Disposal Programme and Portfolio Optimisation
· Disposal update: Total disposals of £456 million; 90% of £500 million target for 2019 achieved
o Contracts exchanged for sale of 75% of Italie Deux and Italik extension for £423 million, representing a net initial yield of 4.1%
o Progressing additional transactions on asset sales across the portfolio
o Committed to the sale of UK retail parks over the medium term; disposals of £33m in H1 2019
· Debt reduction: Pro forma net debt reduced to £3.1bn, gearing 61%, headline LTV 37%
· City Quarters: Planning application submitted for Martineau Galleries, Birmingham, the first major City Quarters scheme; revised mixed-use application submitted for The Goodsyard, Shoreditch, London
Key Financials
· EPS & dividend: Adjusted EPS of 14.0p (-7.3%) impacted by the on-going disposal programme; interim dividend of 11.1p unchanged
· Lfl NRI: Group -0.1%; UK flagship destinations -6.8% impacted by CVAs and administrations; premium outlets +11.1%
· NAVPS & portfolio valuations: H1 NAVPS of £6.85 (-7.2%); Low transaction volumes and a weak UK retail market impacted portfolio valuations. The Group produced a capital return of -4.4%; UK flagships -9.1%; Premium outlets +4.5%; French flagships -3.9%; Ireland flagships -3.2% and retail parks -10.9%
Operational Update
· Repurposing of space: 92% of new UK flagship leases signed to non-fashion and F&B brands
· Occupancy: High level of Group occupancy maintained at 96.7%. UK flagship occupancy 96.4%; Ireland 99.5%; France 97.0% and retail parks 96.7%
· Tenant restructuring: UK flagship LFL NRI impact -1.8% in H1 2019 (H1 2018 -0.9%)
o 45 units across UK flagships affected by tenant restructuring in H1 2019, 84% still trading and annualised rent loss of £1.5m
o Over the past 18 months, 49% of UK & Ireland stores impacted by CVAs have been
Category A (no reduction to rent), compared to 37% for the wider market
· Leasing: Total UK rent from flagship leasing -1% vs previous passing rent: high street fashion -25%; consumer brands, aspirational fashion and F&B +27%
· Footfall: Positive footfall growth across all territories with outperformance of the national footfall index for both UK and French flagships
o UK flagship footfall +0.5%; French flagships +0.5%; and Ireland flagships +0.6%
· Premium outlets: Sustained exceptional performance with premium outlets now accounting for 27% of the Group’s property portfolio
o Continued uplift in brand sales: Value Retail +11% and VIA Outlets +10% vs H1 2018
o Accelerated footfall growth: Value Retail +7% and VIA Outlets +8% against H1 2018
· City Quarters: Planning application submitted for Martineau Galleries, Birmingham, the first major City Quarters scheme; revised mixed-use application submitted for The Goodsyard, Shoreditch, London
· Net Positive: Further progress towards 2030 target: Energy usage fell by14% following investment in energy efficient technology, delivering a 13% reduction in carbon emissions across the portfolio
David Atkins, Chief Executive of Hammerson, said: “The UK retail landscape is undoubtedly challenging and traditional high street fashion is under pressure. However, our focus on shifting our line-up towards categories with greater customer appeal and rental growth potential has resulted in over 90% of new leasing to leading consumer and F&B brands. We’ve seen a stronger performance in Ireland and France, alongside continued exceptional results from premium outlets which demonstrates the benefits of our diversified portfolio.
“Our absolute priority remains to reduce debt. We stated our intention to achieve over £500m of disposals in 2019 and even in this tough environment where deals are taking longer to transact, we are now most of the way there. We will continue to pursue additional sales throughout 2019 and into 2020 to further strengthen our balance sheet.”
