FINANCIAL ANALYSIS FOR

MANAGERS

Module Leader :BijanHesni

Module code :7ACCNO18W

ShailjaTibrewal w1661954

Lovesh Jain w16647585

Vrinda Goel w1656173

Word count 2930

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Contents
Executive Summary ...................................................................................................................................................3
Introduction ..................................................................................................................................................................4
Hammerson Overview ..............................................................................................................................................5
British Land Overview..............................................................................................................................................7
Segmentation Analysis .............................................................................................................................................8
Product Contribution ............................................................................................................................................8
Hammerson .........................................................................................................................................................8
British Land PLC ..............................................................................................................................................9
Region contribution ................................................................................................................................................ 11
Hammerson and British Land Financial Analysis .................................................................................... 14
Growth Ratios ...................................................................................................................................................... 14
Profitability Ratios ............................................................................................................................................. 16
Operating Profit .............................................................................................................................................. 16
Return on equity ............................................................................................................................................. 17
Return on Capital Employed ...................................................................................................................... 17
Efficiency Ratios ..................................................................................................................................................... 18
Asset Turnover .................................................................................................................................................... 18
Return on Asset ................................................................................................................................................... 19
Gearing Ratios .......................................................................................................................................................... 20
Debt/Equity Ratio ............................................................................................................................................... 20
Debt/Debt+Equity............................................................................................................................................... 21
Interest Cover Ratio ........................................................................................................................................... 22
Liquidity Ratios........................................................................................................................................................ 23
Current Ratio ........................................................................................................................................................ 23
Investment Ratios .................................................................................................................................................... 24
Earning Yield and Price Earnings Ratio ...................................................................................................... 24
Dividends Yeilds and Dividends Cover ...................................................................................................... 25
Market Capitalization and Market/Book Ratio ......................................................................................... 27
Cash Flow Ratios ..................................................................................................................................................... 28
Conclusion ................................................................................................................................................................. 29
References.................................................................................................................................................................. 31
Appendix .................................................................................................................................................................... 32

2
Executive Summary

This report aims to analyze the financial position of Hammerson

PLC for the year 2016 and the company’s performance with its key
competitor, British Land. The report provides an assessment of the
liquidity, efficiency, profitability and investment ratios from the
financial statements using figures and graphs. The report briefly
explains about the real estate industry and also includes the
background overview of both the companies.

3
 Introduction

About Real Estate Industry

The real estate industry consists of land and buildings acquired as

gift, abandoned property, in a deed, lost or in a conquest form. This
industry includes the profession of buying, selling or renting
properties or buildings maybe in the form of malls, hotels, retails
stores, warehouses or maybe as garages or medical centers( Worzala
Elaine and Bernasek Alexandra 1996).The real estate sector consists of
residential and commercial properties.

The commercial properties may be for the purpose of construction

of retail, office, leisure or healthcare whereas residential property
maybe for the purpose of flats, duplex, family houses, mobile
homes, apartments or tents.

4
 Hammerson Overview

Industry: Real Estate

Rank in Forbes public companies: 1315(forbes, 2017)
Website: http://www.hammerson.com/
Headquarters: London

Hammerson is one of the leading UK commercial property

company which provides attractive places to work, live and shop.
The headquarters of the company are in London, UK and it was
found in 1942 by Lewis W.Hammerson deals in shopping centers,
retail parks, and premium outlets and has 58 vibrant properties in
UK, Ireland and France and has 23 prime shopping centers in the
UK, Ireland and France. Also the company has 17 convenient retail
parks, 20 premium outlets across UK(Hammerson,2016).
The company is an owner, manager and developer of retail
destinations in Europe.

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The company has got a positive sustainability commitment which
says to create retail destinations that delivers positive impacts
economically, socially and environmentally.

Hammerson Key Competitors

- UNIBAIL – RODAMCO SE

- LAND SECURITIES GROUP PLC

- BRITISH LAND COMPANY PUBLIC LIMITED

COMPANY

6
 British Land Overview

Having its headquarters in London, the British Land Company

PLC is one of the largest property development and investment
companies the United Kingdom(britishland,2017). It is listed in the
London stock Exchange. The British Land company was found in
1856 by Sir John Ritblat (Honorary President), John Gildersleeve
(Chairman), Chris Grigg (Chief Executive).

The firm is involved ina few big projects namely, 122 Leadenhall
Street, 4Kingdom Street at Paddington, Harmsworth Quays and
Survey Quays Shopping Centre.

7
 Segmentation Analysis

Product Contribution

Hammerson

Hammerson’s Contribution Hammerson’s Contribution

In 2016 in 2015

HAMMERSON PRODUCT HAMMERSON PRODUCT

PORTFOLIO IN 2016 PORTFOLIO IN 2015
Other Other
Developme Developme
nts nts
8% 8%
Retail Shopping Shopping
Parks Centres Retail
Centres
23% 40% Parks
40%
28%

Premium Premium
Outlets Outlets
29% 24%

The product portfolio of Hammerson mainly includes investments

in shopping centres, premium outlets, retail parks, and other
developments (Hammerson, 2015). The company’s portfolio value
was £10.0 billion in 2016 as compared to £9.1 billion in the

8
previous year. There were significant changes in the product
contribution with an increase in premium outlets by 5% and
decrease in retail parks by 5%. Premium outlets led to capital
growth and enhance their customers’ experience by providing
access to discounted international fashion and luxury brands.

British Land PLC

British Land’s Contribution British Land’s Contribution

in 2016 in 2017

BRITISH LAND PRODUCT BRITISH LAND PRODUCT

PORTFOLIO IN 2016 PORTFOLIO IN 2017
Other Other
Developme Developme
nts nts
4% 0% 3%

Retail &
Leisure
Retail & 48%
Office &
Leisure Office &
Residential
51% Residential
45%
49%

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The product portfolio of British Land is divided into many
categories: leisure, office and residential and other developments.
The company focuses on high quality retail and offices to meet the
enduring desires of customers’ changing lifestyle. Retail and
leisure sector decreased by 3% as there was increment in stamp
duty for commercial property, whereas office and residential sector
inclined by 4%. The value of office and residential sector was up
by 11.8% to £8.5 billion, due to high demand from global and
domestic investors.

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 Region contribution
HAMMERSON
LONDON BIRMINGHAM
FRANCE IRELAND
CENTRAL AND EASTERN EUROPE
0%

27%
40%

20%
13%

Hammerson is a development and investment firm in London and

various country of Europe. Hammerson’s GDP growth in 2016 was
by 4%. Sales in 2016 were 251.3 which in 2015 were 236.0. The
reason for GDP growth was from redesigning the existing projects
and launching new project in developing countries.
Reason for growth of in sales sector was targeting developing
countries for new project and redesigning the old one. Few of the
project started in 2016 were Westquay leisure extension which has
20 restaurants, cinema, bowling, New international brands were
introduced in France which led to growth of 3.1% and in central
and eastern Europe. Grand central shopping center was bought in
Birmingham, which is the second largest city in UK, for 335
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million (symth, 2016). The company has taken a smart move by
targeting Ireland which is one of the developing country and its
contribution to Hammerson’s ERV growth is 9.0%.

BRITISHLAND COMPANY

other cities
30%
London
60%
scotland
10%

British land is United Kingdom biggest development and

investment firm. The company underlying profit for 2017 is 7.4%,
company’s 4 billion and 58% of the portfolio in UK.
British land main strategy is to connect with people and provide
them better service. 90 percent of parking by them is free. 58
percent property is near cross rail stations hence easy access for
people.
Project owned by British land in London are Broad gate near
Liverpool Street, Regents place in Euston, Paddington central
which is 15 minutes walk from Paddington, Clarges Mayfair,

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Ealing Broadway in greater London. In other part of UK
Meadowhall in South Yorkshire, Whiteley in Hampshire, Old
Market in Hereford, Drake Circus in the center of Plymouth, Fort
Kinnaird and Glasgow Fort in Scotland, Teesside Cleveland,
Broughton Chester ,Nugent ORPINGTON, Mayflower Essex

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 Hammerson and British Land Financial
Analysis

Growth Ratios

Sales Growth Operating Profit Growth

0
0.07
-0.1 Hammerson British Land
0.06
-0.2
0.05 -0.3
0.04 -0.4
0.03 -0.5
0.02 -0.6
0.01 -0.7
0 -0.8
Hammerson British Land -0.9
-0.01
2015 2016 2017
2015 2016 2017

Hammerson has shown an Pre-Tax Profit Growth

increase in Sales Growth of 0

-0.1 Hammerson British Land
6.36 percent (£83 million) -0.2
-0.3
from 2015 to 2016. This -0.4
-0.5
increase is mainly due to -0.6
-0.7
premium outlets of the -0.8
-0.9

2015 2016 2017

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company which comprises of large scale shopping centres
and luxury premium retail outlets. British Land has shown
a negative Sales Growth of -0.17 percent due to decrease in
revenue of the company, contingent rents and lease
incentives.
Operating Profit Growth for Hammerson has a negative
declining graph to -47.71 percent from 2015 to 2016. This
is mainly due to losses in the valuation of the property as
well the rental income. The company has high expansion
expenditures which further leads to this decrease. British
Land’s Operating Profit Growth is also negative to -81.51%
from 2016 to 2017 due to losses in the valuation movement
of the properties in the UK due to incompletion of the
contract.
Pre-Tax Profit Growth for Hammerson has negative value
of -55.88% from 2015 to 2016 while that of British Land is
-85.35%. This negative impact is due to decline in
valuation of the properties for both Hammerson and British
Land. In British Land, it has a number of financial expenses
as well as to repay loans.

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 Profitability Ratios
Operating Profit

The operating income margin for

Hammerson has decreased by almost Operating Profit Margin
half compared to last year, but
400
company income has increased which
350
indicates that the firm is still in
300
position to operate with earning 250
profit. British land operating profit 200

has drastically decreased from 150

238.31in 2016 to 83 in 2017, the 100

main reason for such decrease is cost 50

of current service decreased from the 0

Hammerson British Land
profit and others retrenchment is also 2015 2016 2017

charged. The company sales and cost

has not affected much since last year
Still the operating profit has shown a
Makeable dip.

16
 Return on equity

Equity for Hammerson has decreased from Return on Equity

£409.5 to 306.4 million and the reason for the 16

14
decrement is fall in net profit after tax slight
12
and rise in equity. British land return on equity 10
8
has fallen down because the net profit after tax 6
4
has decreased tremendously and equity has
2
increased comparatively more and such 0
Hammerson British Land
situation can cause hindrance in the future 2015 2016 2017
working of the company.

Return on Capital Employed

Hammerson and British land both returns on
Return on Capital Employed
capital employed have decreased. Hammerson
10
roce in 2015 was 9.63% and in 2016 was
9
4.74% and British land roce in 2015 was 8
7
10.00% and in 2016 was 1.59%. Roce 6
5
indicates how much a company earns
4
excluding taxes; this helps a firm to analyze 3
2
the amount of profit received from the capital 1
0
invested. Hammerson long-term debts and Hammerson British Land
equity both have fluctuated compared to Last 2015 2016 2017

year which led to decrease in returns whereas

in British land long-term debts have decreased
and liability has increased which led to decreased
return.
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 Efficiency Ratios

Asset Turnover
Asset Turnover
In this case of Hammerson, where asset
0.04
turnover ratio remains same as 0.03, 0.035
0.03
there is no change in the way the assets
0.025
and liabilities are being used since the 0.02
0.015
company aims to maximize efficiency
0.01
and deliver asset management strategy. 0.005
0
Similar to this were the efficiency ratio Hammerson British Land

for British Land is also the same 0.04, 2015 2016 2017

since they used there existing assets instead of investing in new assets.

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 Return on Asset
Return on asset for Hammerson, where the
ratio has decreased from 0.08 to 0.03 Return on Asset

means that the company is not efficient in 0.35

using its assets. Hence the company is not 0.3

0.25
efficient in the investment made in
0.2
premium outlets like VIA outlets and 0.15

value retail outlets. 0.1

0.05
Also in the case of British Land where the
0
Hammerson British Land
company’s return on investment ratio has
2015 2016 2017
decreased from 0.35 to 0.01 means that the
company is not using its investment efficiently.

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 Gearing Ratios

Debt/Equity Ratio
Hammerson debt ratio has increased by
Debt/Equity
8 percent compared to last year but debt
1.8
and equity ratio have decreased by 15
1.6
percent. The firm borrows on an 1.4
1.2
unsecure basis on the power of its 1
0.8
agreement to continue operational 0.6
0.4
lethalness. Most of the long-term loans
0.2
are fixed rate unsecured bonds of the 0
Hammerson British Land
groups. The companies increased debt 2015 2016 2017

ratios indicates the firm debts are high

but decreased debt plus equity ratio indicate
that the firm has enough equity to cover its debt.

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 Debt/Debt+Equity
British land debt ratio and debt plus equity
Debt/Debt+Equity
ratio both have decreased as compared to
previous year. Debt ratio in 2016 was 44 4.5
4
percent now decreased to 30 percent and 3.5
3
debt-equity ratio has decreased to 13 2.5
2
percent. The decline shows the company
1.5
has higher income returns against the risk. 1
0.5
This indicates the firm is capable to pay 0
Hammerson British Land
debts in unavoidable current situations or
2015 2016 2017
in future. The low debt-equity ratio shows
the company has a competitive advantage
and can be used as an opportunity when need, rental income, assets and the
scale of the business can yield better finance for debts in future. British land
has a ring fence structure agreement; in joint venture they are not liable for
any repayment on loans and tenable on relevant assets.

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 Interest Cover Ratio

Hammerson interest cover ratio is 5.76 which

Interest Cover Ratio
are considered proficient. Interest cover ratio
6
basically measures how many times a company
5
can repay its current interest from their earning. 4

The margin of safety a company has to repay its 3

2
interest to continue its business in future.
1
British land company interest ratio has also 0
Hammerson British Land
increased to 4.3. the high-income ratio is
2015 2016 2017
considered stable for the company and helps the
company to pay off debts and make better future investment planning.
Both the companies have a smart future plan which helps to control it and
will take loan accordingly, as the loan taken has to be repaid in future with
interest. If both companies had low-interest coverage that would have
indicated that there are more chances of a company to seek for funds
internally and can be used for better purposes like for assets investment or
held as reserves and it also indicated the debt of the company is high
comparatively.

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 Liquidity Ratios

Current Ratio
Current Ratio
The current ratio of both the companies has
1.6
decreased as compared to last year ratios. 1.4
Hammerson has decreased by 39% whereas 1.2
1
British land has decreased by 31%. 0.8
0.6
Hammerson makes sure the firm has enough 0.4
maturity profile and maintain short-term 0.2
0
liquidity which can be paid off easily and Hammerson British Land

the business can function smoothly, loans 2015 2016 2017

are taken from banks and financial institutions and they maintain good
working relationship with them. Current assets are more than current
liability which means the firms are in a position to pay off their short-term
debt.

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 Investment Ratios
Earning Yield and Price Earnings Ratio

Earning Yield Price Earning (PE) Ratio

18 35
16 30
14
25
12
10 20
8 15
6
10
4
2 5
0 0
Hammerson British Land Hammerson British Land

2015 2016 2017 2015 2016 2017

Hammerson has a negative Earning Yield from 2016 to 2015. This is mainly
due to high percentage of reduction in earnings per share (EPS) from 92.8
pence in 2015 to 40.2 pence in 2016. Although the share price of
Hammerson also decreased, but the fall in EPS is more than of share price.
This is also an indicator of downfall in the cash flow. In British Land, there
is also a decrease in earning yield from 2017 to 2016. Value of EPS has
diminished to 15 percent of the value to that in 2016 (131.2 pence to 18.8
pence). This is due to reduction in net profit of the company from 2016 to
2017.

24
PE ratio for Hammerson has increased from 6.78% in 2015 to 14.84% 2016,
since it is inversely proportional to EPS of a company and EPS for
Hammerson is decreasing from 92.8 pence to 40.2 pence. Higher PE ratio
means that the investors are expecting higher earnings growth in the future.
There is a five-fold increase in PE ratio of British Land from 2016 to 2017
(6.12% to 32.82%). Although, there is a decrease in share price of the
company as well as EPS, but there is higher percentage of reduction in EPS,
leading to increase in PE ratio due to its inverse relationship. Higher PE ratio
means that the number of investors are still increasing for the company and
expecting higher earnings growth in the future.

Dividends Yeilds and Dividends Cover

Dividends Yield Dividends Cover

5
5
4
4
3
3

2 2

1 1

0 0
Hammerson British Land Hammerson British Land

2015 2016 2017 2015 2016 2017

The Dividends Yield for Hammerson is increasing from 3.5% in 2015 to 4%

in 2016 due to increase in dividend price per share (22.3 pence in 2015 to 24
pence in 2016) and decrease in share price of the company. This means that

25
the investors will get higher dividends for the price of the stocks of the
company. British Land also has rising Dividends Yield ratio since it is
directly proportional to dividends per share, from 3.5% in 2016 to 4.7% in
2017. This means that the company has generated enough funds to repay the
dividends to its share-holders. This increases the per capita income of the
share-holders.
Dividends Cover for Hammerson is decreasing from 4.16% in 2015 to
1.68% in 2016 due to fall in EPS. It indicates that there is a reduction in the
capacity of the company to give dividends payout to the share-holders. In
case of British Land, there is huge downfall in the dividend cover ratio from
4.63% in 2016 to 0.64% in 2017 due to poor earnings in the period 2016-17.
The payout ratio has decreased leading to lower returns to its share-holders.

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 Market Capitalization and Market/Book Ratio

Market Capitalisation Market/Book Ratio

9000 1.8
8000 1.6
7000 1.4
6000 1.2
5000 1
4000 0.8
3000 0.6
2000 0.4
1000 0.2
0 0
Hammerson British Land Hammerson British Land

2015 2016 2017 2015 2016 2017

Market Capitalization of Hammerson is decreasing from 4932.76 in 2015 to

4706.39 in 2016. Although, there is a slight change but this change is due to
decrease in share price of the company. This means that there is reduction in
the overall stocks value of the company. British Land has a downfall in
Market Capitalization from 8235.88 in 2016 to 6348.93 in 2017. This
change is due to slowdown in performance of the company.

Market/Book ratio for Hammerson is decreasing from 1.61% in 2015 to

1.52% in 2016. This means that there is reduction in the market value of the
company. This decline is due to falling share prices of the company. British
Land has decreasing Market/Book ratio from1.63% in 2016 to 1.25% in
2017. It is an important ratio for shareholders looking to invest in the
company. Since the ratio value is more than 1, the share price is over-valued
and the company has ability to generate revenues.

27
 Cash Flow Ratios

Cash Flow Solvency Ratio Cash Flow Return on Assest

0.5 0.3
0.45
0.4 0.25
0.35
0.2
0.3
0.25 0.15
0.2
0.15 0.1
0.1
0.05
0.05
0 0
Hammerson British Land Hammerson British Land

2015 2016 2017 2015 2016 2017

Ratios for the companies are mutually low, as reflected in the balance sheet
companies are managing their debt smartly and are able to repay debts and
interest coverage when needed. Such figure shows that the company has
high profits and low level of depreciation. Both the company can stay
solvent in near future.
Hammerson cash flow return on asset has decreased and which indicates the
company is not using its assets efficiently and their current liabilities are
more than their current cash income whereas British land cash flow asset
return has increased showing the company is in position to pay off its
liability from the cash available.

28
 Conclusion
A good ratio has a benchmark against which it is compared.
Financial ratio has been used to analyze the data of both the firms.
Growth ratio of the both the firm indicated that Hammerson sales
growth increased by6.36% whereas British land growth went to
negative (-19.0).The operating profit growth and pre tax growth for
both the firms went low, Due to which even the profitability of the
firm was disappointing. Returns on equity and capital employed
were also low as both the firms long term debts decreased and
equity was increased.
Talking about the liquidity of the firm current ratio for the firm
was less compared to the previous year ratio which says the
company has enough liquid funds available to clear short term
debts.
Hammerson performed more efficiently than British land as the
return on assets for Hammerson decreased by 4 percent whereas
for British land it was 31 percent. Debt and equity ratio point out
that both the company are able to clear their debt, equity and
interested coverage. Investment ratio tells whether the shareholders
should invest in the company or not. It also tell the payout return
on the dividends of the company as well as market price of the
outstanding shares of the company. We have compared Looking at
the companies; Hammerson has done better as compared to British

29
Land in some financial areas. Hammerson has a better performance
and has outperformed British Land.

30
 References

 Britishland(2017) Annual Report [online]. Available

from:<https://bfd4f2dde63e9e620a17-
5cad31df697fe43d78c0459eba68b1d4.ssl.cf3.rackcdn.com/w
p-content/uploads/2017/03/1111DN-ham026_ara_2016_web-
original.pdf> [Date accessed 18 November 2016].

 Forbes Welcome (2017). Forbes.com. Available from

https://www.forbes.com/companies/hammerson/ [Accessed
23 November 2017].

 Hammerson(2016) Annual Report [online]. Available

from:<https://bfd4f2dde63e9e620a17-
5cad31df697fe43d78c0459eba68b1d4.ssl.cf3.rackcdn.com/w
p-content/uploads/2017/03/1111DN-ham026_ara_2016_web-
original.pdf> [Date accessed 22 October 2017].

 http://www.britishland.com/investors/results-and-
presentations/results/2017 [Accessed 12 November 2017].

 https://www.hammerson.com/investors/reports/annual-
report-2015/ [Accessed 02 November 2017].

 SMYTH, S. (2016). Hammerson Acquires $477 Million U.K.

Mall, Plans 50% Stake Salepdf>
 Worzala Elaine and Bernasek Alexandra (1996) European
Economic Integration and Commercial Real Estate Markets:
An Analysis of Trends in Market Determinants. Journal of
Real Estate Research: 1996, Vol. 11, No. 2, pp. 159-181.

31
 Appendix

Appendix 1: Hammerson and British Land Ratio Analysis

32
Appendix 2: Hammerson Income Statement

Appendix 3: Hammerson Balance Sheet

33
34
Appendix 4: Hammerson Cash Flow Statement

35
Appendix 5: Hammerson Share Price

36
Appendix 6: British Land Income Statement

37
Appendix 7: British Land Balance Sheet

38
Appendix 8: British Land Cash Flow Statement

39
Appendix 9: British Land Share Price

40