Hammerson plc · LSE:HMSO
Hammerson — H1 2010 Earnings Presentation
42 slides from Hammerson's earnings presentation, Aug 2, 2010
Slide 1: 2010 Half-Year Results
2010 Half-Year Results 2 August 2010
Slide 2: Agenda
Agenda Introduction and overview Financial results Investment markets Operational review Positioning for growth Conclusion 2 2
Slide 3: Our Approach
Our Approach Actions Outcome Asset Management: Focus on income growth Creation of customer teams Adding new skills Best owner-manager and developer of retail and office properties Portfolio Management: Capital recycling Asset outperformance Development Innovative transactions Attractive shareholder
Slide 4: Portfolio Management
Portfolio Management Disposals Acquisitions Developments Espace Saint Quentin Leadenhall Court Brent Cross Cricklewood Exchange Tower Battery Retail Park Les Terrasses du Port 4 We sold a 75% stake in Espace St Quentin to Allianz, whilst keeping the asset management role We sold Exchange Tower, real
Slide 5: Delivering on Our Strategy
Delivering on Our Strategy Intensive asset management Improved growth prospects Transactions release £161 million Pro-forma gearing 60% Advanced developments 5 We are moving our business to be more aligned with our customers. In the UK, we’ve restructured our teams and introduced new skills and work
Slide 6: Strong Results
Strong Results Six months to Six months to 30 June 2010 30 June 2009 Adjusted profit before tax £70.2m £65.6m Adjusted earnings per share 9.7p 11.0p Interim dividend per share 7.15p 6.95p 30 June 2010 31 Dec 2009 Adjusted NAV per share, EPRA basis £4.54 £4.21 Gearing 67% 72% 6 Here are the headlines
Slide 7: Financial Results
Financial Results 7
Slide 8: Like-for-Like Income Growth
Like-for-Like Income Growth £ million Six months to 30 June 2010 2009 Like-for-Like Gross Rents Properties owned throughout 132.5 126.2 UK Shopping centres 0.4% Acquisitions 3.8 (0.4) UK Retail parks 5.7% UK Offices 1.9% Developments 3.8 0.4 French retail 1.3% Properties sold (0.1) 28.6 Total 1.6% E
Slide 9: Reduced Vacancy
Reduced Vacancy 30 June 2010 31 Dec 2009 30 June 2009 UK Retail 4.4% 5.5% 6.4% UK Offices 5.1% 8.4% 20.4% French Retail 2.1% 1.5% 2.2% Total 3.8% 4.8% 7.4% 9 At the end of June the vacancy level was just below 4%. A year ago overall voids were 7.4%. At that time, this vacancy represented a loss of i
Slide 10: Growth in Underlying Profit
Growth in Underlying Profit £ million Six months to 30 June 2010 2009 Operating profit 124.8 137.1 Interest (54.6) (71.5) Underlying profit before tax 70.2 65.6 Tax and minorities (1.9) (2.3) Profit for the year 68.3 63.3 Interest cover 2.6x 2.0x Adjusted earnings per share 9.7p 11.0p Dividend per s
Slide 11: Strong Balance Sheet
Strong Balance Sheet £ million Pro-forma1 30 June 2010 31 Dec 2009 Property assets 5,144 5,355 5,142 Net debt (1,931) (2,142) (2,124) Other net assets/(liabilities) 3 3 (68) Shareholders’ equity 3,216 3,216 2,950 Adjusted net asset value per share £4.54 £4.54 £4.21 Gearing 60% 67% 72% Net debt/EBITD
Slide 12: Property Returns
Property Returns Six months to 30 June 2010 Shopping Centres Retail Parks Offices Total Value Capital Value Capital Value Capital Value Capital £m return % £m return % £m return % £m return % UK 2,157 8.4 940 6.1 637 5.8 3,734 7.3 France 1,530 0.1 91 7.1 - - 1,621 0.5 Total 3,687 4.9 1,031 6.1 637 5
Slide 13: Cash Flow
Cash Flow £ million Six months to 30 June 2010 2009 Cash generated from operations 112 128 Net interest (85) (116) 27 12 Working capital movements (9) 2 Dividends (39) (43) Taxation (1) 2 Acquisitions (55) - Capital expenditure (53) (106) Disposals 2 572 (106) 466 Share issues - 584 Cash flow (128)
Slide 14: Financing
Financing Net debt £2.1 billion Gearing 67%; pro-forma 60% Cash and undrawn committed facilities of £637 million Average cost of debt 5.1% 97% of gross debt unsecured Moody’s rating improved to Baa2 (stable) No borrowings mature until March 2012 Weighted average maturity of debt of nearly eight year
Slide 15: Summary
Summary Encouraging underlying growth in income Capital returns of 5.2% in first six months Credit ratios improved Substantial financial facilities in place 15 So to summarise: Underlying rental income has increased and we have seen a further recovery in capital values. We have further strengthened
Slide 16: Investment Markets
Investment Markets 16
Slide 17: UK Investment Transactions
UK Investment Transactions Total investment by investor type Origin of overseas investors (£ billion) (H1 2010) 9 8 7 6 16% 30% 5 4 2% 3 8% 44% 2 1 German Middle East 0 US Far East Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Other UK institution Property companies Overseas investors Private individuals Othe
Slide 18: Increasing Differentiation of Yields
Increasing Differentiation of Yields Shopping Centre Yields by Quality (%) 11 10 9 8 7 6 5 4 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Super Prime Secondary District Shopping C entres Source: DTZ Research 18 This graph shows shopping centres, but the pattern is the same as in the other s
Slide 19: French Investment Transactions
French Investment Transactions Total investment by investor type 4 (€ billion) 3 2 1 0 Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010 Q2 2010 SICC Funds Insurers Other institutions Private Other Source: CBRE, PMA 19 As usual the overall volumes are much lower than in the UK, with funds being the majority p
Slide 20: Yields and Finance Costs
Yields and Finance Costs UK France % % 6.0 6.0 Spread between UK all-property initial yields Spread between French all-property initial yields 5.0 and five-year sterling swaps 5.0 and five-year euro swaps 4.0 4.0 3.0 3.0 2.0 2.0 1.0 1.0 0.0 0.0 -1.0 -1.0 -2.0 -2.0 1998 2002 2006 H1 2010 1998 2002 20
Slide 21: International Joint Venture Partners
International Joint Venture Partners Canada Pension Plan ADIA 50% Investment Board 50% The Oracle, Reading Silverburn, Glasgow Future Fund 33% GIC 50% WestQuay, Henderson Global Southampton Investors 33% Bullring, Birmingham Allianz 75% Oman Investment Fund 75% Espace St Quentin, Bishops Square, Lon
Slide 22: Improving the Office Portfolio
Improving the Office Portfolio • Asset management opportunities at Leadenhall with high initial income • Sold Exchange Tower, reducing risk • Released capital to deploy in better Exchange Tower, London E14 opportunities Leadenhall Court, London EC3 22 In the office portfolio, the Exchange Tower in D
Slide 23: Improving the Retail Portfolio
Improving the Retail Portfolio • Silverburn performing well • New joint venture at Espace Saint Silverburn, Glasgow Quentin • Battery Retail Park now 100% owned Espace Saint Quentin, Paris 23 Battery Retail Park, Birmingham In the retail portfolio, at Silverburn, which we bought at the end of last y
Slide 24: Operational Review
Operational Review 24
Slide 25: UK Consumer Environment
UK Consumer Environment Retail Sales Values (%) Unemployment (thousands) Consumer Confidence 5 1,800 10 4 1,600 0 3 1,400 -10 2 1,200 1 -20 1,000 0 -30 800 -1 600 -40 -2 400 -50 -3 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 Non-food retail sales growth
Slide 26: French Consumer Environment
French Consumer Environment Retail Sales Values (%) Unemployment (thousands) Consumer Confidence 4 10 3,000 3 0 2,800 2 -10 1 2,600 -20 0 2,400 -30 -1 2,200 -2 -40 -3 2,000 -50 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 2005 2006 2007 2008 2009 2010 Retail sales (12m rolling annual
Slide 27: Low Vacancy Levels
Low Vacancy Levels Shopping Centres UK Retail Parks UK Shopping Centres France 20% 20% 20% 15% 15% 15% 10% 10% 10% 5% 5% 5% 0% 0% 0% 2008 Q4 2009 Q4 2010 Q2 2008 Q4 2009 Q4 2010 Q2 2008 Q4 2009 Q4 2010 Q2 Market average Source: PMA and IPD Hammerson retail vacancy 27 In particular, I’m very pleased
Slide 28: Robust Trading Performance
Robust Trading Performance Six months to 30 June 2010 UK France Footfall and Sales Footfall and Sales Footfall +1.96% (+0.4% Benchmark Footfall UK) Footfall -0.7% (-2.6% French Footfall Index) Sales +2.5% (+0.9% BRC) Sales -1.6% (-2.4% CNCC Index)1 Rent: Sales 13.8%2 Rent: Sales 9.0%2 Non-rental Inc
Slide 29: Attracting Retailers
Attracting Retailers 29 We work hard at building good relationships with both existing and prospective retailers. We recently launched our new customer strategy to retail tenants. We set out our commitments to improve our service and work with them to drive sales. We have a track record of signing m
Slide 30: Quality Retail Park Portfolio
Quality Retail Park Portfolio 15 parks – 366,000 m2 High occupancy rate >97% Average rent £17/ft2 or £185/m2 Cyfarthfa, Merthyr Tydfil Majority have open A1 consent Attractive and profitable locations for retailers Asset management and extension opportunities Orchard Centre, Didcot 30 St Oswald’s, G
Slide 31: UK Retail Rents
UK Retail Rents £ million 170 Rents passing Rent reviews Other 30 June 2010 New lettings Retail park and renewals 160 Rents passing Terminations extensions 0.6m 161.9 31 Dec 2008 and expiries 2.2m 155.6 12.3m 150 (13.5)m 4.7m 140 130 120 Note: Movements in passing rents on a like-for-like basis, exc
Slide 32: French Retail Rents
French Retail Rents € million Rents passing 110 New lettings Other 30 June 2010 Rents passing Terminations and renewals 31 Dec 2008 and expiries 107.8m 13.7m 0.7m 105 106.3m (12.9)m 100 95 90 85 80 Note: On a like-for-like basis. Now includes O’Parinor. 32 We have marginally increased rents in spite
Slide 33: Contracted Income Growth
Contracted Income Growth £ million 2009 2010 2011 2012 2013 2014 Offices - UK 2.2 3.7 6.2 9.4 15.4 16.2 Shopping centres - UK 14.7 26.3 31.5 32.4 32.4 32.6 Shopping centres - France 7.2 8.1 10.6 12.0 12.4 19.52 Total - cash flow 24.1 38.1 48.3 53.8 60.2 68.3 - accounting basis 35.6 50.5 54.7 56.1 56
Slide 34: Positioning For Growth
Positioning For Growth 34 That’s what has been happening in the existing portfolio, I just want to take a few minutes on our approach to progressing our valuable development pipeline…
Slide 35: Development Approach
Development Approach Substantial pipeline of major opportunities Excellent reputation for urban regeneration Extension and improvement potential in current retail portfolio Current financial targets: >7.25% yield on total cost >12.5% IRR Phased programme Rigorous risk management Schemes designed to
Slide 36: Major Development Opportunities
Major Development Opportunities UK Retail French Retail UK Offices • Sevenstone, Sheffield • Les Terrasses du Port, • Bishops Place, London EC2 Marseille • Watermark WestQuay, • St Alphage, London EC2 Southampton • Halle en Ville, Mantes • Eastgate Quarters, Leeds • Bishopsgate Goodsyard, • Retail e
Slide 37: Les Terrasses du Port, Marseille
Les Terrasses du Port, Marseille 54,000 m2 with 160 shops 44% pre-let 70-year ground lease with the Port Total development cost1 €434 m Construction cost €280 m Net rents receivable2 €32 m Development yield 7.4% Average retail rents €540/m2 Note: 1) Includes land and interest 2) Rental income net of
Slide 38: Faubourg St Honoré, Paris
Faubourg St Honoré, Paris 60 m window facade Redevelopment of 3,000 m² 5 MSUs and 2 shops Additional rental income €3 m Development costs €35 m Practical completion Q4 2010 Stores opening Q2 2011 38 At Faubourg, which is fully pre-let, we have secured luxury brands such as Burberry, Moschino and Blu
Slide 39: Bishops Place, London EC2
Bishops Place, London EC2 Mixed use planning consent: • 65,000 m2 offices • 118 bedroom hotel • 240 apartments • New public space, including retail • Potential for office pre-letting • Potential for specialist partner for residential/hotel 39 We have two of the biggest development sites in the city.
Slide 40: Conclusion
Conclusion 40
Slide 41: Conclusion
Conclusion Strong retail locations providing income growth London office portfolio well positioned Operational excellence attracting joint venture partners Prudent financial approach Greater visibility of development potential Potential for good shareholder returns 41 The fundamental attractions of
Slide 42: Disclaimer
Disclaimer This presentation contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking in nature and are subject to risks and uncertainties. Actual future results may differ materially from those expressed in or imp