Hammerson plc · LSE:HMSO
Hammerson — Q1 2018 Earnings Presentation
65 slides from Hammerson's earnings presentation, May 2018
Slide 1: Investor briefing
Investor briefing May 2018
Slide 2: £10.6 billion pan-European retail platform
£10.6 billion leading 57 European pan-European retail shopping platform (1) destinations 14 Countries 7% 21% 33% Top 3 Market position in all chosen sectors 12% 9% 18% 43% non-UK assets 2.3m UK shopping centres - £3.5bn sq m retail space France - £1.9bn Ireland - £1.0bn 440m visitors UK retail parks
Slide 3: Market trends drive our clear, focused strategy
Market trends drive our clear, focused strategy Focus on growing consumer Create differentiated destinations Promote financial efficiency and markets partnerships Dundrum, Dublin Les Terrasses du Port, Marseille Bicester Village, UK 3
Slide 4: Delivering sector leading income-focused returns
Delivering sector leading income-focused returns EPS (pence) DPS (pence) NAVPS (pence) +6.5% +6.3% +5.0% 35 30 800 750 776 30 31.1 25 25.5 700 25 20 650 20 15 600 15 550 10 10 500 5 5 450 0 0 400 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 CAGR +8.3% CAG
Slide 5: Contents
Contents 01 Q1 2018 highlights: Not all retail is equal 02 Our portfolio highlights 03 2017 financial performance 5
Slide 6: Q1 2018 highlights
01 Q1 2018 highlights
Slide 7: Strong operational performance in Q1 2018 underpinned by flight to quality
Strong operational performance in Q1 2018 underpinned by retailer and consumer flight to quality Not all retail is equal Estimated EPRA NAVPS (1) of 790p, up 1.8% £7m group leases signed, 6% above previous Bicester Village passing and 3% above Dec-17 ERV Positive ERV growth across all portfolio segm
Slide 8: Impressive volume of new leasing across the group
Impressive volume of new leasing across the group with strong start in 2018 Hammerson new leasing volume 2016, 2017, 2018 (£m) (1) Leasing Leasing Leasing Leasing volume volume vs vs ERV Cumulative 2016 Cumulative 2017 Cumulative 2018 Q1 2018 Q1 2017 previous passing 35 UK £3.1m £2.4m 10% 4% 2017: +
Slide 9: Retailer rotation provides positive opportunities
Retailer rotation provides positive opportunities Less than 1% negative impact on income from tenants in administration, even at the peak in 2012 UK retail market administrations (no. of stores) and Hammerson impact on income (%) 4,500 10.0% UK market administrations, no of stores 4,000 8.0% Handmad
Slide 10: Q1 2018 portfolio valuation
Q1 2018 portfolio valuation 31 Mar 2018 31 Dec 2017 Q1 capital return (1) £m £m (%) UK shopping centres 3,523 3,528 −0.6% UK retail parks 1,180 1,270 −1.0% UK other 444 422 +4.6% France 1,993 2,011 +0.4% Ireland 1,096 1,095 +1.2% Premium outlets 2,352 2,234 +0.9% Total 10,588 10,560 +0.3% (1) Capita
Slide 11: Our portfolio
03 Our portfolio
Slide 12: UK shopping centres
Bullring, Birmingham UK shopping centres
Slide 13: Rental levels are firm and retailers are investing in their stores
Rental levels are firm and retailers are investing in their stores UK shopping centres 2017 Retailers are investing in store fits Leasing vs. ERV (%) +8 ERV growth (%) +0.9 LfL NRI (%) +1.8 Instore retail sales (%) −2.7 Leasing activity (%) +49 UK shopping centre tenant incentive packages (1) Penhal
Slide 14: Channel selection supports demand for the best physical space
Channel selection supports demand for the best physical space Consumer Luxury Aspirational/fast Homeware Multichannel branded products goods fashion showrooms interface Fewer channels Total focus on Rapid response to Large-ticket items Accessible customer customer experience trends touch-points Redu
Slide 15: Our insights into consumer trends drive our leasing strategy
Our insights into consumer trends drive our leasing strategy Hammerson UK shopping centre leasing growth and instore sales growth(1) 8.0% Leisure 6.0% Change in share of leasing, by ERV (2015 -17) Ath-leisure Aspirational fashion 4.0% Consumer brands Fast fashion Convenient services Personal luxurie
Slide 16: Apparel is a dynamic category; tilting mix towards winning brands
Apparel is a dynamic category; we are tilting our mix towards the winning brands Apparel is lower as a proportion of New brands are replacing old: Evolving consumer preferences total leasing inform our leasing strategy UK shopping centre leasing (£m) (1) UK shopping centre apparel leasing (£m) 2015
Slide 17: Healthy sales for F&B but mixed picture for mid-market casual
Healthy sales for F&B in our centres but a mixed picture for mid-market casual dining operators ‘Grab & Go’ and coffee Mid-market casual dining Aspirational dining Performing well A mixed picture Performing well Offers value for money and efficient Important to differentiate offer in a crowded marke
Slide 18: Focusing on experience with a dynamic programme of events
Focusing on experience with a dynamic programme of events SKATE, Westquay Wimbledon screens at the Footfall +10% Esplanade, Westquay 46,000 visitors Footfall +3.5% Social media reach of Social media reach of 270,000 733,000 people Garden of Pure Viva Las Riverside, Oracle Imagination, Dundrum Footfa
Slide 19: High-quality retail destinations increasingly valuable in multichannel landscape
High-quality retail destinations are increasingly valuable in a multichannel landscape Shoppers are shifting towards large retail destinations and online UK catchment spend market-share split (%) (1) 2015 2017 70% -2% 60% 50% 40% 30% +2% +6% 20% 10% 0% Hammerson UK shopping Rest ofOther retailretail
Slide 20: Store productivity is more than just in-store sales
Store productivity is more than just in-store sales Representation of a retailers’ store productivity 1. Click & collect and online transactions originated in-store (1) +10−14% 2. Retail ‘halo’ effect (2) In-store sales 1 23 +5−7% 3. Retail logistics support (Collect+) (3) Retailers are focused on t
Slide 21: Progressing with key development projects
Progressing with key development projects Brent Cross Croydon 2017 milestones 2017 milestones Detailed reserved matters planning application Resolution to grant outline planning consent approved October 2017 secured October 2017 Confirmation of CPO received December 2017 Scheme approved by GLA Agree
Slide 22: Retail parks
Elliott’s Field, Phase 2, Rugby Retail parks
Slide 23: Focused strategy in retail park market
Focused strategy in retail park market Shopping parks Hybrid parks Key homeware Standard Solus units goods parks homeware parks Hammerson investment focus UK Retail Park 40% market Hammerson 97% Hammerson market(1) 5% portfolio Shopping parks 23% 22% Hybrid parks 35% 43% Key homeware goods Standard
Slide 24: Profitable new developments and supportive leasing trends
Profitable new developments and supportive leasing trends UK retail parks 2017 Adding attractive high-yield space Leasing activity (%) +29 Total £105m 8% YoC Leasing vs. ERV (%) +11 Elliott’s Field, Phase 2, Rugby ERV growth (%) −0.1 Completed LfL NRI (%) −2.5 Fife Central, Kirkcaldy LfL NRI (adj fo
Slide 25: Ireland
POCO store launch, Dundrum, Dublin Ireland
Slide 26: Dundrum is Ireland's premier retail and leisure destination
Dundrum is Ireland’s premier retail and leisure destination Opened A crown jewel in Hammerson’s portfolio 2005 Tenants 170+ Size 140,000 m2 Footfall 18.0m Occupancy 99% Accessibility 2 LUAS tramline stops (14 mins from city centre) Car access from M50 26
Slide 27: Confident consumer backdrop supports continued strong ERV growth
Confident consumer backdrop supports continued strong ERV growth Hammerson Ireland portfolio 2017 Latest value-add asset management initiatives Leasing vs. ERV (%) +10 Fallon & Byrne Food Hall ERV growth (%) +2.7 10,000 sq. ft. speciality food hall LfL NRI (%) +7.4 Reconfiguration of Pembroke Square
Slide 28: Dundrum case study: Superior asset management value creation
Dundrum case study: Superior asset management value creation Uplift in Dundrum ERV since ownership (EURm) (¹) Key ERV growth drivers 100 Tenant clustering ‒ Providing the right space for the right tenant +19% ‒ Aligning F&B offering with profile of the shopping 90 c.€90m Optimising Food & centre Bev
Slide 29: France
Les Terrasses du Port, Marseille Portfolio review: France
Slide 30: Growing consumer confidence translating into sales and footfall outperformance
Growing consumer confidence translating into sales and footfall outperformance Consumer confidence index (1) 110 100 90 80 70 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16 Jan-17 Jul-17 Jan-13 Les Terrasses du Port, Marseille Retail leasing index (ILC) (%) Hammerson France portfolio 2017 3.5 Leas
Slide 31: Refining our portfolio into leading centres
Refining our portfolio into leading centres 2017 capital recycling in France: £295m Investing to enhance leading assets Largest three assets now 86% of portfolio (1) Les Terrasses du Port, Marseille Consistently strong sales growth +9% Growth outperformance from largest three assets New brands inclu
Slide 32: Progressing with key development projects
Progressing with key development projects Les 3 Fontaines, Cergy Italie Deux, Paris Co-ownership agreement, building permit and Project to enhance tenant mix and F&B offer Size retail consent obtained Size at central Paris scheme 6,400m2 Acquired adjacent centre, Cergy 3 33,000m2 Obtained planning c
Slide 33: Premium outlets
Bicester Village, UK Portfolio review: Premium outlets
Slide 34: A strong performance and profitable investments
A strong performance and profitable investments Value Retail VIA Outlets Recent key investments Hammerson share (GAV, £bn) 1.6 0.6 Sales growth YoY (%) (1) +8 +13 Value Retail LP acquisition £76m investment Sales density growth YoY (%) (2) +5 +9 Economic interest in Bicester Village increased to 50%
Slide 35: Global tourism continues as a growth driver
Global tourism continues as a growth driver 2017 European tax refunded sales by nationality (1) YoY growth (%) (1) Greater China +16 19% South and East Asia +17 1% Gulf/Middle East -2 3% 48% 5% Russia +28 India +38 10% USA +22 14% Other (2) +10 Total +14 (1) (2) Source: Global Blue, (Value Retail Vi
Slide 36: Premium outlets offer attractive yields and higher growth
Premium outlets offer attractive yields and higher growth NOI yield and ERV growth of selected premium outlets (1) 10% 9% 8% Zürich Dec 2017 NOI yield (%) 7% Madrid Paris Bicester 6% Frankfurt 5% Porto Amsterdam Barcelona 4% 3% 2% 1% 0% 0% 2% 4% 6% 8% 10% 12% 14% 16% 2017 ERV growth (%) (1) Data as
Slide 37: Financial results
04 Financial results
Slide 38: Headline results
Headline results Income statement 31 December 2017 31 December 2016 Change Net rental income (£m) (1) 370.4 346.5 +6.9% Adjusted profit (£m) 246.3 230.7 +6.8% Adjusted EPS (p) 31.1 29.2 +6.5% Total dividend (p) 25.5 24.0 +6.3% Balance sheet Portfolio value (£m) (2) 10,560 9,971 +2.2%(3) EPRA NAVPS (
Slide 39: LfL NRI growth
LfL NRI growth 2017 NRI growth by sector (1) UK shopping centres LFL NRI LFL NRI growth (%) 2017 2016 UK shopping centres +1.8 Net rents, commercialisation 2.3% 2.0% and other Car parks (business rates) −0.5% 0.4% UK retail parks −2.5 Total 1.8% 2.4% France +2.6 EPRA LfL NRI +1.0 UK retail parks LFL
Slide 40: Strong uplift in profit
Strong uplift in profit 2017 adjusted profit movement (£m) 270 +6.8% 260 4.5 (2.0) (10.9) 6.4 250 7.6 7.3 246.3 240 2.7 230 230.7 220 210 200 2016 LFL NRI Net Premium Developments Tax, MI & Net Net 2017 acquisitions (1) outlets & Other FX Admin Interest (1) (1) Includes change in Ireland income from
Slide 41: Financing ratios underpin our balance sheet strength
Financing ratios underpin our balance sheet strength Financing policy 31 December 2017 31 December 2016 Net debt - £3,501m £3,413m Gearing <85% 58% 59% Loan to value <40% 36% 36% Cash and undrawn facilities - £958m £592m Weighted average cost of debt - 2.9% 3.1% Interest cover >2.0x 3.4x 3.5x Net de
Slide 42: Capital recycling and funding flexibility
Capital recycling and funding flexibility Deleverage through disposals ahead of phased development and reinvestment (£m) 700 Disposals Capex 600 500 £500m Hammerson 400 £440m target disposals Hammerson in 2018 annual run-rate 300 of disposals 200 c.£220m Average run-rate capex (1) 100 0 2015-2017 Sh
Slide 43: EPS growth track record and future trends
EPS growth track record and future trends Drivers of EPS growth 2012-2017 Likely future trends 2012 20.9p LfL NRI +13% Positive - Operational efficiencies Developments +18% Positive – Pipeline projects Premium outlets +17% Positive – Secular growth Net acquisitions +13% Negative – Disposals Interest
Slide 44: Appendices
Appendices
Slide 45: Examples of our Product Experience Framework in action
Examples of our Product Experience Framework in action Iconic destinations Retail specialism Experience led Customer first Victoria Gate awarded Best Delivered 20 new brands in Christmas light switch on at Cabot drove a 10.6% increase Nearly 450k downloads of the Shopping Centre at the MIPIM 2017 ac
Slide 46: Consistency through a framework approach
Consistency through a framework approach Product Experience Framework - 2017 Toilets Wayfinding Seating Handsfree Click & Play 9 Interactive Style Chatbot upgrade shopping Collect hoardings Seeker Brent Cross Bullring Cabot Circus Centrale
Slide 47: Click & collect and online transactions originated in-store
Click & collect and online transactions originated in-store account for a third of all online sales, growing rapidly 2017: Online sales generated by a store, 2020: Online sales generated by a store, add 10% to in-store sales (1) add 14% to in-store sales (1) Store originated Store originated Online
Slide 48: Premium outlets portfolio
Premium outlets portfolio Value Retail Villages VIA Outlets centres Bicester Village, Oxford Batavia Stad Amsterdam Fashion Outlet GLA: 28,000m2 GLA: 31,900m2 Boutiques: 157 Units: 119 La Roca Village, Barcelona Fashion Arena Prague Outlet GLA: 23,500m2 GLA: 24,000m2 Boutiques: 136 Units: 99 Las Roz
Slide 49: Hammerson's total investment in Value Retail
Hammerson’s total investment in Value Retail (1) Holding companies 25% Hammerson €2m shareholder loan equity Las Rozas La Vallée Maasmechelen Wertheim Ingolstadt Kildare Bicester Village La Roca Village Fidenza Village Village Village Village Village Village Village 36 26 23 14 14 23 33 2 28 50 39 3
Slide 50: 2017 operational statistics
2017 operational statistics UK shopping France Sales UK France centres densities(4) £/ft2 £/ft2 Sales (1) –2.7% 0.1% 2017 240 – 490 395 – 620 Footfall (2) 0.4% 1.6% 2016 250 – 515 350 – 715 Rent:sales (3) 13.3% 11.0% 2015 250 – 520 355 – 725 OCR (3) 21.7% 13.8% Occupancy (%) UK shopping UK retail Fr
Slide 51: 2017 portfolio leasing overview
2017 portfolio leasing overview Leasing vs previous Leasing vs ERV (%) ERV growth New rent secured passing (%) (%) from leasing (£m) UK shopping centres +6 +8 +0.9 13.4 UK retail parks +9 +11 –0.1 6.3 France +8 +5 +0.9 9.8 Ireland +4 +10 +2.7 1.9 Group +7 +8 +0.9 33.3(1) (1) Including Ireland and UK
Slide 52: 2017 valuation data
2017 valuation data UK shopping UK retail France Ireland UK other Total centres parks interests portfolio True equivalent yield (%) 31 Dec 2017 5.1 6.2 4.4 4.4 7.2 5.0 31 Dec 2016 5.1 6.1 4.4 4.3 7.4 5.1 ERV (£m) 31 Dec 2017 186.7 75.4 91.7 43.3 14.1 411.2 31 Dec 2016 186.8 77.1 107.9 34.8 13.4 420.
Slide 53: 2017 components of valuation change
2017 components of valuation change Components of valuation change in 2017, total portfolio (£m) 300 282 250 246 225 198 200 150 100 50 37 36 37 24 27 24 7 6 2 6 3 4 6 3 8 0 -1 -2 -11 -20 -19 -32 -27 -50 -41 -44 -100 UK shopping UK retail parks France Ireland Developments and Premium outlets Total P
Slide 54: Successful track-record of capital recycling
Successful track-record of capital recycling through varied conditions to a breadth of buyers Hammerson annual disposal proceeds (£m) Split of Hammerson’s disposals by category of acquirer (2015-2017) 700 £1.2bn 5% 8% 600 33% 13% 500 400 17% 300 24% 200 European institutions 100 Private equity 0 Glo
Slide 55: Breadth of buyers for prime European assets
Breadth of buyers for prime European assets Hammerson disposals 2015 – 2018 YTD Date Buyer Net proceeds £m Drakehouse retail park, Sheffield Mar-15 90 North (private equity) 61 Bercy 2, Paris Oct-15 Tikehau (Institution) 47 Grand Maine, Angers Oct-15 French Institution 46 Monument Mall, Newcastle Ja
Slide 56: Hammerson capex 2018-2020
Hammerson capex 2018-2020 Hammerson (£m) 2018 2019 2020 Major London developments (Brent Cross, Croydon) 97 104 107 France – extensions (Cergy, Italie Deux) 105 81 61 Retail parks 48 34 9 Highcross reconfiguration, Leicester 14 2 0 Total Hammerson 264 221 176 Appendices 56
Slide 57: On-site developments
On-site developments Scheme (1) Lettable Expected Value Estimated Estimated Let (5) area m2 completion 31 Dec 2017 cost to annual % £m(2) complete(3) income(4) £m £m Parc Tawe, Swansea 21,400 Q1 2018 n/a 3 2 91 Orchard Centre, Didcot 8,700 Q1 2018 29 12 3 62 Les 3 Fontaines, Paris extension 33,000 Q
Slide 58: Development pipeline opportunities
Development pipeline opportunities Scheme Scheme area (m2) • Extension and refurbishment of Brent Cross, forming part of wider Brent Cross Cricklewood regeneration plans, totalling 175,000m2 of retail, catering and leisure. Brent Cross extension 90,000 • Reserved matters planning application approve
Slide 59: UK shopping centre investment
UK shopping centre investment Hammerson UK shopping centre cash flow statement 2017 2016 2015 £m £m £m Gross rental income 180.2 174.2 162.0 Service charge income 35.4 34.0 28.7 Total income 215.6 208.2 190.7 B Service charge expenses (excl. investment) −31.5 −32.9 −25.3 Other property expenses (Ham
Slide 60: LTV methodology
31 Dec 2017 Reported (£m) Fully proportionally Net debt consolidated (£m) Group 3,501 3,501 LTV VIA Outlets - 174 methodology Value Retail - 512 Loan 3,501 4,187 Property values Group 8,326 8,326 VIA Outlets - 600 Value Retail - 1,634 Less minority interest (14) (14) VIA Outlets net assets 361 - Val
Slide 61: Continuing to take advantage of refinancing opportunities
Continuing to Debt maturity profile 31 December 2017 (£m) take advantage 1000 of refinancing 900 opportunities 800 700 600 500 400 300 Revolving credit facilities Private placement 200 Sterling bonds 100 Euro bonds 0 Secured debt 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031
Slide 62: Tenants in administration
Tenants in administration 31 December 2017 % of passing rents 50 units in administration 0.9 9 units unoccupied 0.1 30 June 2017 42 units in administration 0.8 8 units unoccupied 0.1 31 December 2016 44 units in administration 0.7 9 units unoccupied 0.1 Appendices 62
Slide 63: Our new Positive Places objective
Our new Positive Places objective is for Hammerson to be Net Positive for carbon, Carbon Resource Use water, resource use and socio-economic impacts Net Positive for carbon means Net Positive for resource use means waste avoided, recycled by 2030 carbon emissions or re-used exceeds materials used av
Slide 64: Steps to becoming Net Positive
Steps to becoming Net Positive 2015 27,000 tonnes CO2e 2016 539,082 m3 water 18,243 tonnes waste 24,000 tonnes CO2e 2017 not recycled or reused 511,888 m3 water 17,293 tonnes waste Deliver carbon neutral 2018 – 2020 not recycled or reused development at Rugby 40,000 FTE jobs Install 3 further solar
Slide 65: Our 2017 sustainability highlights
Our 2017 sustainability highlights Delivered the world’s first BREEAM Outstanding, carbon neutral retail park at Elliott’s Field, Rugby Developed the second zero energy Costa Coffee EcoPod at Parc Tawe, Swansea Managed exposure to Mimimum Energy Efficiency Standards (MEES) risk out of the UK portfol