Hammerson Regulatory News (HMSO)

Thursday 27 July 2023

HAMMERSON plc - UNAUDITED HALF YEAR 2023 RESULTS

Strong first half, return to cash dividend, confident in the future

Rita-Rose Gagné, Chief Executive of Hammerson, said:

"We are pleased to have delivered a strong first half and announce a return to a cash dividend as we look to the future with confidence. Our leasing momentum in 2022 has continued into the first half of 2023 and we have a strong pipeline for the second half. Our core portfolio continues to attract the best occupiers which, combined with our emphasis on commercialisation and placemaking, is creating exceptional destinations for customers. At the same time, we continue to transform our operating model and platform, bringing more integrated and efficient ways of working while reducing costs.

We have further simplified our portfolio with the exit from minority stakes in France, our standalone development interests in Croydon, and other non-core land, generating £215m in disposal proceeds, further strengthening the balance sheet whilst bringing a sharper focus to investment opportunities in the core portfolio.

Our strategy is driven by the repositioning of our unique city centre destinations in some of Europe's fastest-growing cities from traditional retail-anchored footprints to a broader mix of uses. Today we are a more agile, market facing, asset-centric Hammerson that continues to reshape our urban destinations to be fit for future lifestyles."

Operational momentum continues

· Footfall and like-for-like sales remain strong, with the former up +4% year-on-year (UK +2%, France and Ireland +7%) and the latter up +3% in the UK, +7% in France, and +2% in Ireland

· 134 leasing deals concluded in the period representing £18.3m of headline rent (£10.7m at our share, ) (+13% LFL)

− Principal leasing +20% ahead of previous passing rent (HY 22: +31%)

− Net effective rent +8% vs ERV (HY 22: +1%)

− WAULB 7.1 years; 9.4 years WAULT

− Strong leasing pipeline for the second half, with a further £15m deals in solicitors' hands

· Flagship occupancy up +1% point year-on-year to 95%

· Rent collection: FY 22 now at 98%; HY 23 95%

· Value Retail GRI up +13%, 156 leases signed and 55 new openings, footfall and sales up +13% and +14% year-on-year respectively

Robust financial performance

· Adjusted earnings up +15% to £56m (HY 22: £48m) benefitting from:

− Like-for-like GRI up +3% reflecting the continuation of strong leasing trends; like-for-like NRI up +2% YoY

− Gross administration costs down -12% year-on-year to £26m, on track to meet target of reducing costs by -20% by FY 24, which will bring cumulative savings of 30% since FY 20

− Net finance costs -13% reflecting debt retirement and increased interest receipts from cash

· Adjusted earnings per share up 0.1p to 1.1p; basic loss per share of 0.0p (HY 22 earnings per share: 1.0p)

· Value Retail adjusted earnings of £13.4m (HY 22: £13.7m): GRI growth offset by higher finance and operational costs

· Value Retail cash distribution of £43m received

· Interim cash dividend per share of 0.72p per share, to be paid entirely as a PID, new dividend policy announced

· Group portfolio value of £4.7bn (FY 22: £5.1bn), values broadly stable, reduction principally due to disposals

− Capital return -0.3% (HY 22 -0.4%); Total return +2.5% (HY 22: 2.1%)

· IFRS loss of £1m (HY 22: £50m profit)

· EPRA NTA per share 52p (FY 22: 53p)

Stronger balance sheet

· Net debt down 24% to £1,318m (FY 22: £1,732m):

− Completed £215m disposals in the first half, bringing total since start of FY 22 to £410m. Remain on track to complete £500m programme by end of FY 23

− Derecognition of £125m of secured debt following exit from Highcross and O'Parinor joint ventures

· Headline LTV 33% (FY 22: 39%), fully proportionally consolidated (FPC) LTV 43% (FY 22: 47%)

· Net debt to EBITDA of 7.7x (FY 22: 10.4x)

· Ample liquidity of £1.2bn (FY 22: £1.0bn), including undrawn committed facilities and £563m of cash

Outlook

Whilst the macroeconomic outlook remains uncertain, we have strong leasing and operational momentum and are well placed to deliver another year of robust adjusted earnings and cash flow. We have maintained our strong operational grip on the business and are on track for both our cost reduction and disposals targets. Given our progress of the last few years, we are returning to a cash dividend.

Results presentation today:

Hammerson will hold a virtual presentation for analysts and investors to present its half year financial results for the six months ended 30 June 2023, followed by a Q&A session.

Please join the call 5 minutes before the booked start time to allow the operator to transfer you into the call by the scheduled start time

The presentation and press release will be available on: www.hammerson.com/investors/reports-results-presentations/2023-half-year-results on the morning of results.

Enquiries:

Disclaimer

Certain statements made in this document are forward looking and are based on current expectations concerning future events which are subject to a number of assumptions, risks and uncertainties. Many of these assumptions, risks and uncertainties relate to factors that are beyond the Group's control and which could cause actual results to differ materially from any expected future events or results referred to or implied by these forward-looking statements. Any forward-looking statements made are based on the knowledge and information available to Directors on the date of publication of this announcement. Unless otherwise required by applicable laws, regulations or accounting standards, the Group does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future developments or otherwise. Accordingly, no assurance can be given that any particular expectation will be met, and reliance should not be placed on any forward-looking statement. Nothing in this announcement should be regarded as a profit estimate or forecast.

This announcement does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to subscribe for or purchase any shares or other securities in the Company or any of its group members, nor shall it or any part of it or the fact of its distribution form the basis of, or be relied on in connection with, any contract or commitment or investment decisions relating thereto, nor does it constitute a recommendation regarding the shares or other securities of the Company or any of its group members. Statements in this announcement reflect the knowledge and information available at the time of its preparation. Liability arising from anything in this announcement shall be governed by English law. Nothing in this announcement shall exclude any liability under applicable laws that cannot be excluded in accordance with such laws.

Index to key data

Unless otherwise stated, figures have been prepared on a proportionally consolidated basis, excluding Value Retail as outlined in the presentation of information section of the Financial Review.

† HY 22 income statement figures have been restated to reflect the IFRIC Decision on Concessions with further information set out in notes 1B and 5 to the interim financial statements.

a These results include discussion of alternative performance measures (APMs) which include those described as Adjusted, EPRA and Headline as well as constant currency (where current period exchange rates are applied to the prior period's results). Adjusted, EPRA and Headline measures are described in note 1C to the interim financial statements and reconciliations for earnings and net assets measures to their IFRS equivalents are set out in note 9 to the interim financial statements.

b Adjusted earnings per share and basic loss per share for 2022 have been restated to reflect the bonus element of scrip dividends as set out in note 10 to the interim financial statements.

c Proportionally consolidated basis as set out in the Financial Review.

Chief Executive's REVIEW

We have delivered another half year of operational and strategic progress. We have a strong operational grip, positive momentum, and a clear strategy to grow our business. Footfall and like-for-like sales remain resilient, despite the volatile macroeconomic environment. Footfall is up 4% year-on-year, whilst like-for-like sales are up 3% year-on-year in the UK, 7% in France, and 2% in Ireland.

At 95%, flagship occupancy remains strong with occupier flight to quality evident - fewer, better stores in prime locations. By leveraging our unique city centre locations and increasing our focus on placemaking, intelligent marketing and commercialisation we continue to harness this shift to create exceptional environments for customers and occupiers and deliver another strong leasing performance. We have signed 134 leases representing £18m of headline rent, £11m at our share, also introducing numerous new entrants and concepts, with best-in-class occupiers making significant investments in their physical footprint.

Since 2020, we have undertaken a transformation of our operating model, and reshaped our organisation bringing in new skills and talent in asset management, leasing, commercialisation and placemaking, which means we can focus our energies on occupiers and customers. Property management and associated accounting services in the UK and France are being consolidated with proven scale operators. Today we are a more agile and market facing asset-centric organisation that is continuing to reshape our destinations to be fit for the future.

We have further simplified our portfolio with the exit from minority stakes in Italie Deux in France, standalone development assets in Croydon, and other non-core land generating £215m in disposal proceeds. At the same time, we have been disciplined in not allocating capital to assets with secured debt where these were non-core, with £125m of secured borrowing derecognised in the period following exits from Highcross and O'Parinor, whilst bringing a sharper focus to investment opportunities in the core portfolio.

Our resulting financial position is significantly strengthened. We have ample liquidity in cash and undrawn committed facilities of £1.2bn. We will continue to be disciplined allocators of capital and select the best returns for shareholders, mindful of our own cost of capital and all options for capital deployment including debt reduction and distributions for shareholders.

Our strategy is underpinned by the quality of our city centre destinations in some of Europe's fastest growing cities, and their evolution from traditional retail-anchored footprints to a broader mix of uses, alongside the transformation of our platform and cost base. Together, this has delivered further growth in adjusted earnings, broadened our opportunity set, and provided the confidence to return to a cash dividend.

DIVIDEND POLICY

The Board recognises the importance of cash dividends for shareholders and has previously stated its intention to return to a cash dividend from HY 23. The Group's financial position has strengthened in recent years following the disposals of non-core assets, strong operational performance, and the rebasing of income and earnings.

The Board today announces a new sustainable dividend policy of 60-70% of annual adjusted earnings. Dividends will be paid semi-annually.

This policy is based on a disciplined approach to capital allocation balancing returns to shareholders whilst continuing to invest in our core assets, as well as the impact of disposals, acquisitions, loan to value and changes in financing operating conditions. The Board will continue to keep the policy under review over the coming years as the Group continues to execute on its strategy. 

The Board today declares an interim dividend in respect of 2023 of 0.72p pence per share, which will be paid as a PID. There will be no scrip alternative although the dividend reinvestment plan (DRIP) remains available to shareholders.

FINANCIAL AND OPERATIONAL REVIEW

Adjusted earnings were up 15% to £56m or 1.1p per share, reflecting 3% growth in like-for-like GRI and 2% in like-for-like NRI, and significant further reductions in gross administration and net finance costs.

At FY 22, we committed to reduce our gross administration costs by 20% by FY 24. We have delivered a 12% reduction year on year. There are more efficiencies to come as we pursue greater automation and digitalisation of our business, as well as outsourcing and consolidation of supplier opportunities. We are well on track to deliver our 2024 target, which will bring cumulative savings of 30% since FY 20.

Net debt was down 24% to £1,318m, headline LTV was 33% (FY 22: 39%) and fully proportionally consolidated LTV including the Group's proportionate share of Value Retail debt was 43% (FY 22: 47%). Our net debt to EBITDA improved to 7.7x from 10.4x at FY 22, reflecting both lower debt and the improved operating performance.

EPRA NTA was 52p per share at 30 June 2023 (FY 22: 53p), with earnings largely offsetting disposal and impairment losses. Yields were broadly stable other than some marginal expansion in Ireland and ERVs were also broadly flat in all geographies.

Overall, the Group recorded an IFRS loss of £1m (HY 22: £50m profit).

Sales and footfall

Footfall and sales performance is reflective of our proactive asset management to create exceptional destinations and a more relevant mix. The recovery in footfall that we saw across our assets in FY 22 continued into HY 23 with consumers also increasingly returning to city centres, both for leisure and work. Footfall to-date is +4% year-on-year (UK+2%, France and Ireland +7%). Our largest city centre estates have benefitted significantly from this continued return (Birmingham +6%, Marseille +8%, Dublin +13%).

Consumer spending continues to be resilient, with sales positive vs HY 22 (UK +3%, France +7%, and Ireland +2%), reflecting an inflationary environment, although we have seen some change in spend patterns with consumers trading down in certain categories (e.g. fashion accessories outperforming jewellery). In-store footfall and sales have also been supported by a more cautious consumer, focusing on value (price vs. quality) which is easier to do in-person. In addition, the increasing number of occupiers charging for online deliveries and returns continues to drive store visits.

Occupancy

Our core portfolio is also benefitting from the increasing polarisation in the market and the flight to quality with a number of new key openings. These flagship openings are part of a wider repositioning and ongoing improvement of adjacencies to create relevant placemaking.  Flagship portfolio occupancy increased 1% point year-on-year to 95% with vacancy levels remaining low across our assets with the UK 5%, France 6% and Ireland at only 3%.

Collections

Collections have normalised. For FY 22, collection now stands at 98% and HY 23 95% (UK 95%, France 94%, Ireland 96%).

Value Retail

Value Retail saw operational performance exceed both HY 22 and HY 19 levels; Brand sales increased by 14% year-on-year and were 6% above FY 19 levels. Footfall across the Villages continued to bounce back to pre pandemic levels, with a 13% year-on-year increase and only 2% down on HY 19.

In line with expectations, Value Retail have begun to see the benefits from a recovery of the affluent international traveller, reflected in an increase in spend per visit of 8%. Overall, Value Retail signed 156 leases during the first half of the year, with many brands choosing to re-fit units with their latest flagship concept. Year-to-date average occupancy for the six months was at 94%.

There have been 55 new openings in HY 23. Palm Angels opened its first off-price boutique in Bicester Village, Burberry implemented a new flagship store design in their upsized unit in Ingolstadt and Bollicine Ruinart Champagne Bar opened in Wertheim Village in February. At La Vallée, Monogram, a pre-loved boutique will be taking permanent space in the second half of the year following a series of successful pop ups. 

 The Group's share of adjusted earnings was £13.4m. GRI has increased by 13% year-on-year, however this continued growth was partially offset in the half by rising finance costs reflecting the refinancing activity in FY 22 at Bicester and La Vallée, and the phasing of investment for growth. Year-to-date, Hammerson has received £43m of cash distributions from Value Retail, in part reflecting catch up payments from FY 22.

At 30 June 2023, the Group's interest in Value Retail's property portfolio was £1.9bn and the net assets were £1.2bn; the difference is principally due to £0.7bn of net debt within the Villages which is non-recourse to the Group. The average LTV across the Villages is 37%.

STRATEGY UPDATE

We own city centre destinations and adjacent land around which we can reshape entire neighbourhoods. Our strategy recognises the unique position that we have in our urban locations and the opportunities to leverage our experience and capabilities to create and manage exceptional multi-use city centre destinations that realise value for all our stakeholders, connects our communities and delivers a positive impact for generations to come.

Our aim is simple and clear - to chart a path to growth that delivers total returns for shareholders through consistent execution against our strategic goals. As we focus on investing in our portfolio of core assets, we are combining targeted leasing and placemaking with integral and complementary repurposing and redevelopment opportunities, and directing capital expenditure to our core estates. This asset focus is underpinned by the continuing transformation of our agile platform, by maintaining a sustainable and resilient capital structure and by our commitment to ESG.

In the first six months of FY 23, we have made significant progress towards all our goals as follows:

Investing in our assets

The quality and location of our destinations in growing cites is a key source of competitive advantage for Hammerson. We have some of the best assets in the very best prime city centre catchments and transportation hubs, and, due to the strong ties we have in the communities in which we operate, supportive local authorities.

The consumer and occupier landscape continues to evolve at pace. Occupiers are continuing to shift to using physical space for a broad mix of uses, including: point of sale; last mile fulfilment; returns; servicing; experiential; education; workspace, and leisure -living spaces. At the same time, consumers demand top quality environments and experiences. We continue to reinvest in our assets to partner with best-in-class occupiers to cater to the communities and catchments in which we operate, whether this be the repurposing of obsolete department store space into leisure and modern retail, or redevelopment to residential, workspace, healthcare and lifestyle uses.

Our leasing strategy has evolved from an emphasis on filling space and increasing occupancy as we emerged from the COVID-19 pandemic to now focus more proactively on the quality of the complementary mix and offer for both occupiers and customers, which in turn will underpin a higher quality of earnings.

Following our best year since FY 18 in FY 22, our leasing momentum has continued into the first half of 2023, with 134 leases signed on a more focused portfolio (HY 22: 143), representing £18.3m of headline rent at 100%, or £10.7m at share (HY 22: £10.5m), and +13% on a like-for-like basis. Whilst demand continued through the period, June was particularly strong, with 46 leases signed. For principal deals, headline rent was 20% ahead of previous passing rent. On a net effective basis, principal deals were 8% ahead of ERV. In terms of mix, just under half of leasing was to best-in-class and new fashion concepts, and the balance to non-fashion, services, leisure, food, workspace and Printemps in France.

In terms of key deals and openings:

· We secured renewals and new deals with Printemps, Olympique de Marseille, Levi's, Puma and Five Guys at Les Terrasses du Port as we approach the ten-year anniversary of the opening of Marseille's super prime destination

· We are bringing new Inditex brands - Bershka and Pull & Bear - into Bullring by reconfiguring former Arcadia space. With other reconfigurations we have facilitated Boots renewal and the introduction of Superdrug at Brent Cross

· Also in Birmingham, we handed over former Debenhams space to M&S in the first half, with TOCA Social anticipated in the second, let underutilised space above Link Street to Lane 7 bowling, brought a new leisure concept, VR Sandbox, to Grand Central, and will be opening Nike Rise in the second half

· We opened Penneys (Primark) and Nike Live at Dundrum, completing the repurposing of former House of Fraser space, with the backfill allowing Dunnes Stores to enter for the first time, already handed over and opening later this year

· Also at Dundrum we leased underutilised storage space to Western Union converted to modern workspace, bringing a new use and income stream to the asset, as well as incremental customers to the food and leisure-oriented Pembroke Square area

Our approach to leasing goes hand in hand with the greater emphasis on placemaking, which not only serves to enliven space and enhance the experience and environment for customers and occupiers, but also increasingly contributes meaningfully in its own right in terms of incremental footfall, income, and engagement across all channels. Like-for-like commercialisation income was up 15%. Key highlights were:

· We staged our first Late Night Out ticketed event, bringing the after hours economy to Bullring

· We brought the Charity Super.Mkt, the UK's first shop space bringing multiple charities under one roof, to Brent Cross and The Oracle, driving incremental footfall and media coverage, and bringing it to Cabot Circus in July

· We had further success bringing digitally native brands to physical space, most notably SHEIN to Bullring and Grand Central

· In France, we hosted a two-week pop-up store at Les Terrasses du Port for local rapper Jul, while at Les 3 Fontaines we hosted the second edition of the 3Festival which celebrates "Art in all its forms" with local partners from street art workshops to culinary battles

· We continue to exploit underutilised car parking space with new uses, occupiers and events, including a Tesla collection point, the Florescenza garden centre, and Big Kid Circus at Brent Cross; Skatepark with Red Bull at Cabot Circus, and the Supercar Weekend at Dundrum

· We increased our social media presence and partnerships with local influencers, contributing to increased visibility and customer engagement with our destinations

In terms of the repurposing of department stores, which constitutes a substantial part of our integral projects - capital light repurposing and redevelopment on existing assets - we achieved planning consent for Drum, an amenity rich workspace-led proposal, directly served by the UK's most connected rail station Birmingham New Street, which predominantly occupies the former John Lewis Partnership space at Grand Central. Strip-out works are almost complete. In Reading, we await the outcome of a planning application for the major regeneration of the eastern quarter of The Oracle; to demolish obsolete department store space and develop around 450 rental apartments alongside renewed landscaping and commercial uses. We are considering options for the repurposing of the other department store, including new restaurant, leisure and fashion uses. Overall, of the department store space the Group had at FY 19, roughly a third has been repurposed or is in planning, a third has been sold, and we see potential future opportunities for the remainder.

Turning to other projects integral to our existing assets, at Ironworks in Dundrum, a 122 unit residential development, structural steelwork has commenced on schedule, with agreement reached for the long lease of the 15 affordable apartments. In France, we are considering options for an add-on development, Cergy 3, to capitalise on strong demand, following the opening of Les 3 Fontaines extension in March last year.

We continue to progress complementary projects in a disciplined and capital light manner. In Ireland, we expect initial planning consents to be finalised imminently at Dublin Central and there are ongoing discussions with potential end users, while our planning application at Dundrum Phase II remains in progress. At Martineau Galleries, part of the wider Birmingham Estate, we are working with Birmingham City Council and the West Midlands Combined Authority on phasing, grant funding and the programme for delivery. At Brent Cross, we are engaged with key stakeholders to consider a future masterplan.

Lastly, in our standalone projects, we exited our 50% share of all land and corporate interests at Croydon close to book value, focusing the core portfolio and creating additional liquidity for reinvestment. At Eastgate, Leeds, master planning and development agreement with the City Council is ongoing, while at The Goodsyard, Bishopsgate, we are progressing with detailed design and feasibility, the procurement of initial demolition and preparation works, and engagement with Network Rail. These capital light steps continue to create value and optionality.

Environmental, Social and Governance

In the first half of 2023 we continued to deliver against our ESG strategy and Net Zero commitments. Following the completion of our Net Zero Asset Plans (NZAPs) in 2022, in the first half of 2023 we commenced work on multiple projects involving renewable energy in France, removing gas from our Irish assets and in the UK are improving building management systems, lighting, heating and ventilation. Our ongoing commitment to energy efficiency has resulted in a 5% year-on-year reduction in carbon emissions and a 12% reduction in energy usage, both calculated on a like-for-like portfolio basis.

In June we held our first all-company Giving Back Day with colleagues across the Group supporting local charities and organisations aligned with our four key social value themes. We have also supported 96 organisations through our social value work this year and engaged over 3,000 people in a multitude of activities.

We also continue to improve our reporting and governance and obtained Board approval to adopt more realistic climate change scenarios aligned to the latest scientific research stating that more urgent climate action is needed. We are developing a new management system to ensure we have a robust way to process, monitor and improve our ESG performance. All of this progress in the first half of 2023 demonstrates how our ESG strategy will ensure we continue to increase our contribution to addressing climate change.

An agile platform

Transforming our platform and cost base, and creating more agile, responsive, integrated and efficient ways of working with a growth mindset remains a priority.  We took early action in FY 21 and HY 22, shifting from a top-heavy, geographically oriented and siloed organisation to a simplified, asset-centric operating model.  As a result, we achieved a 17% year-on-year reduction in gross administration costs at FY 22, achieving our initial target of a 15-20% reduction by FY 23.

We continue to take further steps including more efficient ways of working, both in terms of systems, automation and digitalisation, but also in terms of greater team integration which allows for cross pollination of ideas and practices between asset management, leasing, placemaking and marketing, ESG, strategy and insights, finance and communications. 

Our goal is to create a high performance culture with an emphasis on the value add work we do best - strategic asset management and delivery, placemaking and the repositioning of our assets - whilst property management and associated accounting services are consolidated to proven third party providers of scale. Earlier this year, we launched the consolidation of our property management suppliers in the UK, which formally started in February, and we have just launched in July a similar activity in France.

The actions we have taken over the last two years have resulted in a reduction of headcount, down almost 60% since FY 20 and 30% since FY 22, and achieved cost reduction of about a quarter. At the same time, we continue to invest in and promote key talent to be fit for the future. Other sources of savings include reductions in office space in the UK and France and insurance renewals.

Overall, we have reduced our gross administration cost by 12% year-on-year. There is more to do, however, we remain on track to meet our goal of a further 20% reduction off the FY 22 base by FY 24, which will bring cumulative savings of 30% since FY 20.

A sustainable and resilient capital structure

Reflective both of our operational strength, strategic progress and the disciplined realignment of the portfolio through our disposals programme, today we have a resilient balance sheet, ample liquidity, and have maintained our IG credit rating.

Generating total gross proceeds of £215m, in France we completed the sale of our 25% share of Italie Deux, and 100% of the Italik extension, and our 50% share of our interests in Croydon, together with non-core land in the UK. Moreover, £125m of secured borrowings have been derecognised in connection with our exits from non-core assets in Highcross and O'Parinor. 

Having now achieved disposal proceeds of £410m since the beginning of 2022, the Group remains confident of achieving its target of £500m by FY 23. We have completed £843m of sales over the last two years. Overall, net debt reduced 24% in the first half of the year to £1,318m at 30 June 2023. Headline LTV stood at 33% (FPC: 43%), down from 39% (FPC: 47%) at FY 22. Also reflecting the increase in earnings, net debt to EBITDA improved to 7.7x from 10.4x.

At 30 June 2023, the Group had liquidity of £1.2bn in the form of cash balances (£563m) and undrawn committed RCFs (£654m), and had no significant unsecured refinancing requirements until 2025 not covered by existing cash.

FINANCIAL REVIEW

OVERVIEW

We have delivered another half year of financial progress from both an earnings and balance sheet perspective.

Adjusted earnings for the six months ended 30 June 2023 were £56m, a year-on-year increase of 15% driven by higher rental income and reduced operating and financing costs. On a like-for-like basis, gross rental income increased by 3% and like-for-like net rental income improved by 2%. Our gross administration costs reduced 12% year-on-year with more efficiencies to come and we continue to target a 20% cost reduction compared with FY 22 by 2024. Net finance costs were 13% lower as a result of the continued balance sheet deleveraging and increased interest income from cash held on deposit.

On an IFRS basis, the Group reported an IFRS loss of £1m compared with a profit of £50m in the first half of 2022. The variance was principally due to losses on disposal and impairment losses totalling £39m in 2023.

As previously committed, the Group is returning to the payment of cash dividends and has declared an interim dividend of 0.72p per share, to be paid entirely as a PID. The Board has also announced a new dividend policy as explained in the Chief Executive's Review on page 4.

EPRA NTA was £2,623m at 30 June 2023, £11m lower than at the start of the year, equating to EPRA NTA per share of 52p (2022:53p).

Net debt reduced by 24% to £1,318m at 30 June 2023 (FY 22: £1,732m) benefitting from gross disposal proceeds of £215m, £125m from the derecognition of secured borrowings, £51m of cash generated from operations and £43m of distributions from Value Retail.

The significant debt reduction strengthened the Group's balance sheet and credit metrics. At 30 June 2023 headline LTV was 33% (FY 22: 39%) and LTV on a fully proportional consolidation basis was 43% (FY 22: 47%). Net debt: EBITDA improved to 7.7x from 10.4x at 31 December 2022. The Group has ample liquidity in cash and undrawn committed facilities of £1.2bn(FY 22: £1.0bn) and has no unsecured debt maturities until 2025 not covered by existing cash.

Since the year end results, Fitch's senior unsecured investment grade credit rating was re-affirmed as BBB+ and Moody's Baa3 rating was retained. 

PRESENTATION OF FINANCIAL INFORMATION

The Group's property portfolio comprises properties that are either wholly owned or co-owned with third parties. 

Whilst the Group prepares its financial statements under IFRS (the 'Reported Group'), the Group evaluates the performance of its portfolio for internal management reporting by aggregating its wholly owned businesses together with its share of joint ventures and associates which are under the Group's management ('Share of Property interests') on a proportionally consolidated basis, line-by-line (in total described as the Group's 'Managed portfolio').

The Group's investment in Value Retail is not proportionally consolidated because it is not under the Group's management, is independently financed and has differing operating metrics to the Group's Managed portfolio. Accordingly, it is accounted for separately as share of results of associates as reported under IFRS and is also excluded from the Group's proportionally consolidated key metrics such as net debt or like-for-like net rental income growth.

However, for certain of the Group's Alternative Performance Measures (APMs), for enhanced transparency, we do disclose metrics combining both the Managed portfolio and Value Retail. These include property valuations, returns and certain credit metrics.

Both the IFRS and Management reporting bases are presented in the financial statements.

Management reporting and IFRS accounting treatment

* See note 11B to the interim financial statements for more information on the Group's two joint operations.

Derecognition of Highcross and O'Parinor

The Group's Highcross and O'Parinor joint ventures, in which the Group had 50% and 25% interests respectively, had a total of £125m of borrowings secured against the individual property interests which were non-recourse to the Group. In both cases the loans were in breach of certain conditions and the Group was working constructively with the respective lenders on options to realise 'best value' for all stakeholders. 

On 9 February 2023, a receiver was appointed to administer Highcross for the benefit of the creditors and as a result of no longer having joint control the Group derecognised its share of assets and liabilities, including the property value and £80m of secured borrowings. There was no loss on derecognition as the Group's joint venture investment in Highcross had been fully impaired at 31 December 2021, from which date the Group had ceased recognising the results of this joint venture in the income statement.

On 30 June 2023, the lenders on O'Parinor took control of the joint venture and the Group therefore impaired its joint venture investment by £22m and derecognised its share of assets and liabilities, including the property value and £45m of secured borrowings.

New accounting pronouncements resulting in restatements of the six months ended 30 June 2022

In 2022, IFRIC issued agenda decisions which resulted in the restatement of a number of line items in the prior period financial statements. These restatements are explained in Note 1B to the interim financial statements and relate to the accounting treatment of rent concessions granted to tenants (lessors) and the classification of cash and restricted monetary assets:

• Rent concessions: Restatement of revenue, gross rental income, cost of sales, net rental income and revaluation losses although operating profit and income statement figures below operating profit are unaffected. Adjusted figures are also affected including those down to adjusted earnings. A more detailed analysis of the effects is set out in note 5 to the interim financial statements.

• Cash: An increase in cash and cash equivalents of £5.0m, or £25.4m on a proportionally consolidated basis, with a corresponding decrease in restricted monetary assets at 30 June 2022. The equivalent figures at 31 December 2021 were £5.4m and £20.4m respectively. See note 19C to the interim financial statements for further information.

Where figures in this Financial Review or interim financial statements have been restated, they are marked †.

Alternative Performance Measures (APMs)

The Group uses a number of APMs, being financial measures not specified under IFRS, to monitor the performance of the business. Many of these measures are based on the EPRA Best Practice Recommendations (BPR) reporting framework which aims to improve the transparency, comparability and relevance of the published results of listed European real estate companies. Details on the EPRA BPR can be found on www.epra.com and the Group's key EPRA metrics are shown in Table 1 of the Additional information.

We present the Group's results on an IFRS basis but also on an EPRA, Headline and Adjusted basis as explained in note 1C to the interim financial statements. The Adjusted basis enables us to monitor the underlying operations of the business on a proportionally consolidated basis as described in the basis of preparation and excludes capital and non-recurring items such as revaluation movements, gains or losses on the disposal of properties or investments, impairment of investments, as well as other items which the Directors and management do not consider to be part of the day-to-day operations of the business. Such excluded items are in the main reflective of those excluded for EPRA earnings, but additionally exclude certain cash and non-cash items which we believe are not reflective of the normal routine operating activities of the Group. We believe that disclosing such non-IFRS measures enables evaluation of the impact of such items on results to facilitate a fuller understanding of performance from period to period. These items, together with EPRA and Headline adjustments are set out in more detail in note 9A to the interim financial statements.

For the first half of 2023, adjusting items additional to EPRA adjusting items comprised:

• Exclusion of a charge of £3.2m (HY 22: £1.4m) in respect of business transformation as the Group continues its implementation of strategic change and comprises mainly non-capitalisable digital transformation costs, and severance and other costs associated with team and operational restructuring.

• A credit of £0.2m (HY 22: £1.6m) for expected credit losses charged to the income statement but where the related income is deferred on the balance sheet such that the exclusion of this removes the distortive mismatch this causes.

INCOME STATEMENT

The Group's IFRS reported loss was £1.2m (HY 22: £50.3m profit). The year-on-year reduction in IFRS earnings was principally due to losses on the disposal of the Group's interests in Italie Deux and Croydon and an impairment charge in relation to the derecognition of the Group's joint venture investment in O'Parinor totalling £39.4m and a net reduction in IFRS earnings from Value Retail of £30.3m. These were partly offset by the recycling of exchange gains on the two French disposals of £20.1m.

As explained above, the Group evaluates the performance of its portfolio on a proportionally consolidated basis. A detailed reconciliation from Reported Group to the proportionally consolidated basis is set out in note 2 to the interim financial statements.

On an Adjusted basis, earnings increased by £7.5m to £55.9m (HY 22: £48.4m) and a summary reconciling adjusted earnings is set out below:

Summary income statement

† Figures for the six months ended 30 June 2022 have been restated to reflect the IFRIC Decision on Concessions with further information provided in notes 1B and 5 to the interim financial statements.

a Proportionally consolidated figures are set out in more detail in note 2 and adjustments are detailed in note 9A to the interim financial statements.

b In addition to the IFRIC Decision on Concessions, comparative figures for 2022 have also been restated to reflect the bonus element of scrip dividends as explained in note 10B to the interim financial statements. Previously reported figures were: Reported Group: 1.1p; Adjusted: 1.1p.

The table below bridges adjusted earnings between the two periods:

Reconciliation of movements in adjusted earnings*

† The figure for the six months ended 30 June 2022 has been restated to reflect the IFRIC Decision on Concessions with further information provided in notes 1B and 5 to the interim financial statements.

* Decreases and increases are all on an Adjusted basis and therefore exclude adjusting items as set out in note 9A to the interim financial statements.

Rental income

Analysis of rental income

Gross rental income decreased by £1.1m to £106.3m. Disposals reduced income by £7.9m, including Silverburn and Victoria Leeds in 2022 and Italie Deux and Croydon in 2023. This was partly offset by favourable foreign exchange movements of £2.0m and income from developments and other assets which increased by £2.4m principally relating to the Les 3 Fontaines extension which opened in March 2022. Like-for-like GRI increased by £2.4m, or 3.1% benefitting from increased base rent associated with the strong leasing performance over the previous 18 months.

Net rental income increased by £1.3m compared with HY 22, with lower income due to disposals of £4.5m offset by foreign exchange movements of £1.7m, income from development and other assets of £2.6m and like-for-like growth of £1.5m, or 2.3%. From a like-for-like NRI perspective, Ireland (+8.6%) benefit from reduced year-on-year bad debt charges whilst France(-2.5%) was the opposite with an increased charge in HY 23 following a small number of tenants entering administration.

The above movements resulted in an improvement of the adjusted NRI:GRI (after ground rents payable) ratio to 80.7% (HY 22: 78.5%).

Further analysis of net rental income by segment is provided in Table 6 of the Additional information.

† 2022 figures have been restated to reflect the IFRIC Decision on Concessions with further information provided in notes 1B and 5 to the interim financial statements.

Analysis of rental income by ownership

GRI and NRI for the Group are analysed below to break out Share of Property interests.

† 2022 figures have been restated to reflect the IFRIC Decision on Concessions with further information provided in notes 1B and 5 to the interim financial statements.

Administration expenses

Gross administration costs decreased by £3.4m or 12% compared to the first half of 2022 reflecting the Group's continuing focus on cost reduction and principally relates to:

• Employee costs, including variable costs, reduced by £2.0m or 10% as we continued to reshape our organisation to an asset-centric structure. Headcount at 30 June 2023 was 224, 40% lower than at 30 June 2022 (371) and 30% lower than at 31 December 2022 (320).

• Other corporate costs (comprising mainly professional fees, office and IT costs) fell by £1.4m or 14%. Office costs were £0.6m lower following the UK head office relocation to Marble Arch House and Directors and Officers insurance premiums were £0.8m lower year-on-year reflecting the strengthening of the Group's financial position.

Other income decreased by £1.1m against 2022 due to disposals. 

Business transformation costs of £3.2m comprised mainly fees for contractors and consultants working on the Group's digitalisation and automation programme, which were not eligible for capitalisation, and severance costs.

Disposals

During the first half of 2023, we raised gross proceeds of £215m, relating mainly to the disposals of the Group's interests in Italie Deux (including the Italik extension) and our standalone development interests in Croydon. In total, disposals in the period resulted in an overall loss on disposal of £17m, reflecting an 8% discount to book value at 31 December 2022.

Share of results of associates - Value Retail

On an Adjusted basis, the Group's share of results of joint ventures and associates comprises solely the Group's investment in Value Retail which generated adjusted earnings of £13.4m (HY 22: £13.7m).

Year-on-year GRI increased by £8.7m, or 13% due to increased sales across the Villages. This was offset by higher property and administration costs totalling £6.4m and increased finance costs of £3.0m following the refinancing of La Vallée and Bicester Villages in 2022. The Group received cash distributions of £43m from Value Retail in the first half of 2023 (HY 22: £nil).

Net finance costs

Adjusted net finance costs were £25.1m, a decrease of £3.9m, or 13%, compared with 2022. This was predominately due to higher interest income of £3.2m due to increased cash balances following disposals and higher interest rates in HY 23 compared with HY 22.

Tax

Due to the Group having tax exempt status in its principal operating countries the tax charge, on a proportionally consolidated basis, remained low at £nil (HY 22: £0.3m).

The tax charge remains low as the Group benefits from being a UK REIT and French SIIC and its Irish assets are held in a QIAIF. The Group is committed to remaining in these tax exempt regimes and further details on these regimes are given in note 7 to the interim financial statements. In order to satisfy the REIT conditions, the Company is required, on an annual basis, to pass certain business tests. The Group expects to meet all requirements for maintaining its REIT status for the year ending 31 December 2023 and to continue doing so for the foreseeable future.

Dividends

The Group has announced a new dividend policy as set out in the Chief Executive's review on page 4.

The Board has declared an interim dividend of 0.72p pence per share, payable as a PID on 2 October 2023 to shareholders on the register on 25 September 2023. There will be no scrip alternative although the dividend reinvestment plan (DRIP) remains available to shareholders.

NET ASSETS

A detailed analysis of the balance sheet on a proportionally consolidated basis is set out in Table 12 of the Additional information with a summary reconciling to EPRA NTA set out in the table below:

Summary net assets

a Comprises cash and cash equivalents, loans, fair value of currency swaps.

b EPRA adjustments in accordance with EPRA best practice, principally in relation to deferred tax, as shown in note 9B to the interim financial statements.

During the first half of 2023, net assets decreased by £17m to £2,569m (2022: £2,586m). Net assets, calculated on an EPRA Net Tangible Assets (NTA) basis, were £2,623m, or 52 pence per share, a reduction of 1 pence compared to 31 December 2022. The reduction in NTA was principally due to disposal and impairment losses of £39m, portfolio revaluation losses of £18m, these were largely offset by adjusted earnings of £56m. This is equivalent to a total accounting return of -0.4% (FY 22 -6.8%).

The key components of the movement in Reported Group net assets and EPRA NTA are as follows:

Movement in net assets

PROPERTY PORTFOLIO ANALYSIS

Portfolio valuation

The Group's external valuations continue to be conducted by CBRE Limited (CBRE), Cushman & Wakefield (C&W) and Jones Lang LaSalle Limited (JLL), providing diversification of valuation expertise across the Group. At 30 June 2023, the majority of our UK flagship destinations have been valued by JLL and CBRE, the French portfolio by JLL, and the Irish portfolio, Value Retail and Brent Cross have been valued by C&W. This is unchanged from 31 December 2022.

In the first half of the year the Group's investment markets have been largely stable, with relatively few transactions as potential investors wait for greater certainty and liquidity in debt markets. Across all markets there has been a growing polarisation based on asset quality from both an occupational and investment perspective, with values for the highest quality assets outperforming less prime assets. Market yields for prime shopping centres have remained unchanged in the UK in the six months to 30 June 2023 (source: JLL, CBRE), in France market yields have increased slightly (source: JLL), while in Ireland yields have increased by c. 15-25bps (source: C&W).

At 30 June 2023, the Group's portfolio was valued at £4,694m, a reduction of £413m (8%) since 31 December 2022. This movement was primarily due to disposals totalling £331m comprising the sales of Italie Deux (including Italik) and Croydon and the derecogntion of Highcross and O'Parinor. Adverse foreign exchange movement also reduced the portfolio value by £89m. Movements in the portfolio valuation are shown in the table below.

Movements in property valuation

* Includes the derecognition of Highcross and O'Parinor.

During the year, capital expenditure on the Managed portfolio was £18m principally reflecting costs directly related to the high leasing volume in terms of reconfiguration works and incentives across the portfolio; works to repurpose the former Debenhams units at Bullring where M&S recently began fitting out, and development costs at the on-site Ironworks residential scheme. Costs on the Group's remaining land bank schemes were modest at £3m. Table 11 of the Additional information analyses the spend between the creation of additional area and that relating to the enhancement of existing space.

Revaluation (losses)/gains

In the first half of 2023 we recognised a total net revaluation loss of £18m across the Group portfolio, comprising a loss of £44m in respect of the Managed portfolio partly offset by a gain of £26m in Value Retail. For the Managed portfolio, outward yield shift, principally in Ireland, caused half (£22m) of the revaluation loss of £44m. £16m related to reductions on development schemes and the recognition a £4m cladding cost allowance, with the remaining loss of £2m associated with lower ERVs at selected assets.

UK flagship destinations reported a revaluation deficit of £10m, £8m of which was at Union Square relating to an allowance for cladding costs and lower ERVs, the remaining deficit of £2m across the portfolio was due to expenditure directly relating to leasing such as unit reconfiguration and incentives. Excluding Union Square, ERVs grew by 0.8% in the first six months of the year.

France reported a revaluation gain of £2m, a £1m adverse yield shift impact offset by increased income.

Ireland recorded a revaluation loss of £19m, with average outward yield shift of 17bp resulting in a loss of £21m, this was partly offset by a £2m gain in relation to increased income from leasing activity. 

There was a revaluation loss of £16m on the Developments and other portfolio with the valuers reflecting weaker values in the office market which adversely impacted the residual valuation of The Goodsyard scheme.

Yields were unchanged across the Value Retail Villages, with the revaluation gain of £26m solely due to strong trading in 2023.

Further valuation analysis is included in Table 9 of the Additional information.

Like-for-like ERV*

* Calculated on a constant currency basis for properties owned throughout the relevant reporting period.

Like-for-like ERVs were broadly unchanged in the first half of the year with an overall increase of 0.1%. As reported in the valuation section, excluding Union Square, like-for-like ERV across the UK flagship portfolio was 0.8% higher driven by the strong leasing performance in 2023.

Property returns analysis

The Group's managed property portfolio generated a total property return of +1.4%, comprising an income return of +2.8% offset by a capital return of -1.4%. Incorporating the income and capital returns from the Value Retail portfolio, the Group's income return was +2.8% and the capital return -0.3%, to generate a total return of +2.5% (FY 22: -0.7%).

INVESTMENT IN JOINT VENTURES AND ASSOCIATES

Details of the Group's joint ventures and associates are shown in notes 12 and 13, respectively, to the interim financial statements. 

Reported Group

Joint ventures

During the year, our investment in joint ventures decreased by £144m to £1,198m (FY 22: £1,342m) where the most significant movements were £99m relating to the disposal of the Group's 50% interest in Croydon in April and the derecognition of the Group's 25% interest in O'Parinor in June. £40m of the reduction also related to a cash distributions paid to the Group.

Associates

Our investment in associates decreased by £125m to £1,172m (FY 22: £1,297m). £109m of the reduction was due to the disposal of Italie Deux in March with a further £43m relating to Value Retail distributions.

TRADE RECEIVABLES

On a proportionally consolidated basis, gross trade (tenant) receivables totalled £61.0m at 30 June 2023 (FY 22: £74.1m) against which a provision of £20.4m (FY 22: £32.3m) has been applied. This provision represents 44% (FY 22: 60%) of trade receivables of £45.9m (FY 22: £53.9m) after excluding tenant deposits, guarantees and VAT. The reduction in the provision percentage is principally due to the disposal of Croydon. See note 14 to the interim financial statements for further information.

FINANCING AND CASH FLOW

Financing strategy

Our financing strategy is to borrow predominantly on an unsecured basis. Secured borrowings are occasionally used, mainly in conjunction with joint venture partners. Value Retail also uses predominantly secured debt in its financing strategy. All secured debt is non-recourse to the rest of the Group.

The Group's borrowings are arranged to maintain access to short term liquidity and long term financing. Short term liquidity is principally through syndicated revolving credit facilities. Long term debt comprises the Group's fixed rate unsecured bonds and private placement notes. At 30 June 2023, the Group also had secured borrowings in the Dundrum joint venture and Value Retail. Acquisitions may initially be financed using short term funds before being refinanced with longer term funding depending on the Group's financing position in terms of maturities, future commitments or disposals, and market conditions.

Derivative financial instruments are used to manage exposure to fluctuations in foreign currency exchange rates and interest rates but are not employed for speculative purposes.

The Board regularly reviews the Group's financing strategy and approves financing guidelines against which it monitors the Group's capital structure. Where there is any non-compliance with the guidelines, this should not be for an extended period but the Group always strives to maintain an investment grade credit rating. The key financing metrics are set out below.

Key financial metrics 

a Headline: Loan excludes Value Retail net debt and Value includes Value Retail net assets.

b Full proportional consolidation of Value Retail ('VR'): Loan includes Group's share of VR net debt and Value includes share of VR's values.

c Applicable to bonds maturing in 2025 and 2027 (as set out in note 15 to the interim financial statements).

Credit ratings

Following the year end results and in recognition of the Group's strengthened financial position, Fitch's senior unsecured investment grade credit rating was re-affirmed as BBB+. Moody's rating of Baa3 was retained.

Outlooks from both rating agencies were changed from negative to stable in 2022 following the recovery from the COVID-19 pandemic.

Leverage

At 30 June 2023, the Group's gearing was 52% (FY 22: 68%) and Headline loan to value ratio was 33% (FY 22: 39%). 

The Group's share of net debt in Value Retail totalled £698m (FY 22: £675m). Fully proportionally consolidating Value Retail's net debt, the Group's loan to value ratio was 43% (FY 22: 47%).

Calculations for loan to value and gearing are set out in Tables 18 and 19 of the Additional information, respectively.

Borrowings and covenants

The terms of the Group's unsecured borrowings contain a number of covenants which provide protection to the lenders and bondholders as set out in the Key financial metrics table above. At 30 June 2023, the Group had significant headroom against these metrics.

In addition, Dundrum and Value Retail have secured debt facilities which include covenants specific to those properties, including covenants for loan to value and interest cover, however, there is no recourse to the Group.

Managing foreign exchange exposure

The Group's exposure to foreign exchange translation differences on euro-denominated assets is managed through a combination of euro borrowings and derivatives. At 30 June 2023, the value of euro-denominated liabilities as a proportion of the value of euro-denominated assets was 90% compared with 91% at the beginning of the year. Interest on euro-denominated debt also acts as a partial hedge against exchange differences arising on net income from our overseas operations. Sterling strengthened against the euro during the year by 3%.

CASH FLOW AND NET DEBT

Movement in proportionally consolidated net debt (£m) 

http://www.rns-pdf.londonstockexchange.com/rns/3273H_1-2023-7-26.pdf

On a proportionally consolidated basis, in the first half of 2023 net debt decreased by 24% to £1,318m (FY 22: £1,732m). At 30 June 2023, net debt comprised loans of £1,879m and the fair value of currency swaps of £2m, less cash and cash equivalents of £563m, of which £479m is held by the Reported Group. Disposals during the year generated net cash proceeds of £215m with £125m of secured borrowings removed with the derecognition of Highcross and O'Parinor. Further reductions were due to cash generated from operations of £60m, £43m of distributions received from Value Retail and favourable foreign exchange and other movements of £26m. These items were partly offset by net interest of £39m and capital expenditure in the first half of the year of £16m.

Further information on the movement in proportionally consolidated net debt is in Table 14 of the Additional information.

Liquidity

The Group's liquidity at 30 June 2023, calculated on a proportionally consolidated basis comprising cash of £563m and unutilised committed facilities of £654m, was £1,217m, £221m higher than at the beginning of the year. This was primarily due to the retention of cash proceeds from disposals.

During the first six months of the year, we obtained lender consent to extend £605m of the Group's revolving credit facilities by one year such that they now mature in 2026 as shown on the chart below.

Debt and facility profile

Maturity profile of loans and facilities (£m)

Proportionally consolidated

http://www.rns-pdf.londonstockexchange.com/rns/3273H_2-2023-7-26.pdf

The Group's weighted average maturity is 2.9 years (FY 22: 3.4 years). The maturity of 2024 private placements are covered by existing cash with the Group having no further unsecured debt maturities until 2025.

Maturity analysis of loans

* Debit balance comprises unamortised fees for RCFs against which no funds had been drawn at the period ends.

Risks and uncertainties

The Board continually reviews and monitors the principal risks and uncertainties which could have a material effect on the Group's results. The Directors have considered the principal risks and uncertainties disclosed in the Annual Report for the year ended 31 December 2022, which are summarised below, and do not consider these to have changed significantly. Full disclosure of these risks, including the factors which mitigate them, is set out within the Risk and uncertainties section of the Annual Report 2022.

Independent review report to Hammerson plc

Report on the condensed consolidated interim financial statements

Our conclusion

We have reviewed Hammerson plc's condensed consolidated interim financial statements (the 'interim financial statements') in the Half-year Report of Hammerson plc for the six month period ended 30 June 2023 (the 'period').

Based on our review, nothing has come to our attention that causes us to believe that the interim financial statements are not prepared, in all material respects, in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting', International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union, the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority, and the Transparency (Directive 2004/109/EC) Regulations 2007.

The interim financial statements comprise:

· the Consolidated Balance Sheet as at 30 June 2023;

· the Consolidated Income Statement and Consolidated Statement of Comprehensive Income for the period then ended;

· the Consolidated Cash Flow Statement for the period then ended;

· the Consolidated Statement of Changes in Equity for the period then ended; and

· the explanatory notes to the interim financial statements.

The interim financial statements included in the Half-year Report of Hammerson plc have been prepared in accordance with UK adopted International Accounting Standard 34, 'Interim Financial Reporting', International Accounting Standard 34, 'Interim Financial Reporting' as adopted by the European Union, the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority, and the Transparency (Directive 2004/109/EC) Regulations 2007.

Basis for conclusion

We conducted our review in accordance with International Standard on Review Engagements (UK) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Financial Reporting Council for use in the United Kingdom ("ISRE (UK) 2410"). A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK) and, consequently, does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

We have read the other information contained in the Half-year Report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial statements.

Conclusions relating to going concern

Based on our review procedures, which are less extensive than those performed in an audit as described in the Basis for conclusion section of this report, nothing has come to our attention to suggest that the Directors have inappropriately adopted the going concern basis of accounting or that the Directors have identified material uncertainties relating to going concern that are not appropriately disclosed. This conclusion is based on the review procedures performed in accordance with ISRE (UK) 2410. However, future events or conditions may cause the Group to cease to continue as a going concern.

Responsibilities for the interim financial statements and the review

Our responsibilities and those of the Directors

The Half-year Report, including the interim financial statements, is the responsibility of, and has been approved by the Directors. The Directors are responsible for preparing the Half-year Report in accordance with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007. In preparing the Half-year Report, including the interim financial statements, the Directors are responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Group or to cease operations, or have no realistic alternative but to do so.

Our responsibility is to express a conclusion on the interim financial statements in the Half-year Report based on our review. Our conclusion, including our Conclusions relating to going concern, is based on procedures that are less extensive than audit procedures, as described in the Basis for conclusion paragraph of this report. This report, including the conclusion, has been prepared for and only for the Company for the purpose of complying with the Disclosure Guidance and Transparency Rules sourcebook of the United Kingdom's Financial Conduct Authority and in accordance with the Transparency (Directive 2004/109/EC) Regulations 2007 and for no other purpose. We do not, in giving this conclusion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

PricewaterhouseCoopers LLP

Chartered Accountants

London

26 July 2023

statement OF DIRECTORS' RESPONSIBILITIES

The Directors' confirm that, to the best of their knowledge, the condensed consolidated interim financial statements (the 'interim financial statements') in the Half-year Report have been prepared in accordance with UK adopted International Accounting Standard 34 (IAS 34), IAS 34 as adopted by the European Union, the Transparency (Directive 2004/109/EC) Regulations 2007, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and that the Half-year Report includes a fair review of the information required by the Disclosure Guidance and Transparency Rules (DTR) 4.2.7R and DTR 4.2.8R, namely:

The interim financial statements comprise:

· An indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

· Any material related party transactions that have taken place in the first six months of the financial year and any material changes in the related party transactions described in the Company's last Annual Report.

A list of the current Directors is maintained on the Hammerson plc website: www.hammerson.com. The maintenance and integrity of the Hammerson plc website is the responsibility of the Directors. The work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that might have occurred to the interim financial statements since they were initially presented on the website.

Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Signed on behalf of the Board on 26 July 2023

Consolidated income statement

† Figures for the six months ended 30 June 2022 have been restated to reflect the IFRIC Decision on Concessions with further information provided in notes 1B and 5.

a Includes a net credit of £1.7m (six months ended 30 June 2022: nil) relating to provisions for impairment of trade (tenant) receivables as set out in note 14.

b Other net gains comprise gains/(losses) and recycled exchange gains arising on disposals and changes in fair value of other investments. Such items are set out in more detail in note 2.

c The comparative earnings per share figures have been restated to incorporate the bonus element of scrip dividends. Further details are provided in note 10B.

Consolidated statement of COMPREHENSIVE income

a Relates to the sale of Italie Deux and Italik and derecognition of O'Parinor as described in note 8.

b All items within total other comprehensive income/(loss) relate to continuing operations.

Consolidated balance sheet

As at 30 June 2023

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Six months ended 30 June 2023