6% at the end of 2006. The increase principally reflectedprogress in letting space in the London office portfolio where the occupancyrate now stands at 99.7%. Income security and quality Our investment portfolio generates a secure income stream with good growthpotential. We have a large number of occupiers, generally of good financialstanding, with diverse businesses, so the risk to Hammerson of individual tenantdefault is low. The weighted average unexpired lease term is 10.5 years. At 31 December 2007, the group's five largest retail tenants by rental incomerepresented 10.6% of total rents passing from the investment portfolio: B&Q3.2%; Pinault Printemps Redoute 2.3%; Arcadia 2.0%; H&M 1.8%; and DSG Retail1.3%. In the office portfolio, the three largest tenants accounted for 15.9% oftotal rents passing from the investment portfolio: Allen & Overy 11.2%; DeutscheBank 3.3%; and Barclays 1.4%. Lease expiries and breaks Leases with current rents passing of £50.4 million will expire, or are subjectto tenants' break clauses, during the period from 2008 to 2010, as shown in thetable below. These expiries and break options are spread throughout theportfolio and there are no properties where the current rent is significantlyabove the market rent. We estimate that, assuming renewals take place at currentrental values, additional rents of £6 million would be secured, principally inthe retail portfolio. This is not a forecast and takes no account of voidperiods, lease incentives or possible changes in rental values. Lease expiries and breaksas at 31 December 2007 Weighted average unexpired lease Rents passing that expire/ ERV of leases that expire term break in /break in to break to expiry 2008 2009 2010 2008 2009 2010 years years £m £m £m £m £m £mNotes (1) (1) (1) (2) (2) (2)United KingdomRetail: Shopping centres 8.1 1.8 3.1 9.6 2.0 3.3 9.5 10.2 Retail parks 1.0 0.2 0.7 1.3 0.4 0.8 14.2 14.6_____________________________________________________________________________________________________ 9.1 2.0 3.8 10.9 2.4 4.1 11.4 12.0_____________________________________________________________________________________________________ Office: City 2.0 - 0.1 1.9 - 0.1 13.5 16.2 Other 1.4 1.5 2.1 2.8 1.9 2.2 5.1 7.3_____________________________________________________________________________________________________ 3.4 1.5 2.2 4.7 1.9 2.3 11.8 14.4_____________________________________________________________________________________________________Total United Kingdom 12.5 3.5 6.0 15.6 4.3 6.4 11.5 13.0_____________________________________________________________________________________________________ Continental EuropeFranceRetail 13.3 6.0 8.4 14.5 5.4 9.4 1.3 4.1Office 0.3 - - 0.3 - - 2.2 5.8_____________________________________________________________________________________________________Total France 13.6 6.0 8.4 14.8 5.4 9.4 1.4 4.3_____________________________________________________________________________________________________ GermanyRetail 0.3 0.1 - 0.4 0.1 - 6.3 8.0_____________________________________________________________________________________________________Total Continental Europe 13.9 6.1 8.4 15.2 5.5 9.4 1.6 4.5_____________________________________________________________________________________________________ GroupRetail 22.7 8.1 12.2 25.8 7.9 13.5 7.7 9.1Office 3.7 1.5 2.2 5.0 1.9 2.3 10.6 13.3_____________________________________________________________________________________________________Total group 26.4 9.6 14.4 30.8 9.8 15.8 8.6 10.5_____________________________________________________________________________________________________ Notes (1) The amount by which rental income, based on rents passing at 31 December 2007, could fall in the event that occupational leases due to expire are not renewed or replaced by new leases. For the UK it includes tenants' break options. For France and Germany, it is based on the earliest date of lease expiry. (2) The ERV at 31 December 2007 for leases that expire or break in each year, after deducting head and equity rents and ignoring the impact of rental growth and any rent-free periods. Rent reviews The investment portfolio was 6.6% reversionary overall at the end of 2007,compared with 5.2% at the end of the previous year. The UK shopping centres andretail parks were 7.4% and 15.5% reversionary respectively at the year end. Theoffice portfolio in the UK was 3.1% reversionary. In France, the retail andoffice portfolios were 5.6% reversionary and 4.0% over-rented respectively. In the UK, leases with current rents passing of £144 million are subject to rentreview in the period to 2010 as shown in the table below. On review, we estimatethat rents receivable in respect of these leases would increase by £14.4 millionby 2010, if reviewed at current rental values. This is not a forecast and takesno account of changes in rental values before the relevant review dates. The majority of rents in France are subject to annual indexation. Rent reviewsas at 31 December 2007 Projected rent at current ERV of Rents passing subject to review in leases subject to review in Outstanding 2008 2009 2010 Outstanding 2008 2009 2010 £m £m £m £m £m £m £m £mNotes (1) (1) (1) (1) (2) (2) (2) (2)United KingdomRetail: Shopping centres 7.1 14.3 12.5 14.7 8.5 15.4 13.3 15.6 Retail parks 12.5 5.8 3.8 15.2 14.5 7.6 4.6 17.0____________________________________________________________________________________________________ 19.6 20.1 16.3 29.9 23.0 23.0 17.9 32.6____________________________________________________________________________________________________ Office: City 11.0 - 3.7 32.7 11.0 - 4.1 33.6 Other 1.9 1.0 2.6 5.0 2.0 1.2 3.8 6.0____________________________________________________________________________________________________ 12.9 1.0 6.3 37.7 13.0 1.2 7.9 39.6____________________________________________________________________________________________________ Total United Kingdom 32.5 21.1 22.6 67.6 36.0 24.2 25.8 72.2____________________________________________________________________________________________________ Notes (1) Rents passing at 31 December 2007, after deducting head and equity rents, which is subject to review in each year. (2) Projected rents for space that is subject to review in each year, based on the higher of the current rental income and the ERV as at 31 December 2007, after deducting head and equity rents and ignoring the impact of changes in rental values before the review date. Additional contracted income Hammerson's cash flow will increase substantially in 2009 from leases andcontracts that have already been signed at current developments. The table belowshows additional contracted income on both cash and accounting bases. 2008 2009 2010 2011Rents passing £m £m £m £mShopping centres - UK 1.2 12.6 19.9 21.4Retail parks - UK - 2.5 4.9 4.9Shopping centres - France 3.8 5.2 5.9 6.5Retail parks - France - 1.0 1.9 1.9________________________________________________________________________________Total - cash flow 5.0 21.3 32.6 34.7 - accounting basis 9.4 28.5 33.6 33.6________________________________________________________________________________ NoteFigures show Hammerson's share of the income from joint ventures. Current developments Our objectives from development are threefold: first, to create assets whichwill generate an attractive initial yield with significant future growth inincome; second, to create assets valued at a surplus above our costs; third, tocreate prime assets for Hammerson's portfolio of a type which are difficult toacquire on the open market. Through the schemes we have carried out in recent years, Hammerson has built areputation as one of the foremost developers in the UK and France, managingcomplex urban regeneration schemes and forging strong links with localauthorities and key occupiers. Real estate development requires us to take aview of future market conditions, anticipate occupiers' needs, exercise strongproject management skills and carefully manage risk. Besides the projectsunderway at any one time, we aim to maintain and advance a substantial pipelineof future development opportunities. Six developments were underway at 31 December 2007 with an estimated totaldevelopment cost of £950 million, of which £541 million has already been spent.The value of our overall development portfolio at the end of 2007 was just over£1 billion, compared with its cost of £846 million. Developments with a currentvalue of £681 million will achieve practical completion in 2008. Owner-ship Lettable Forecast Cost to Value at Cost to Forecast % Estimated interest area completion 31/12/07 31/12/07 complete total Let annual income date cost % m(2) £m £m £m £m £mNotes (1) (1) (1) (2)RetailCabot Circus, 50 92,000 Sep 2008 178 198 67 245 75 18BristolHighcross, 60 61,000 Sep 2008 137 162 73 210 66 12LeicesterUnion Square,Aberdeen 100 49,000 Oct 2009 88 87 157 245 25 16Parinor Extension, Aulnay-sous-Bois 100 24,000 Sep 2008 54 109 26 80 82 7 Offices125 Old BroadStreet, London EC2(3) 50 30,900 Apr 2008 25 128 20 45 - 1060 ThreadneedleStreet, London EC2 100 20,600 Nov 2008 59 84 66 125 - 12__________________________________________________________________________________________________________________Total 541 768 409 950 41 75__________________________________________________________________________________________________________________ Other developments 259 238Profit on disposal of 50% of 125 Old Broad Street(3) 46 -_______________________________________________________________________Total development properties (note 7 to the 846 1,006accounts)_______________________________________________________________________ Notes (1) Capital costs including capitalised interest. (2) Amount let or in solicitors' hands by income at 19 February 2008. (3) Cost to 31 December 2007 and forecast total cost shown net of £46 million profit on disposal of 50% interest in 2006. (4) Figures show Hammerson's share of costs, value and income. Cabot Circus in Bristol, the 92,000m(2) retail-led mixed-use scheme beingdeveloped in a 50:50 joint venture with Land Securities, is on schedule to openin September 2008 and 75% of the forecast rental income has been secured.Hammerson's share of the estimated income is £18 million and its totaldevelopment cost £245 million. On completion, Cabot Circus will re-establishBristol as a top-ten UK retail destination. In Leicester, the anchor store at the Highcross development has been handed overto John Lewis on schedule for fitting out. The scheme is a 60:40 joint venturewith Hermes, and 66% of the target income has been secured or is in solicitors'hands. The shopping centre extension is scheduled to open in September 2008 atan estimated total development cost to Hammerson of £210 million. Whencomplete, the project will more than double the size of the existing Shiresshopping centre to over 100,000m(2). The development at Union Square of a nine-hectare site beside Aberdeen railwaystation will provide 49,000m(2) of space including retail units, leisure andcatering, a 200 bedroom hotel and 1,700 car parking spaces. Having handed overthe new rail freight yards to Network Rail, work has now started at the GuildStreet site next to the railway station. The estimated total development cost ofthe scheme, which is expected to be completed towards the end of 2009, is £245million and the projected rental income is £16 million per annum, of which 25%is let or in solicitors' hands. The extension to the Parinor shopping centre to the north of Paris commenced inOctober 2006 and is being built in two phases, with anticipated completion inApril and September 2008 respectively. Anchored by Planete Saturn and Toys 'R'Us, the estimated total development cost is £80 million. The works will increasethe area of the scheme to over 90,000m(2), making it the largest shopping centreserving the north of Paris. It will also enhance the footfall in the existingmalls. Over 80% of the forecast annual income of £7 million from the extensionhas been secured. The former London Stock Exchange at 125 Old Broad Street is a joint venture withtwo co-investors, GE Capital and Bank of Ireland, each of which has a 25%interest in the scheme. Hammerson is managing the development and will beretained as the asset manager when the building is completed, scheduled to be inApril 2008. The project will provide 29,700m(2) of prime office space and 1,200m(2) of retail accommodation and Hammerson's share of the estimated rental incomeis £10 million. Letting interest is encouraging and around 40% of the projectedrental income is under offer. Construction work is also progressing at 60 Threadneedle Street to create a19,400m(2) nine-storey office building and 1,200m(2) of retail space. Whencompleted in November 2008 at an estimated cost of £125 million, it will provideexcellent modern accommodation in one of the best locations in the City ofLondon. The estimated rental income for the scheme is £12 million per annum. In December, we acquired the five hectare development site of Cap Malo RetailPark, near Rennes, at a cost of £7 million. Planning consent has been grantedfor 11,800m(2) of retail park accommodation and development costs are estimatedat a further £7 million. Work is expected to start on site in March 2008 forcompletion in March 2009. Also in December, we entered into an agreement to acquire the freehold of StOmer Retail Park, located 2km south of St Omer, between Calais and Lille. Thescheme is currently under development and Hammerson's ownership on completionwill amount to 19,300m(2). Around 85% of the park is pre-let and the estimatednet rental income on completion, expected in October 2009, will be £1.2 millionper annum. Future developments Hammerson has built up a very attractive pipeline of future developmentopportunities. In total the pipeline could involve investment of some £6 billionover the next decade in retail and office schemes both in the UK and France.These projects, which are listed in the table below, include: major retail-ledcity centre regeneration schemes; extensions to existing retail centres; retailpark schemes; and office developments. We continued to make good progress in2007 in advancing many of these schemes through the various feasibility, siteassembly and planning stages. Future Development Pipeline Major retail-led schemes Retail parksBrent Cross and Cricklewood, NW London Abbey Retail Park, BelfastCentral Area, Milton Keynes Fife Central Retail Park, KirkcaldyEastgate Quarter, Leeds Manor Walks, CramlingtonKingston-upon-Thames Nice Lingostiere, NiceMartineau Galleries, Birmingham Parc Tawe, SwanseaNorth Westgate, Peterborough The Orchard Centre, DidcotSevenstone, SheffieldSwansea city centre Retail extensions OfficesEspace St Quentin, St Quentin-en-Yvelines Bishopsgate Goodsyard, London E1Italie 2, Paris Bishops Place, London E1Les 3 Fontaines, Cergy-Pontoise Paddington Triangle, London W2WestQuay III, Southampton Shoreditch High Street, London E1 Victoria, London SW1 In all of our future developments the current committed capital remains modestand we have flexibility over when we become committed to start work on theschemes. We will generally commit to major projects only when a degree ofpre-letting has been achieved and the appropriate funding is in place. Thelatter may include joint venture arrangements. Good progress has been made in Sheffield on our 105,000m(2) mixed-useregeneration of the city centre. An agreement for lease has been signed withJohn Lewis to anchor the scheme, which is now known as Sevenstone. In February 2007, a resolution to grant planning consent was passed for our122,000m(2) retail-led regeneration of Leeds city centre. Eastgate Quarter is tobe developed in a 90:10 joint venture between Hammerson and Leeds-based TownCentre Securities. It will be anchored by a 26,000m(2) John Lewis store and aMarks & Spencer store of 17,900m(2), include over 100 retail units, restaurantsand bars, a hotel, office accommodation, new homes and 2,880 car parking spaces. Hammerson is a partner in the Brent Cross and Cricklewood Regenerationproposals, for the redevelopment of 100 hectares, bordered by Brent CrossShopping Centre to the north and Cricklewood Lane to the south. The proposalsinclude the creation of a new town centre, including office and retailaccommodation, 7,500 homes and associated community infrastructure. Theproposals are being evolved in conjunction with the Mayor of London and theLondon Borough of Barnet. A planning application for the masterplan will besubmitted during 2008. The scheme proposals were recently awarded "BestConceptual Project" in the Mayor of London's 2007 Planning Awards. In Southampton we are progressing a scheme with our 50:50 joint venture partnerGIC to create a leisure and retail scheme set around a new town piazza adjacentto the partners' WestQuay shopping centre. The scheme will be anchored byCineplex. We had been selected by the Royal Borough of Kingston-upon-Thames as developmentpartner for the regeneration of the town centre. Following a review of EUprocurement rules, the Council has put the scheme out to tender. Hammersonintends to continue to progress its plans whilst participating in the tenderprocess. Hammerson, together with Urban Splash, has been selected as the developmentpartner for the regeneration of Swansea city centre. Our masterplan includes56,000m(2) of retail space, leisure facilities, offices, two hotels, aconference venue, 1,000 residential units and 3,000 car parking spaces. Within the retail parks sector, we are planning a major expansion of ourexisting interests in Cramlington town centre. We will be making a planningapplication in 2008 to increase the size of the centre by over 50%. In Scotland, we have received planning permission to create 11,000m(2) of retailwarehousing and 360 car parking spaces on a site adjacent to our existing retailpark in Kirkcaldy, Fife. Over 80% of the new accommodation has been pre-let anda start on site is anticipated in summer 2008. During 2007 we have made goodprogress advancing our plans for extensions to a number of our other retailparks, including those at Didcot and Belfast. The group is progressing the Bishops Place project in Bishopsgate, London E1,having acquired an option to purchase a development site adjoining its existingNorton Folgate site. We submitted a planning application in August 2007 for amixed-use development totalling 100,000m(2), incorporating 62,000m(2) ofoffices. In France, plans are being worked up for the expansion of our shopping centre atLes 3 Fontaines in Cergy-Pontoise. The scheme will create an additional 30,000m(2) of space, of which Hammerson's ownership would be 18,000m(2), encompassing15 stores, 50 shop units and 2,200 car parking spaces. In May 2007 we entered into an exclusivity agreement with JP Morgan Chase todevelop a new European headquarters building for the bank. We are working withour partner, the City of London, to create a building of around 90,000m(2) onthe site of an existing building, St Alphage House, owned by the City. We aim tosubmit a planning application in 2008, with a view to a start on site next year.JP Morgan Chase will own the building. FINANCIAL REVIEW The financial information contained in this review is extracted or calculatedfrom the attached income statement, balance sheet, cash flow statement, otherfinancial statements, notes and the glossary of terms. Profit before tax Profit before tax for the year ended 31 December 2007 was £110.4 millioncompared with £792.4 million for 2006. The reduction resulted principally fromthe lower revaluation gains for the investment portfolio in 2007. Adjustedprofit before tax, analysed in the table below, was £117.3 million, an increaseof £22.8 million, or 24.1% on the previous year. Analysis of profit before tax 2007 2006 £m £mProfit before tax 110.4 792.4Adjustments:Profit on sale of investment properties (39.8) (95.8)Revaluation gains on investment properties (20.7) (664.8)Revaluation losses on development properties 25.7 -Goodwill impairment - 12.6Provision relating to formerly owned property 6.0 -Investment impairment 3.6 -Bond redemption costs 28.3 34.0Change in fair value of derivatives 3.8 16.1______________________________________________________________________________________________________Adjusted profit before tax 117.3 94.5______________________________________________________________________________________________________ Compared with 2006, adjusted earnings per share in 2007 increased by 7.5 pence,or 22.9%, to 40.3 pence as the growth in net rental income more than offsetincreased interest and administration costs. Note 6 to the accounts on page 31provides detailed calculations for earnings per share. Net rental income For the year ended 31 December 2007, net rental income was £275.7 millioncompared with £237.4 million in the previous year. Just over half of theincrease was due to a full year's contribution from the recent development atBishops Square. The balance arose principally from lettings, rent reviews andindexation in France. Our investment portfolio showed a like-for-like increase in net rental income of7.4%. The tables on the following page show the year-on-year movements for theportfolio. In 2007, rent receivable of £18.2 million has been accrued and allocated torent-free periods. Net rental income of £2.9 million was related to retailoccupiers' turnover whilst shopping centre car parks generated net income of£7.8 million in 2007. Like-for-like net rental income analysisFor the year ended 31 December 2007 Properties owned throughout Total net 2006/7 Acquisitions Disposals Developments rental income £m £m £m £m £m United KingdomRetail 106.7 19.9 7.2 2.6 136.4Office 36.3 2.2 - 26.0 64.5______________________________________________________________________________________________________Total United Kingdom 143.0 22.1 7.2 28.6 200.9______________________________________________________________________________________________________ Continental EuropeFrance 68.6 0.4 (0.2) 2.6 71.4Germany - - - 1.2 1.2______________________________________________________________________________________________________Total Continental Europe 68.6 0.4 (0.2) 3.8 72.6______________________________________________________________________________________________________ GroupRetail 161.0 20.3 7.0 3.9 192.2Office 50.6 2.2 - 28.5 81.3______________________________________________________________________________________________________Total investment 211.6 22.5 7.0 32.4 273.5portfolio______________________________________________________________________________________________________ Income from developments 2.2 - - - 2.2and other sources notanalysed above______________________________________________________________________________________________________ Total portfolio 213.8 22.5 7.0 32.4 275.7______________________________________________________________________________________________________ For the year ended 31 December 2006 Properties owned Total net throughout rental 2006/7 Acquisitions Disposals Developments Exchange income £m £m £m £m £m £m United KingdomRetail 103.5 6.7 20.2 2.0 - 132.4Office 30.6 - 1.4 6.6 - 38.6____________________________________________________________________________________________________________Total United Kingdom 134.1 6.7 21.6 8.6 - 171.0____________________________________________________________________________________________________________ Continental EuropeFrance 63.0 - (0.1) 2.1 (0.3) 64.7Germany - - 0.3 (0.1) - 0.2____________________________________________________________________________________________________________TotalContinental Europe 63.0 - 0.2 2.0 (0.3) 64.9____________________________________________________________________________________________________________ GroupRetail 153.9 6.7 20.4 1.7 (0.3) 182.4Office 43.2 - 1.4 8.9 - 53.5____________________________________________________________________________________________________________Total investment portfolio 197.1 6.7 21.8 10.6 (0.3) 235.9____________________________________________________________________________________________________________ Income from developments andother sources not analysedabove 1.5 - - - - 1.5____________________________________________________________________________________________________________Total portfolio 198.6 6.7 21.8 10.6 (0.3) 237.4____________________________________________________________________________________________________________ Administration expenses Administration expenses totalled £41.2 million in 2007 compared with £36.1million in 2006. The increase was primarily accounted for by increased staffingand performance-related remuneration, which together accounted for £3.3 millionof the increase. Net finance costs For the year ended 31 December 2007, net finance costs, excluding the change infair value of derivatives and bond redemption costs, increased by £10.4 millionto £117.2 million. Higher interest rates and the cost of funding the first twoinstalments of the REIT conversion charge were partly offset by the savingsachieved from the early redemption of the 10.75% 2013 bonds. Interest of £27.6 million relating to the development programme was capitalisedduring the year. The majority related to the retail developments at CabotCircus, Bristol and Highcross, Leicester. The average cost of borrowing in 2007 was 5.9% and interest cover was 1.9 timescompared with 1.8 times the previous year. Tax Since becoming a UK REIT at the beginning of 2007, Hammerson has been exemptfrom corporation tax on its UK property income and on capital gains on disposalsof UK investment properties. The initial effects of the UK REIT election wereaccounted for in the 2006 accounts. UK REIT status and the SIIC exemption of ourFrench business mean that, in future, the current tax charge should be minimal.However, the sale of our interest in 9 place Vendome, the only French propertyoutside the SIIC regime, crystallised a tax liability of £17.7 million. Therelated deferred tax provision of £28.7 million has been released. Dividend The Board is proposing a final dividend of 15.3 pence per share. It is intendedthat 7.7 pence per share will be paid as a PID, net of withholding tax whereappropriate, and the remainder of 7.6 pence per share paid as a normal dividend.Together with the interim dividend of 12 pence, this makes a total of 27.3 penceper share for the year, representing an increase of 25.9% over the totaldividend for 2006. Cash flow For the year ended 31 December 2007, there was a cash outflow from operatingactivities of £29 million compared with an inflow of £6 million in 2006.Increased interest payments and the payment of two UK REIT entry chargeinstalments totalling £50 million more than offset increased rental income. In 2007, disposals raised £537 million whilst capital expenditure andacquisitions amounted to £543 million. The latter figure excludes theacquisition of Ravenhead Retail Park paid for with the Company's shares and anaccrual for the acquisition of the leasehold interest in Bishops Square. Afterthe net cash inflow from financing activities of £35 million, there was a netdecrease in cash and deposits for the year of £12 million. Balance sheet In the Half-Year Report for the six months to 30 June 2007, we reported netasset value per share, calculated in accordance with EPRA recommendations, of£16.35, representing an increase of £1.35 or 9.0% during the half year. Sincethat time the decline in property values has reduced net asset value per shareby £0.90 or 5.5% to £15.45 at 31 December 2007. Accordingly there was anincrease for the year of £0.45 or 3.0%. If the bond redemption costs of £28.3million are excluded, the increase in adjusted net asset value per share for2007 as a whole would have been £0.55, or 3.7%. The tables below show how netasset value is calculated and the components of the movement in the year. During the year, we purchased 1.45 million of the Company's own shares in theopen market for £16.8 million, representing an average price of £11.59 pershare. The shares are held in treasury. Analysis of net asset value 2007 2006 £m £ per share £m £ per shareBasic 4,354.6 14.98 4,165.1 14.60Dilution on exercise of share options 6.4 n/a 8.7 n/aDiluted 4,361.0 15.06 4,173.8 14.61Adjustments:Fair value of derivatives 13.2 0.05 8.8 0.03Deferred tax 99.6 0.34 103.3 0.36________________________________________________________________________________________________________EPRA 4,473.8 15.45 4,285.9 15.00________________________________________________________________________________________________________ Basic shares in issue (million) 290.6 285.2Diluted shares in issue (million) 289.6 285.7 Equity shareholders' funds* EPRA NAV*Movement in net asset value £m £ per share31 December 2006 4,285.9 15.00Revaluation: equity changes 76.9 0.27 income changes (5.0) (0.02)Retained profit (excluding revaluation losses and bond 116.7 0.40redemption costs)Bond redemption costs (28.3) (0.10)Dividends (79.1) (0.27)Issue of shares for acquisition 79.0 -Exchange and other movements 27.7 0.17______________________________________________________________________________________________31 December 2007 4,473.8 15.45______________________________________________________________________________________________ * Excludes deferred tax and the fair value of derivatives Financing Our policy is to optimise the group's weighted average cost of capital by usingan appropriate mix of debt and equity. We monitor the group's financialstructure against guidelines approved by the Board which currently includeminimum interest cover of 1.8 times and gearing of no more than 85% for anextended period. At 31 December 2007, borrowings were £2,524 million and cash and deposits £28million so that net debt amounted to £2,496 million. Gearing was 57% comparedwith 54% at the end of 2006 and the loan to value ratio was 41%. The averagematurity of the group's borrowings was nearly nine years with £461 millionmaturing in the next three years. Virtually all debt was unsecured at the yearend and 66% was at fixed rates of interest. During 2007 we arranged a new £340 million five-year bank facility and redeemedthe remaining £106 million 10.75% 2013 sterling bonds at a premium of £28million. At 31 December 2007, the market value of borrowings was £2,433 million, whichwas £91 million less than their book value. This was equivalent, after taxrelief, to an increase of 23 pence in net asset value per share. At the end of 2007, we had undrawn committed facilities of £561 million which,when added to cash and deposits, provided liquidity of £590 million. Additionalbank facilities totalling £300 million have been put in place since December andwe expect to conclude further facilities in the first half of 2008. Consolidated income statement For the year ended 31 December 2007 2007 2006 Unaudited Audited Notes £m £m Gross rental income 1 311.5 278.2______________________________________________________________________________________________________Operating profit before other gains 1 234.5 201.3Other gains 1 25.2 748.0______________________________________________________________________________________________________Operating profit 1 259.7 949.3 Finance costs (129.8) (118.0)Bond redemption costs (28.3) (34.0)Change in fair value of derivatives (3.8) (16.1)Finance income 12.6 11.2Net finance costs 3 (149.3) (156.9)______________________________________________________________________________________________________Profit before tax 110.4 792.4 Current tax 4A (16.4) (99.4)Deferred tax 4A 17.6 333.8Tax credit 1.2 234.4______________________________________________________________________________________________________Profit for the year 111.6 1,026.8______________________________________________________________________________________________________ Attributable to:Equity shareholders 101.0 1,016.9Minority interests 10.6 9.9______________________________________________________________________________________________________Profit for the year 111.6 1,026.8______________________________________________________________________________________________________ Basic earnings per share 6 34.9p 357.5pDiluted earnings per share 6 34.9p 356.9p______________________________________________________________________________________________________ Adjusted earnings per share are shown in note 6. All results derive from continuing operations. Consolidated balance sheetAs at 31 December 2007 2007 2006 Unaudited Audited Notes £m £m Non-current assetsInvestment and development properties 7 7,275.0 6,716.0Interests in leasehold properties 30.3 32.4Plant, equipment and owner-occupied property 8 43.1 42.2Investments 10 80.1 64.9Receivables 11 12.9 13.6_________________________________________________________________________________________________________ 7,441.4 6,869.1Current assetsReceivables 12 152.3 148.0Cash and deposits 13 28.6 39.4_________________________________________________________________________________________________________ 180.9 187.4_________________________________________________________________________________________________________Total assets 7,622.3 7,056.5_________________________________________________________________________________________________________ Current liabilitiesPayables 14 387.0 218.2Tax liabilities 4D 113.2 111.1Borrowings 15 406.5 210.2_________________________________________________________________________________________________________ 906.7 539.5Non-current liabilitiesBorrowings 15 2,117.7 2,072.4Deferred tax 4D 99.6 103.3Tax liabilities 4D 3.1 55.1Obligations under finance leases 30.1 32.3Other payables 34.1 32.2Provision 1 6.0 -_________________________________________________________________________________________________________ 2,290.6 2,295.3_________________________________________________________________________________________________________Total liabilities 3,197.3 2,834.8_________________________________________________________________________________________________________Net assets 4,425.0 4,221.7_________________________________________________________________________________________________________ EquityShare capital 17 72.6 71.3Share premium account 18 740.0 660.5Translation reserve 18 86.0 (62.9)Hedging reserve 18 (71.4) 59.9Capital redemption reserve 18 7.2 7.2Other reserves 18 10.6 8.9Revaluation reserve 18 156.3 78.9Retained earnings 18 3,373.9 3,348.3Investment in own shares 19 (3.8) (7.0)Treasury shares 20 (16.8) -Equity shareholders' funds 4,354.6 4,165.1_________________________________________________________________________________________________________ Equity minority interests 70.4 56.6_________________________________________________________________________________________________________Total equity 4,425.0 4,221.7_________________________________________________________________________________________________________ Diluted net asset value per share 6 £15.06 £14.61EPRA net asset value per share 6 £15.45 £15.00_________________________________________________________________________________________________________ Consolidated statement of recognised income and expense For the year ended 31 December 2007 2007 2006 Unaudited Audited Notes £m £m Foreign exchange translation differences 154.0 (31.1)Net (loss)/gain on hedge of net investment in foreign subsidiaries 18 (131.3) 27.0Revaluation gains on development properties 18 75.0 67.0Revaluation gains on owner-occupied property 18 - 7.6Revaluation gains on investments 18 1.9 14.4Acquisition of minority interests 18 - (2.2)Transfer to income statement on impairment of investment 18 3.1 -Actuarial gains/(losses) on pension schemes 18 5.9 (0.9)Tax on items taken directly to equity 4C (5.3) (4.0)__________________________________________________________________________________________________________Net gain recognised directly in equity 103.3 77.8 Profit for the year 111.6 1,026.8__________________________________________________________________________________________________________Total recognised income and expense 214.9 1,104.6__________________________________________________________________________________________________________ Attributable to:Equity shareholders 199.2 1,095.7Minority interests 15.7 8.9__________________________________________________________________________________________________________Total recognised income and expense 214.9 1,104.6__________________________________________________________________________________________________________ Reconciliation of equityFor the year ended 31 December 2007 2007 2006 Unaudited Audited Notes £m £m Opening equity shareholders' funds 4,165.1 3,125.8Issue of shares 80.8 1.1Share-based employee remuneration 18 5.2 3.8Proceeds on award of own shares to employees 18 0.2 0.4Purchase of own shares 19 - (4.0)Purchase of treasury shares 20 (16.8) -__________________________________________________________________________________________________________ 4,234.5 3,127.1__________________________________________________________________________________________________________ Total recognised income and expense 199.2 1,095.7__________________________________________________________________________________________________________ 4,433.7 4,222.8__________________________________________________________________________________________________________ Dividends 5 (79.1) (57.7)__________________________________________________________________________________________________________Closing equity shareholders' funds 4,354.6 4,165.1__________________________________________________________________________________________________________ Consolidated cash flow statement For the year ended 31 December 2007 2007 2006 Unaudited Audited Notes £m £m Operating activitiesOperating profit before other gains 1 234.5 201.3Adjustment for non-cash items 21 (29.3) (12.7)(Increase)/Decrease in receivables (10.4) 14.1Increase/(Decrease) in payables 13.4 (31.9)__________________________________________________________________________________________________________Cash generated from operations 208.2 170.8__________________________________________________________________________________________________________ Interest and bond redemption costs paid (177.7) (155.2)Interest received 11.9 11.0Tax paid 4D (71.6) (21.1)__________________________________________________________________________________________________________Cash flows from operating activities (29.2) 5.5__________________________________________________________________________________________________________ Investing activitiesProperty and corporate acquisitions (163.3) (219.5)Development and major refurbishments (335.5) (250.5)Other capital expenditure (44.6) (29.6)Sale of property 537.2 628.0Purchase of investments (11.0) (1.0)Decrease/(Increase) in non-current receivables 0.1 (9.2)__________________________________________________________________________________________________________Cash flows from investing activities (17.1) 118.2__________________________________________________________________________________________________________ Financing activitiesIssue of shares 1.7 1.1Purchase of own shares 19 - (4.0)Purchase of treasury shares 20 (16.8) -Proceeds from award of own shares 0.2 0.2Decrease in non-current borrowings (28.9) (277.7)Increase in current borrowings 153.3 211.0Dividends paid to minorities (1.9) (2.4)Equity dividends paid (73.1) (57.7)__________________________________________________________________________________________________________Cash flows from financing activities 34.5 (129.5)__________________________________________________________________________________________________________ Net decrease in cash and deposits (11.8) (5.8) Opening cash and deposits 39.4 45.5Exchange translation movement 1.0 (0.3)__________________________________________________________________________________________________________Closing cash and deposits 13 28.6 39.4__________________________________________________________________________________________________________ Analysis of movement in net debt For the year ended 31 December 2007 Short-term Cash at Current Non-current deposits bank borrowings borrowings Net debt £m £m £m £m £mBalance at 1 January 2007 13.1 26.3 (210.2) (2,072.4) (2,243.2)Unamortised bond issue costswritten off - - - (2.1) (2.1)Cash flow (2.7) (9.1) (153.3) 28.9 (136.2)Exchange 0.5 0.5 (43.0) (72.1) (114.1)_____________________________________________________________________________________________________Balance at 31 December 2007 10.9 17.7 (406.5) (2,117.7) (2,495.6)_____________________________________________________________________________________________________ Notes to the accounts 1. OPERATING PROFIT 2007 2006 Notes £m £mGross rental income 311.5 278.2Ground and equity rents payable (5.4) (5.1)__________________________________________________________________________________________________________Gross rental income, after rents payable 306.1 273.1__________________________________________________________________________________________________________ Service charge income 53.0 45.4Service charge expenses (59.2) (53.0)Net service charge expenses (6.2) (7.6)Other property outgoings (24.2) (28.1)__________________________________________________________________________________________________________Property outgoings (30.4) (35.7)__________________________________________________________________________________________________________ Net rental income 2 275.7 237.4 Management fees receivable 4.3 4.1Cost of property activities (27.2) (20.9)Corporate expenses (18.3) (19.3)Administration expenses (41.2) (36.1)__________________________________________________________________________________________________________Operating profit before other gains 234.5 201.3__________________________________________________________________________________________________________ Profit on the sale of investment properties 39.8 95.8Revaluation gains on investment properties 20.7 664.8Revaluation losses on development properties (25.7) -Goodwill impairment - (12.6)Provision relating to formerly owned property (6.0) -Investment impairment 10 (3.6) -Other gains 25.2 748.0__________________________________________________________________________________________________________Operating profit 259.7 949.3__________________________________________________________________________________________________________ Included in gross rental income is £2.9 million (2006: £3.2 million) calculatedby reference to tenants' turnover. The provision relating to a formerly owned property is expected to crystallisein 2009. 2. SEGMENTAL ANALYSIS PRIMARY AND SECONDARY SEGMENTS The group's primary segments are the geographic locations of its properties. Thesecondary segments are the business sectors in which the group operates. TOTALS BY GEOGRAPHIC SEGMENT United Kingdom France Germany Unallocated Total 2007 2006 2007 2006 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m £m £m £m £mGross rentalincome 228.2 200.9 79.8 73.6 3.5 3.7 - - 311.5 278.2 Ground andequity rentspayable (5.4) (5.1) - - - - - - (5.4) (5.1) Propertyoutgoings (19.4) (22.8) (8.8) (9.3) (2.2) (3.6) - - (30.4) (35.7)_____________________________________________________________________________________________________________ Net rentalincome 203.4 173.0 71.0 64.3 1.3 0.1 - - 275.7 237.4 Administrationexpenses (16.3) (10.7) (6.2) (5.5) (0.4) (0.6) (18.3) (19.3) (41.2) (36.1)_____________________________________________________________________________________________________________ Operatingprofit beforeother gains 187.1 162.3 64.8 58.8 0.9 (0.5) (18.3) (19.3) 234.5 201.3 Other gains (236.9) 527.0 255.4 231.4 6.7 (10.4) - - 25.2 748.0_____________________________________________________________________________________________________________Operating(loss)/profit (49.8) 689.3 320.2 290.2 7.6 (10.9) (18.3) (19.3) 259.7 949.3 Net financecosts - - - - - - (149.3) (156.9) (149.3) (156.9)_____________________________________________________________________________________________________________ Segment result (49.8) 689.3 320.2 290.2 7.6 (10.9) (167.6) (176.2) 110.4 792.4_____________________________________________________________________________________________________________ Non-cash flowitems credit/(charge)included inoperatingprofit 3.8 11.7 (0.4) 1.0 - - 25.9 - 29.3 12.7_____________________________________________________________________________________________________________ Property 5,129.5 4,937.2 2,056.8 1,707.0 88.7 71.8 - - 7,275.0 6,716.0assetsNet debt - - - - - - (2,495.6) (2,243.2) (2,495.6) (2,243.2)Other net(liabilities)/assets (323.4) (187.7) (101.7) (113.8) 0.3 (6.2) - - (424.8) (307.7)_____________________________________________________________________________________________________________ Equityshareholders'funds 4,806.1 4,749.5 1,955.1 1,593.2 89.0 65.6 (2,495.6) (2,243.2) 4,354.6 4,165.1_____________________________________________________________________________________________________________ Capitalexpenditure 675.6 746.1 117.0 25.4 3.6 11.6 - - 796.2 783.1_____________________________________________________________________________________________________________ Other net liabilities include all operating assets and liabilities that can beallocated to the segment on a reasonable basis but exclude net debt. TOTALS BY BUSINESS SEGMENT Shopping centres Retail parks Offices Total 2007 2006 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £m £m £mGross rental income 165.1 173.0 57.3 41.8 89.1 63.4 311.5 278.2Ground and equityrents payable (1.4) (1.8) (0.3) (0.1) (3.7) (3.2) (5.4) (5.1)Property outgoings (22.9) (26.2) (2.6) (2.4) (4.9) (7.1) (30.4) (35.7)______________________________________________________________________________________________________Net rental income 140.8 145.0 54.4 39.3 80.5 53.1 275.7 237.4______________________________________________________________________________________________________ Property assets 3,895.2 3,521.5 1,359.5 1,321.1 2,020.3 1,873.4 7,275.0 6,716.0______________________________________________________________________________________________________ Capital expenditure 340.2 178.6 155.8 493.5 300.2 111.0 796.2 783.1 2. SEGMENTAL ANALYSIS continued ANALYSIS OF EQUITY SHAREHOLDERS' FUNDS Equity shareholders' funds Assets employed Net debt 2007 2006 2007 2006 2007 2006 £m £m £m £m £m £mUnited Kingdom 4,806.1 4,749.5 (1,383.2) (1,246.8) 3,422.9 3,502.7Continental Europe 2,044.1 1,658.8 (1,112.4) (996.4) 931.7 662.4________________________________________________________________________________________________ 6,850.2 6,408.3 (2,495.6) (2,243.2) 4,354.6 4,165.1________________________________________________________________________________________________ As part of the group's foreign currency hedging programme, at 31 December 2007the group had sold €609.0 million (2006: €369.2 million) forward againststerling: €14.8 million for value on 31 January 2008 at a rate of £1 = €1.388;and €594.2 million for value on 27 June 2008 at a rate of £1 = €1.384. Net debt cannot be allocated between countries within continental Europe. 3. NET FINANCE COSTS 2007 2006 £m £mInterest on bank loans and overdrafts 22.0 13.7Interest on other loans 126.9 121.5Interest on obligations under finance leases 3.0 3.1Other interest payable 5.5 6.3_________________________________________________________________________________________________________ Gross interest costs 157.4 144.6Less: Interest capitalised (27.6) (26.6)_________________________________________________________________________________________________________Finance costs 129.8 118.0Bond redemption costs 28.3 34.0Change in fair value of interest rate swaps (2.4) 16.1Change in fair value of currency swaps outside hedge accounting designation 6.2 -Change in fair value of derivatives 3.8 16.1Finance income (12.6) (11.2)_________________________________________________________________________________________________________Net finance costs 149.3 156.9_________________________________________________________________________________________________________ In 2006, £93.8 million of the £200 million 10.75% 2013 sterling bonds wereredeemed, leaving £106.2 million outstanding as at 31 December 2006. Theremaining bonds were redeemed in 2007. Bond redemption costs in 2007 include aredemption premium of £26.2 million (2006: £32.0 million) and unamortised issuecosts of £2.1 million (2006: £2.0 million). 4. TAX A. TAX CREDIT 2007 2006 Notes £m £mUK current taxOn net income before revaluations and disposals 0.1 0.2Credit in respect of prior years (1.7) (0.5)Entry charge payable on election for UK REIT status - 100.5_________________________________________________________________________________________________________ (1.6) 100.2_________________________________________________________________________________________________________Foreign current taxOn net income before revaluations and disposals 0.2 1.1Charge/(Credit) in respect of prior years 0.1 (1.9)On disposals 4D 17.7 -_________________________________________________________________________________________________________ 18.0 (0.8)_________________________________________________________________________________________________________Total current tax charge 16.4 99.4_________________________________________________________________________________________________________Deferred taxOn net income before revaluations and disposals (2.7) 17.9Released on disposal of 9 place Vendome (28.7) -On other revaluations and disposals 32.7 127.6On bond redemption costs (8.5) (10.2)On change in fair value of interest rate swaps 0.7 (4.8)Credit in respect of prior years (7.3) (15.7)Effect of reduction in UK corporation tax rate (3.8) -Released on election for UK REIT status - (448.6)_________________________________________________________________________________________________________ (17.6) (333.8)_________________________________________________________________________________________________________Tax credit (1.2) (234.4)_________________________________________________________________________________________________________ 4. TAX continued B. TAX CREDIT RECONCILIATION 2007 2006 £m £mProfit before tax 110.4 792.4_________________________________________________________________________________________________________Profit multiplied by the UK corporation tax rate of 30% 33.1 237.7UK REIT tax exemption on net income before revaluations and disposals (34.2) -UK REIT tax exemption on revaluations and disposals 64.4 -SIIC tax exemption net of deferred tax provision on SIIC dividends (33.4) (33.9)Disposal of 9 place Vendome at low effective tax rate (22.0) -Prior year adjustments (8.9) (18.1)Effect of reduction in UK corporation tax rate (3.8) -Deferred tax released in excess of entry charge payable on election for UK REITstatus - (348.1)Non-taxable surpluses on UK investment properties - (53.5)Indexation relief on UK investment properties - (30.8)Other items 3.6 12.3_________________________________________________________________________________________________________Tax credit (1.2) (234.4)_________________________________________________________________________________________________________ C. TAX RECOGNISED DIRECTLY IN EQUITY 2007 2006 £m £mDeferred tax charge on revaluations 1.9 12.1Deferred tax on share-based employee remuneration 1.8 -Deferred tax charge on actuarial gains on pension schemes 1.6 0.4Deferred tax released on election for UK REIT status - (8.5)_________________________________________________________________________________________________________Tax recognised directly in equity 5.3 4.0_________________________________________________________________________________________________________ D. CURRENT AND DEFERRED TAX MOVEMENTS Exchange 1 January Recognised Recognised Tax and other 31 December 2007 in income in equity paid movements 2007 £m £m £m £m £m £mCurrent taxUK REIT entry charge 100.5 (0.1) - (50.2) - 50.2Other UK tax 40.5 (1.5) - (0.4) 1.8 40.4French SIIC conversioncharge 16.8 - - (17.1) 0.3 -9 place Vendome disposal - 17.7 - - 1.3 19.0Other overseas tax 7.8 0.3 - (3.9) 1.2 5.4_____________________________________________________________________________________________________________ 165.6 16.4 - (71.6) 4.6 115.0_____________________________________________________________________________________________________________ Deferred taxUK Revenue tax losses (37.2) (6.7) - - - (43.9) Surpluses in trading subsidiaries 17.7 (17.6) - - - 0.1 Dividends receivable from France (note 4G) 97.2 36.5 2.4 - 8.7 144.8 Other timing (3.2) (1.1) 2.9 - - (1.4) differencesFrance 28.8 (28.7) - - (0.1) -_____________________________________________________________________________________________________________ 103.3 (17.6) 5.3 - 8.6 99.6_____________________________________________________________________________________________________________ 268.9 (1.2) 5.3 (71.6) 13.2 214.6_____________________________________________________________________________________________________________ Analysed as:Current liabilities: Tax liabilities 111.1 113.2Non-current liabilities: Other payables 55.1 3.1Current assets: Tax receivables (0.6) (1.3)Non-current liabilities: Deferred tax 103.3 99.6 ______ ______ 268.9 214.6 ______ ______ 4. TAX continued D. CURRENT AND DEFERRED TAX MOVEMENTS continued Current tax is reduced by the UK REIT and French SIIC tax exemptions. A UK REIT entry charge of £2.3 million arising on the acquisition of RavenheadRetail Park is included within other UK tax. The provision for UK deferred tax at 31 December 2007 has been calculated at arate of 28%, reflecting the reduction in the UK corporation tax rate that willapply from 1 April 2008. Provision has been made in current tax for the £17.7 million of French taxarising on the sale in the year of the company owning 9 place Vendome. Deferredtax of £28.7 million, which had been calculated on the basis of a sale of theproperty, has been written back. The group continues to carry full provision for the £38.0 million of tax (2006:£38.0 million) and £14.3 million interest (2006: £11.3 million) relating tocapital gains incurred by the Grantchester Group prior to its acquisition byHammerson in 2002 in respect of which the tax authorities are disputing whethercapital losses can be utilised. In January 2008, the High Court decided infavour of HM Revenue & Customs following which the tax and interest has becomepayable. The Company is seeking leave to appeal and should the decisionultimately be overturned, the total of £52.3 million will be released. E. UNRECOGNISED DEFERRED TAX Deferred tax is not provided on potential gains on investments in subsidiariesand joint ventures when the group can control whether gains crystallise and itis probable that gains will not arise in the foreseeable future. At 31 December2007 the total of such gains was £1,200 million and the potential tax effect£336 million (2006: £900 million, potential tax effect £270 million). If a UK REIT sells a property completed after 1 January 2007 within three yearsof completion of development, the REIT exemption will not apply. The group hadno such properties at 31 December 2007 or 31 December 2006. A deferred tax asset of £17.7 million (2006: £8.2 million) is not recognised forcarried forward UK tax losses that may not be utilised, because it is uncertainwhether appropriate taxable profits will arise. F. UK REIT STATUS The group elected to be treated as a UK REIT with effect from 1 January 2007.The UK REIT rules exempt the profits of the group's UK property rental businessfrom corporation tax. Gains on UK properties are also exempt from tax, providedthey are not held for trading or, for properties completed after 1 January 2007,sold within three years after completion of development. The group is otherwisesubject to UK corporation tax. As a REIT, Hammerson plc is required to pay Property Income Distributions equalto at least 90% of the group's exempted net income. On entering the REIT regime, entry tax became payable equal to 2% of the marketvalue of the group's qualifying UK properties at 31 December 2006. The financialstatements for the year ended 31 December 2006 provided for this entry charge incurrent tax and showed the corresponding release of deferred tax relating to UKcapital gains and UK capital allowances. The total entry charge provided was£100.5 million and is being paid in quarterly instalments between July 2007 andApril 2008. To remain a UK REIT there are a number of conditions to be met in respect of theprincipal company of the group, the group's qualifying activity and its balanceof business which are set out in the UK REIT legislation in the Finance Act2006. 4. TAX continued G. FRENCH SIIC STATUS Hammerson plc has been a French SIIC since 1 January 2004 and all the Frenchproperties, with the exception of 9 place Vendome which was sold in 2007, arewithin the SIIC tax-exempt regime. Income and gains are exempted from French taxbut the French subsidiaries are required to distribute a proportion of theirprofits to Hammerson plc, which will then pay UK dividends to its shareholders.Under current UK tax rules, Hammerson plc will be taxed in the UK on dividendsreceived from France, subject to available UK tax losses. If all the propertieswere realised at their 31 December 2007 values, a total of £517 million ofdividends would arise (2006: £324 million), and deferred tax of £144.8 million(2006: £97.2 million) is provided for the potential UK tax thereon. Dividend obligations will arise after property disposals but there will be aperiod of approximately four years after a sale before dividends are required tobe received in the UK. Under the SIIC qualifying conditions, Hammerson plc must continue to be listedin France and at least 80% of assets must be employed in property investment. Ifthe conditions are breached before 2014, the original conversion charge would berecalculated at full rates giving an additional £74 million tax cost. 5. DIVIDENDS The proposed final dividend of 15.3 pence per share (2006: 15.3 pence per share)was recommended by the Board on 25 February 2008 and, subject to approval byshareholders, is payable on 23 May 2008 to shareholders on the register at theclose of business on 11 April 2008. It is intended that 7.7 pence per sharewill be paid as a PID, net of withholding tax where appropriate, and theremainder of 7.6 pence per share will be paid as a normal dividend. Based on theproposed final dividend, the total dividend for the year ended 31 December 2007will be 27.3 pence per share (2006: 21.68 pence per share). The £79.1 million dividend included in the reconciliation of equity on page 24comprises the 2006 final dividend of £44.3 million, which was paid on 14 May2007, together with the 2007 half-year dividend of £34.8 million. The latter waspaid on 19 October 2007 as a PID, and was subject to withholding tax of £6.0million, which was paid on 14 January 2008. 6. EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE The European Public Real Estate Association (EPRA) has issued recommended basesfor the calculation of certain per share information and these are included inthe following tables. EARNINGS PER SHARE The calculations for earnings per share use the weighted average number ofshares, which excludes those shares held in the Hammerson Employee ShareOwnership Plan (note 19) and the treasury shares (note 20), which are treated ascancelled. 2007 2006 Earnings Shares Pence Earnings Shares Pence £m million per share £m million per shareBasic 101.0 289.1 34.9 1,016.9 284.4 357.5Dilutive share options - 0.5 - - 0.5 (0.6)________________________________________________________________________________________________________Diluted 101.0 289.6 34.9 1,016.9 284.9 356.9________________________________________________________________________________________________________Adjustments:Revaluation gains oninvestment properties (20.7) (7.1) (664.8) (233.3) Revaluation losses ondevelopment properties 25.7 8.9 - - Profit on the sale ofinvestment properties (39.8) (13.7) (95.8) (33.6) Goodwill impairment - - 12.6 4.4Change in fair value of 3.8 1.3 16.1 5.7derivativesDeferred tax credit (17.6) (6.1) (333.8) (117.2)UK REIT entry tax charge - - 100.5 35.3Tax on property disposals 17.7 6.1 - -Minority interests in respectof the above 8.6 2.9 7.8 2.7________________________________________________________________________________________________________EPRA 78.7 27.2 59.5 20.9Bond redemption costs 28.3 9.8 34.0 11.9Provision relating to formerlyowned property 6.0 2.1 - - Investment impairment 3.6 1.2 - -________________________________________________________________________________________________________Adjusted 116.6 40.3 93.5 32.8________________________________________________________________________________________________________ 6. EARNINGS PER SHARE AND NET ASSET VALUE PER SHARE continued NET ASSET VALUE PER SHARE 2007 2006 Equity Net asset Equity Net asset shareholders' value shareholders' value funds Shares per share funds Shares per share £m million £ £m million £Basic 4,354.6 290.6 14.98 4,165.1 285.2 14.60Company's own shares heldin Employee ShareOwnership Plan - (0.3) n/a - (0.7) n/aTreasury shares - (1.5) n/a - - n/aUnexercised share options 6.4 0.8 n/a 8.7 1.2 n/a________________________________________________________________________________________________________Diluted 4,361.0 289.6 15.06 4,173.8 285.7 14.61________________________________________________________________________________________________________Fair value adjustment toborrowings (net of tax) 65.7 0.23 (63.5) (0.22)________________________________________________________________________________________________________EPRA triple net 4,426.7 15.29 4,110.3 14.39________________________________________________________________________________________________________Fair value of derivatives 13.2 0.05 8.8 0.03Fair value adjustment toborrowings (net of tax) (65.7) (0.23) 63.5 0.22Deferred tax 99.6 0.34 103.3 0.36________________________________________________________________________________________________________EPRA 4,473.8 15.45 4,285.9 15.00________________________________________________________________________________________________________ 7. INVESTMENT AND DEVELOPMENT PROPERTIES Investment Development properties properties Total Valuation Cost Valuation Cost Valuation Cost £m £m £m £m £m £mBalance at1 January 2007 6,181.2 3,820.5 534.8 423.3 6,716.0 4,243.8Exchange adjustment 156.8 91.9 2.5 1.6 159.3 93.5Additions:- Capital expenditure 44.1 44.1 379.7 379.7 423.8 423.8- Asset acquisitions 357.1 357.1 15.3 15.3 372.4 372.4 401.2 401.2 395.0 395.0 796.2 796.2Disposals (490.7) (309.8) (3.4) (1.7) (494.1) (311.5)Capitalised interest - - 27.6 27.6 27.6 27.6Revaluation adjustment 20.7 - 49.3 - 70.0 -______________________________________________________________________________________________________Balance at31 December 2007 6,269.2 4,003.8 1,005.8 845.8 7,275.0 4,849.6______________________________________________________________________________________________________ Investment Development properties properties Total Valuation Cost Valuation Cost Valuation Cost £m £m £m £m £m £mBalance at1 January 2006 4,958.0 3,348.2 773.7 512.4 5,731.7 3,860.6Exchange adjustment (30.2) (21.2) (1.8) (1.8) (32.0) (23.0)Additions:- Capital expenditure 79.7 79.7 200.9 200.9 280.6 280.6- Asset acquisitions 22.9 22.9 53.1 53.1 76.0 76.0- Corporate acquisitions 400.9 400.9 25.6 25.6 426.5 426.5 503.5 503.5 279.6 279.6 783.1 783.1Disposals (482.5) (375.5) (42.7) (28.0) (525.2) (403.5)Transfers 567.0 364.9 (567.0) (364.9) - -Capitalised interest 0.6 0.6 26.0 26.0 26.6 26.6Revaluation adjustment 664.8 - 67.0 - 731.8 -______________________________________________________________________________________________________Balance at31 December 2006 6,181.2 3,820.5 534.8 423.3 6,716.0 4,243.8______________________________________________________________________________________________________ 7. INVESTMENT AND DEVELOPMENT PROPERTIES continued Properties are stated at market value as at 31 December 2007, valued byprofessionally qualified external valuers. In the United Kingdom, the group'sproperties were valued by DTZ Debenham Tie Leung, Chartered Surveyors. In Franceand Germany, the group's properties were valued by Cushman & Wakefield,Chartered Surveyors. The valuations have been prepared in accordance with theAppraisal and Valuation Standards of the Royal Institution of CharteredSurveyors and with IVA 1 of the International Valuation Standards. Valuationfees are based on a fixed amount agreed between the group and the valuers andare independent of the portfolio value. At 31 December 2007 the total amount of interest included in developmentproperties was £39.8 million (2006: £12.1 million), calculated using the group'saverage cost of borrowings. 2007 2006 £m £m________________________________________________________________________________Capital commitments 419.7 746.6________________________________________________________________________________ At 31 December 2007, Hammerson's share of the capital commitments in respect ofjoint ventures, which is included in the table above, was £155.9 million (2006:£334.7 million). 8. PLANT, EQUIPMENT AND OWNER-OCCUPIED PROPERTY Owner-occupied Plant and property equipment Total £m £m £m Book value at 31 December 2007 34.9 8.2 43.1_________________________________________________________________________________Book value at 31 December 2006 34.9 7.3 42.2_________________________________________________________________________________ 9. JOINT VENTURES As at 31 December 2007 certain property and corporate interests, being jointlycontrolled entities, have been proportionately consolidated, and these are setout in the following table: Group share %InvestmentsBrent Cross Shopping Centre 41.2Brent South Retail Park 40.6Bristol Alliance Limited Partnership 50Cricklewood Regeneration Limited 50Queensgate Limited Partnership 50The Bull Ring Limited Partnership 33.33The Grosvenor Street Limited Partnership 50The London Wall Limited Partnership 50The Martineau Galleries Limited Partnership 33.33The Moor House Limited Partnership 66.67The Oracle Limited Partnership 50The Shires Limited Partnership 60The West Quay Limited Partnership 50 Developments125 OBS Limited Partnership 50Bishopsgate Goodsyard Regeneration Limited 50Paddington Triangle 50Wensum Developments Limited 50 In July 2007, the group disposed of its 50% interest in 9 place Vendome SCI andsold a 50% interest in WestQuay Shopping Centre. The following summarisedincome statements and balance sheets show the proportion of the group's results,assets and liabilities which are derived from its joint ventures: 9. JOINT VENTURES continued INCOME STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2007 Bristol Moor Alliance Bull Ring House Oracle Queensgate Shires West Quay Brent Limited Limited Limited Limited Limited Limited Limited Total Cross* Partnership Partnership Partnership Partnership Partnership Partnership Partnership+ Other 2007 £m £m £m £m £m £m £m £m £m £mNet rental 18.4 3.5 13.0 8.8 12.4 8.3 7.3 6.2 9.3 87.2incomeAdministration - (0.1) - (0.2) - (0.2) - - (0.1) (0.6)expenses_______________________________________________________________________________________________________________________Operatingprofit beforeother losses 18.4 3.4 13.0 8.6 12.4 8.1 7.3 6.2 9.2 86.6 Other losses (6.5) (3.6) (4.3) (21.8) (9.6) (10.6) (0.2) (19.8) (9.4) (85.8)Net finance - 0.3 0.1 (1.9) 0.1 0.2 0.2 (0.2) (2.1) (3.3)costs_______________________________________________________________________________________________________________________Profit/(Loss) 11.9 0.1 8.8 (15.1) 2.9 (2.3) 7.3 (13.8) (2.3) (2.5)before tax_______________________________________________________________________________________________________________________ BALANCE SHEETS AS AT 31 DECEMBER 2007 Bristol Moor Alliance Bull Ring House Oracle Queensgate Shires West Quay Brent Limited Limited Limited Limited Limited Limited Limited Total Cross Partnership Partnership Partnership Partnership Partnership Partnership Partnership+ Other 2007 * £m £m £m £m £m £m £m £m £m £mNon-current assetsInvestmentanddevelopment 435.3 262.8 312.9 186.7 275.2 169.7 322.4 280.2 325.1 2,570.3properties atvaluationInterests in - 0.3 - 1.9 - - - 2.1 10.0 14.3leaseholdproperties_______________________________________________________________________________________________________________________ 435.3 263.1 312.9 188.6 275.2 169.7 322.4 282.3 335.1 2,584.6 Current assetsOther current 12.4 5.9 4.3 2.2 4.6 1.9 5.0 4.5 4.2 45.0assetsCash and - 1.0 0.6 - 1.2 3.8 0.7 1.3 9.1 17.7deposits _______________________________________________________________________________________________________________________ 12.4 6.9 4.9 2.2 5.8 5.7 5.7 5.8 13.3 62.7 Current liabilitiesOther (8.8) (13.0) (4.4) (2.2) (3.3) (3.2) (6.8) (3.5) (7.4) (52.6)liabilities_______________________________________________________________________________________________________________________ (8.8) (13.0) (4.4) (2.2) (3.3) (3.2) (6.8) (3.5) (7.4) (52.6)_______________________________________________________________________________________________________________________ Non-current liabilitiesBorrowings - - - - - - - - (54.1) (54.1)Other - - - (0.3) - - - - - (0.3)liabilities_______________________________________________________________________________________________________________________ - - - (0.3) - - - - (54.1) (54.4)_______________________________________________________________________________________________________________________Net assets 438.9 257.0 313.4 188.3 277.7 172.2 321.3 284.6 286.9 2,540.3_______________________________________________________________________________________________________________________ Other than as shown above, the joint ventures are funded by the Company and therelevant partners. 'Other losses' principally represent valuation changes oninvestment properties. • includes Brent Cross Shopping Centre and Brent South Retail Park. • + reflects the group's disposal of a 50% interest in WestQuay Shopping Centre in July 2007. 9. JOINT VENTURES continued INCOME STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2006 Bristol Moor Alliance Bull Ring House Oracle Queensgate Shires 9 place Brent Limited Limited Limited Limited Limited Limited Vendome Total Cross* Partnership Partnership Partnership Partnership Partnership Partnership SCI Other 2006 £m £m £m £m £m £m £m £m £m £mNet rental income 17.2 3.2 14.8 5.0 11.9 8.0 7.5 2.5 7.0 77.1Administration - (0.1) (0.1) (0.3) (0.4) (0.7) (0.4) - (0.2) (2.2)expenses_______________________________________________________________________________________________________________________Operating profit 17.2 3.1 14.7 4.7 11.5 7.3 7.1 2.5 6.8 74.9before other gainsOther gains 25.9 3.1 21.7 55.1 19.3 20.6 10.8 39.7 14.6 210.8Net finance costs - 0.1 0.1 (4.5) 0.2 0.1 0.1 - (2.2) (6.1)_______________________________________________________________________________________________________________________Profit before tax 43.1 6.3 36.5 55.3 31.0 28.0 18.0 42.2 19.2 279.6_______________________________________________________________________________________________________________________ BALANCE SHEETS AS AT 31 DECEMBER 2006 Bristol Moor Alliance Bull Ring House Oracle Queensgate Shires 9 place Brent Limited Limited Limited Limited Limited Limited Vendome Total Cross* Partnership Partnership Partnership Partnership Partnership Partnership SCI Other 2006 £m £m £m £m £m £m £m £m £m £mNon-current assetsInvestment and 438.7 176.2 317.9 201.3 285.2 180.0 258.1 167.7 235.3 2,260.4developmentproperties atvaluationInterests in - 0.3 - 1.9 - - - - 10.1 12.3leaseholdproperties_______________________________________________________________________________________________________________________ 438.7 176.5 317.9 203.2 285.2 180.0 258.1 167.7 245.4 2,272.7_______________________________________________________________________________________________________________________ Current assetsOther current 4.0 1.2 2.0 0.6 3.8 1.9 1.7 3.1 17.1 35.4assetsCash and deposits - 3.3 2.6 1.2 2.8 1.9 3.0 0.2 4.2 19.2_______________________________________________________________________________________________________________________ 4.0 4.5 4.6 1.8 6.6 3.8 4.7 3.3 21.3 54.6_______________________________________________________________________________________________________________________ Current liabilitiesOther liabilities (11.6) (3.3) (4.8) (0.9) (5.3) (3.3) (4.5) (2.3) (9.6) (45.6)_______________________________________________________________________________________________________________________ (11.6) (3.3) (4.8) (0.9) (5.3) (3.3) (4.5) (2.3) (9.6) (45.6)_______________________________________________________________________________________________________________________ Non-current liabilitiesBorrowings - - - - - - - - (15.8) (15.8)Other liabilities - (0.3) - (2.2) - - - (0.2) (10.1) (12.8)_______________________________________________________________________________________________________________________ - (0.3) - (2.2) - - - (0.2) (25.9) (28.6)_______________________________________________________________________________________________________________________ Net assets 431.1 177.4 317.7 201.9 286.5 180.5 258.3 168.5 231.2 2,253.1 Other than as shown above, the joint ventures are funded by the Company and therelevant partners. 'Other gains' principally represent valuation changes oninvestment properties includes Brent Cross Shopping Centre and Brent SouthRetail Park. 10. INVESTMENTS 2007 2006Available for sale investments £m £mValue Retail Investors Limited Partnerships 41.2 47.3Interests in Value Retail plc and related companies 38.0 16.1Other investments 0.9 1.5_________________________________________________________________________________________________________ 80.1 64.9_________________________________________________________________________________________________________ 11. RECEIVABLES: NON-CURRENT ASSETS 2007 2006 £m £mLoans receivable 11.7 10.8Other receivables 1.2 2.8_________________________________________________________________________________________________________ 12.9 13.6_________________________________________________________________________________________________________ Loans receivable of £11.7 million (2006: £10.8 million) comprised a loan of €16million to Value Retail plc bearing interest based on EURIBOR and maturing on 22August 2010. 12. RECEIVABLES: CURRENT ASSETS 2007 2006 £m £mTrade receivables 75.9 57.1Other receivables 65.9 87.0Corporation tax 1.3 0.6Prepayments 9.2 3.3_________________________________________________________________________________________________________ 152.3 148.0_________________________________________________________________________________________________________ 13. CASH AND DEPOSITS 2007 2006 £m £mCash at bank 17.7 26.3Short-term deposits 10.9 13.1_________________________________________________________________________________________________________ 28.6 39.4_________________________________________________________________________________________________________ Analysis by currencySterling 20.7 27.3Euro 7.9 12.1_________________________________________________________________________________________________________ 28.6 39.4_________________________________________________________________________________________________________ 14. PAYABLES: CURRENT LIABILITIES 2007 2006 £m £mTrade payables 60.6 48.7Other payables 300.3 137.3Accruals 19.7 23.4Fair value of interest rate swaps 6.4 8.8_________________________________________________________________________________________________________ 387.0 218.2_________________________________________________________________________________________________________ 15. BORROWINGS A. ANALYSIS 2007 2006 £m £mUnsecured£200 million 7.25% Sterling bonds due 2028 197.6 197.5£300 million 6% Sterling bonds due 2026 296.6 296.5£250 million 6.875% Sterling bonds due 2020 247.1 247.0£300 million 5.25% Sterling bonds due 2016 297.2 296.9€700 million 4.875% Euro bonds due 2015 511.7 469.3£106.2 million 10.75% Sterling bonds due 2013 - 103.9€500 million 6.25% Euro bonds due 2008 366.8 336.2£26 million variable rate loan notes due 2008 26.0 26.0€300 million 5% Euro bonds due 2007 - 202.0Bank loans and overdrafts 520.3 90.8_________________________________________________________________________________________________________ 2,463.3 2,266.1_________________________________________________________________________________________________________Fair value of currency swaps 6.8 1.0_________________________________________________________________________________________________________ 2,470.1 2,267.1_________________________________________________________________________________________________________ SecuredSterling variable rate mortgage due 2010 38.6 -Sterling fixed rate mortgage due 2009 15.5 15.5_________________________________________________________________________________________________________ 54.1 15.5_________________________________________________________________________________________________________ 2,524.2 2,282.6_________________________________________________________________________________________________________ Security for secured borrowings as at 31 December 2007 is provided by charges onproperty. B. MATURITY Bank loans Other 2007 2006 and overdrafts borrowings Total Total £m £m £m £mAfter five years - 1,550.2 1,550.2 1,610.0From two to five years 552.0 - 552.0 100.2From one to two years 15.5 - 15.5 362.2_______________________________________________________________________________________________________Due after more than one year 567.5 1,550.2 2,117.7 2,072.4Due within one year 6.9 399.6 406.5 210.2_______________________________________________________________________________________________________ 574.4 1,949.8 2,524.2 2,282.6_______________________________________________________________________________________________________ At 31 December 2006 and 2007 there were no borrowings due after five yearsrepayable by instalments. C. UNDRAWN COMMITTED FACILITIES 2007 2006 £m £mExpiring after more than two years 561.0 845.0 D. INTEREST RATE AND CURRENCY PROFILE Variable rate 2007 Fixed rate borrowings borrowings Total % Years £m £m £mSterling 6.58 14 782.9 621.0 1,403.9Euro 5.45 5 878.5 241.8 1,120.3__________________________________________________________________________________________________ 5.98 10 1,661.4 862.8 2,524.2__________________________________________________________________________________________________ Variable rate 2006 Fixed rate borrowings Borrowings Total % Years £m £m £mSterling 7.11 14 857.3 416.8 1,274.1Euro 5.36 5 1,007.5 1.0 1,008.5__________________________________________________________________________________________________ 6.16 10 1,864.8 417.8 2,282.6__________________________________________________________________________________________________ 15. BORROWINGS continued E. RATES AT WHICH INTEREST IS CHARGED ON BORROWINGS DUE AFTER MORE THAN ONE YEAR 2007 2006 £m £mUp to 7% 1,397.0 1,361.47% to 10% 197.6 197.5Over 10% - 103.9_________________________________________________________________________________________________________ 1,594.6 1,662.8Variable rates 523.1 409.6_________________________________________________________________________________________________________ 2,117.7 2,072.4_________________________________________________________________________________________________________ Variable rate borrowings bear interest based on LIBOR, with the exception ofcertain euro borrowings whose interest costs are linked to EURIBOR. The aboveanalysis reflects the effect of currency and interest rate swaps in place at 31December 2006 and 2007. 16. FINANCIAL INSTRUMENTS FAIR VALUES OF FINANCIAL INSTRUMENTS The fair values of borrowings, with their carrying amounts included in thebalance sheet, are as follows: 2007 2006 Book value Fair value Book value Fair value £m £m £m £mCurrent borrowings (399.9) (402.1) (209.4) (210.4)Non-current borrowings (2,133.5) (2,040.0) (2,091.3) (2,181.0)Unamortised borrowing costs 16.0 16.0 19.1 19.1Currency swaps (6.8) (6.8) (1.0) (1.0)___________________________________________________________________________________________________Total borrowings (2,524.2) (2,432.9) (2,282.6) (2,373.3)___________________________________________________________________________________________________Interest rate swaps (6.4) (6.4) (8.8) (8.8)___________________________________________________________________________________________________ At 31 December 2007, the book value of financial liabilities exceeded their fairvalue by £91.3 million (2006: book value £90.7 million less than fair value)equivalent to 32 pence per share (2006: 32 pence per share) on an adjusted netasset value per share basis. On a post-tax basis, the difference was equivalentto 23 pence per share (2006: 22 pence per share). 17. SHARE CAPITAL Called up, allotted Authorised and fully paid 2007 2006 2007 2006 £m £m £m £mOrdinary shares of 25p each 94.8 94.8 72.6 71.3 NumberMovements in issued share capitalNumber of shares in issue at 1 January 2007 285,201,940Issued in respect of property acquisition (note 23) 5,019,875Share options exercised - Share option schemes 348,897 - Save As You Earn 13,204_____________________________________________________________________________________________________Number of shares in issue at 31 December 2007 290,583,916_____________________________________________________________________________________________________ The number of shares in issue at the balance sheet included 1,450,000 sharesheld in treasury (2006: nil), see note 20. 18. RESERVES Share Capital premium Translation Hedging redemption account reserve reserve reserve £m £m £m £mBalance at 1 January 2007 660.5 (62.9) 59.9 7.2Exchange adjustment - 148.9 - -Net loss on hedging activities - - (131.3) -Premium on issue of shares 79.5 - - -________________________________________________________________________________________________Balance at 31 December 2007 740.0 86.0 (71.4) 7.2________________________________________________________________________________________________ Other Revaluation Retained reserves reserve earnings £m £m £mBalance at 1 January 2007 8.9 78.9 3,348.3Share-based employee remuneration 5.2 - -Cost of shares awarded to employees (3.2) - -Transfer on award of own shares to employees (0.3) - 0.3Revaluation gains on development properties - 75.0 -Revaluation gains on investments - 1.9 -Transfer on sale of investments - (0.1) 0.1Transfer on sale of development properties - (0.6) 0.6Transfer to income statement on impairment ofinvestment - 3.1 -Actuarial gains on pension schemes - - 5.9Proceeds on award of own shares to employees - - 0.2Dividends - - (79.1)Deferred tax recognised directly in equity - (1.9) (3.4)Profit for the year attributable to equity - - 101.0shareholders________________________________________________________________________________________________Balance at 31 December 2007 10.6 156.3 3,373.9________________________________________________________________________________________________ 19. INVESTMENT IN OWN SHARES 2007 2006At cost £m £mBalance at 1 January 7.0 4.4Purchase of own shares - 4.0Cost of shares awarded to employees (3.2) (1.4)_________________________________________________________________________________________________________Balance at 31 December 3.8 7.0_________________________________________________________________________________________________________ 20. TREASURY SHARES 2007 2006At cost £m £mBalance at 1 January - -Purchase of treasury shares 16.8 -_________________________________________________________________________________________________________Balance at 31 December 16.8 -_________________________________________________________________________________________________________ In September 2007 the Company purchased 1,450,000 of its own shares for a totalof £16.8 million. 21. ADJUSTMENT FOR NON-CASH ITEMS IN THE CASH FLOW STATEMENT 2007 2006 £m £mDepreciation 1.2 0.8Share-based employee remuneration 5.2 3.8Amortisation of lease incentives and other direct costs 1.3 1.2Increase in accrued rents receivable (18.2) (17.5)Exchange and other items (18.8) (1.0)_________________________________________________________________________________________________________ (29.3) (12.7)_________________________________________________________________________________________________________ 22. CONTINGENT LIABILITIES There are contingent liabilities of £28.7 million (2006: £27.8 million) relatingto guarantees given by the group and a further £27.3 million (2006: £14.0million) relating to claims against the group arising in the normal course ofbusiness. Hammerson's share of contingent liabilities arising within jointventures, which is included in the figures shown above, is £4.0 million (2006:£2.9 million). 23. ACQUISITION On 8 March 2007 the group acquired the company owning Ravenhead Retail Park. Theacquisition price was £120 million, including costs, which was satisfied throughthe issue of 5,019,875 ordinary shares in Hammerson plc, with a value of £79million, and the assumption and immediate repayment of debt of £39 million. Noother significant assets or liabilities were acquired and the transaction hasbeen accounted for as an asset acquisition. 24. OTHER INFORMATION The financial information contained in this announcement has been prepared onthe basis of the accounting policies set out in the statutory accounts for theyear ended 31 December 2006 but does not constitute the group's statutoryaccounts for the years ended 31 December 2006 or 2007. Whilst the financialinformation included in this announcement has been computed in accordance withInternational Financial Reporting Standards (IFRS), as adopted by the EuropeanUnion, this announcement does not itself contain sufficient information tocomply with IFRS. The financial information for the year ended 31 December 2006is derived from the statutory accounts for that year which have been deliveredto the Registrar of Companies. The auditors reported on those accounts and theirreport was unqualified and did not contain a statement under s.237(2) or (3)Companies Act 1985. The statutory accounts for the year ended 31 December 2007,for which the audit report has not yet been signed, will be finalised on thebasis of the financial information presented by the directors in thispreliminary announcement, will comply with IFRS and will be delivered to theRegistrar of Companies. This document contains certain statements that are neither reported financialresults nor other historical information. These statements are forward-lookingin nature and are subject to risks and uncertainties. Actual future results maydiffer materially from those expressed in or implied by these statements. Many of these risks and uncertainties relate to factors that are beyondHammerson's ability to control or estimate precisely, such as future marketconditions, currency fluctuations, the behaviour of other market participants,the actions of governmental regulators and other risk factors such as theCompany's ability to continue to obtain financing to meet its liquidity needs,changes in the political, social and regulatory framework in which the Companyoperates or in economic or technological trends or conditions, includinginflation and consumer confidence, on a global, regional or national basis. Readers are cautioned not to place undue reliance on these forward-lookingstatements, which speak only as of the date of this document. Hammerson does notundertake any obligation to publicly release any revisions to theseforward-looking statements to reflect events or circumstances after the date ofthese materials. Information contained in this document relating to the Companyor its share price, or the yield on its shares, should not be relied upon as aguide to future performance. SHAREHOLDER INFORMATION Financial calendarFull year results announced 25 February 2008Annual General Meeting 1 May 2008Interim management statement 1 May 2008Recommended final dividend - Ex-dividend date 9 April 2008 - Record date 11 April 2008 - Payable on 23 May 2008Anticipated 2008 half-year October 2008dividend Website The 2007 Annual Report and other information will be available on the Company'swebsite, www.hammerson.com, when posted to shareholders. The Company operates aservice whereby all registered users of the Company's website can choose toreceive, via e-mail, notice of all Company announcements which can be viewed onthe website. Registered Office 10 Grosvenor Street, London W1K 4BJ. Registered in England No. 360632. Glossary of Terms Adjusted figures (per share) Reported amounts adjusted to exclude certain non-recurring items as set out in note 6 to the accounts. Anchor store A major store, usually a department store or supermarket, occupying a large unit within a shopping centre or retail park, which serves as a draw to other retailers and consumers. Average cost of borrowing The cost of finance expressed as a percentage of the weighted average of borrowings during the period. Capital return 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, calculated on a monthly time-weighted basis. Earnings per share (or ' Profit for the period attributable to equity shareholders divided by theEPS') average number of shares in issue during the period. EPRA European Public Real Estate Association. This organisation has issued recommended bases for the calculation of earnings per share and net asset value per share. ERV The estimated market rental value of the total lettable space in a property, after deducting head and equity rents, calculated by the group's valuers. Gearing Net debt expressed as a percentage of equity shareholders' funds. Gross rental income Income from rents, car parks and commercial income. IFRS International Financial Reporting Standard. IPD Investment Property Databank. An organisation supplying independent market indices and portfolio benchmarks to the property industry. Initial yield Annual cash rents receivable, net of head and equity rents and the cost of vacancy, as a percentage of property value. Interest cover Net rental income divided by net cost of finance before capitalised interest, the change in fair value of derivatives and bond redemption costs. Interest rate and currency An agreement with another party to exchange an interest or currency rateswap (or 'derivatives') obligation for a pre-determined period of time. Like-for-like / underlying The percentage change in rental income for completed investmentnet rental income properties owned throughout both current and prior periods, after taking account of 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 Equity shareholders' funds divided by the number of shares in issue at(or 'NAV') the balance sheet date. Over-rented The percentage by which the ERV falls short of rents passing, together with the estimated rental value of vacant space. Property Income Distribution A dividend, generally subject to withholding tax, that a UK REIT is(PID) required to pay from its tax-exempted property rental business and which is taxable for UK-resident shareholders at their marginal tax rate. Pre-let A lease signed with a tenant prior to completion of a development. 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. Rents passing The annual rental income receivable from an investment property, after any rent-free periods and after deducting head and equity rents. This may be more or less than the ERV (see over-rented and reversionary or under-rented). Return on shareholders' Capital growth and profit for the year expressed as a percentage ofequity shareholders' funds at the beginning of the year, all excluding deferred tax. Reversionary or under-rented The percentage by which the ERV exceeds the rents passing, together with the estimated rental value of vacant space. SIIC Societes d'Investissements Immobiliers Cotees. A French tax-exempt regime available to property companies listed in France. Total development cost All capital expenditure on a development project, including capitalised interest. Total return Net rental income and capital return expressed as a percentage of the opening book value of property adjusted for capital expenditure and exchange translation movements, calculated on a monthly time-weighted basis. True equivalent yield The average income return, reflecting the timing of future rental increases, based on current ERV, resulting from lettings, lease renewals and rent reviews, assuming rents are received quarterly in advance. Turnover rent Rental income which is related to an occupier's turnover. 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 total ERV of the property or portfolio. This information is provided by RNS The company news service from the London Stock Exchange

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