Hammerson Plc · LSE:HMSO
Hammerson — H1 2012 Earnings Presentation
40 slides from Hammerson's earnings presentation, 2012
Slide 1: Welcome to half year results presentation
Good morning everyone, and welcome to our half year results presentation. I have to say I am absolutely delighted with the progress that the company has made in the last six months. There’s been a real sense of purpose in the business with the entire company getting behind the new strategy. As a res
Slide 2: Overview of today's proceedings
So turning to today’s proceedings I am going to give you an overview of the first six months, and thoughts on where we will deploy capital released by the offices disposal. We’ve reported some strong financial results today which Timon will run through, as well as giving you detail on our future fin
Slide 3: Headline results
I’m pleased to say that in a tough environment, we’ve demonstrated a strong operating performance. Occupancy in the ongoing retail portfolio is high at 97.5%, remaining above our 97% target and up since our IMS in March. Underlying Net Rental Income is up an impressive 2.4%. And, significantly for f
Slide 4: Revised vision: best owner and developer of retail property in Europe
So in February I set out a revised vision to be the best owner and developer of retail property in Europe, because I fundamentally believe that by doing this we can deliver consistent, industry leading returns. Let me reiterate why I believe that’s true. By increasing scale we can leverage our platf
Slide 5: Key achievements in the first six months
Importantly we’ve performed very well across all areas of the business. Looking at the blue box the major transaction was, of course, the sale of the office portfolio above book value, but don’t forget we made a 75% profit on the sale of Faubourg St-Honoré and have announced today that we have acqui
Slide 6: A focused retail business
Following the sale of the offices, we are now a focused retail business. We have targeted the three successful segments of retail which we believe will continue to prosper because they address the underlying structural demands of consumers and retailers respectively: We have 19 prime shopping centre
Slide 7: Three ways to invest in our markets
I’m very confident that we will be able to further increase scale across our three chosen sectors and continue to enhance returns. This slide shows the three ways that we will invest in our markets First, as I have previously mentioned we are on site with some of our extensions, and Peter will give
Slide 8: Value Retail scale and reach
Value Retail is an excellent business. To give you an idea of the scale and reach, there are nine villages with an asset value of over £2 billion, generating over £1 billion in tenants’ sales annually, a number which has grown consistently and strongly every year over the last five years. The best o
Slide 9: Increased investment in Value Retail
So I am pleased to announce today that we have materially increased our investment in Value Retail. To explain their structure, broadly half of each village is owned by the holding company, and half by investors with direct stakes. Now we have interests in both the holding company and direct investm
Slide 10: Tough retail environment and administrations
First, the retail environment is tough, no question. You are seeing consumer weakness reflected in the tenants’ sales and footfall figures. Second, unsurprisingly ,administrations have ticked up since Christmas. But as you can see lost income from administrations has a minimal impact on our portfoli
Slide 11: High occupancy and leasing above ERV
We are maintaining high occupancy due to the quality of our assets and, our active management is enabling us to continue to secure deals well above ERV in both the UK and France. There is of course a range in these rents, but I ‘m pleased to say that 80% of our long-term deals were at or above ERV,
Slide 12: Finance review priorities
Thank you David. Good Morning everyone. In this section I’m going to set out our key priorities, describe the financial trends in the first half and explain our future actions to generate income growth. 12
Slide 13: Hammerson's finance agenda
First, I’d like to introduce Hammerson’s finance agenda. This covers four main priority areas set out in the left hand column:- Drive top line growth Control costs Manage interest expense Optimise capital structure These objectives support our strategic goals and I believe we have made fine progress
Slide 14: Financial results table
David set out the main elements of the financial results – here’s a little more detail. Let’s go down this table from the top – NRI at £141.6 million is up 2.4% on a like for like basis on the first half mainly due to good underlying performance from UK shopping centres. Adjusted PBT is up on last y
Slide 15: Like for like rental income by sector
Here, I’ve summarised changes in like for like rental income by sector. You can see UK shopping centres generated an uplift of 3.3% with good contributions from centres such as Union Square, Oracle and Brent Cross. UK retail parks had a stable first half as new leases were compensated by tenant ince
Slide 16: EPS walk
I’d like to talk you through this EPS walk which explains YoY changes from last year’s number of 9.6p shown in purple in the left bar. Moving across the chart – First let’s deal with acquisitions and disposals, as you can see there is a slight reduction from net disposals of 0.1p per share. Developm
Slide 17: Cost and interest expense trends
Here’s some more colour on the trends in our cost management. On the left the bars show a decline in overhead costs of £1m compared to H1 2011, this is mainly due to lower property expenses. The cost income ratio shown in the red dot fell by 30bp to 25.6% and we are focussed on improving this figure
Slide 18: Property valuation by sector
Turning to the property valuation, we have segmented the portfolio by sector so you can see the capital value movements over the last six months. The largest segment, UK shopping centres is down 0.5% over the first half. Retail parks saw a fall in valuation by 2.5% due to yield expansion. Other UK i
Slide 19: NAV per share walk
Moving on to NAV per share, in this walk I illustrate the movement from the value of 530p per share at December 2011 – shown on the left. The first bar shows 8p of valuation declines in the investment portfolio coming mainly from marginal yield expansion in the UK retail portfolio. Development prope
Slide 20: Analysis of debt
Turning to the analysis of debt, we are in excellent shape. Running down the 30 June 2012 column, total net debt was £1.9 billion, down from the end of 2011 primarily due to net disposals. Gearing and LTV remain low at 50% and 34% respectively. We have substantial liquidity of over £500m as at the e
Slide 21: Future finance actions
We continue to drive performance across our business and here I’m giving you a preview of future actions. As before, there are four elements, I’m going to start with top line growth in blue. We will look to replace the rental income from the office disposals by capturing some of the reversion potent
Slide 22: Plan to grow rental income to 2015
So I’d like to conclude by explaining the plan to grow our rental income. Let’s start at the left bar in purple, with the Group’s current passing rent of £316m. The London portfolio disposal will reduce rent by £32m, shown in light blue. We will look to rebuild from here in steps over the period to
Slide 23: Office disposal and development programme
Thank you Timon I will give you a summary of our London office disposal and some more detail on the progress of our development programme. 23
Slide 24: London office portfolio disposal
First, the disposal of our London office portfolio. I’m really proud of the way our team worked on this transaction, securing a transformational deal on the majority of the office portfolio for £518 million at 5% above book value. We have agreed a phased completion with £330 million completing in Se
Slide 25: Low future supply of retail space
The chart on the left shows that the future supply of new retail space in the UK is forecast to be low. Over the next 5 years it is estimated that there will be approximately 3.8 million ft 2 of retail floor space delivered to the market each year. This is around 40% of the long run average. We see
Slide 26: Development pipeline
We have a pipeline of attractive development projects that will enable us to capture this demand. This could provide over 500,000 m² of retail floorspace, and there is the potential for us to invest up to £2billion. What I want to show here is that we have a full range of opportunities in both the U
Slide 27: Printemps signed at Les Terrasses du Port
Today we have announced that we have signed Printemps as a major anchor at this project. It is a significant deal for both us and Printemps. We have created an 8,500 m² department store, and extended the size of the overall scheme by 4,000 m² to 61,000 m². It is Printemps’ first new store since the
Slide 28: Marseille project progress
We have made good progress on the project generally. The Printemps deal has resulted in an increased cost, however this has been offset by the rental agreed, ensuring the scheme maintains overall profitability. This important deal takes the scheme to 72% prelet by income. The project shows a very co
Slide 29: Extension projects on site
We’re on site with a number of the extension projects that we identified earlier this year. At Cramlington, construction on the cinema and catering scheme has commenced and is due for completion by the end of this year. At Monument Mall, Newcastle leasing is progressing well and this project is on s
Slide 30: Leeds and Croydon future developments
I’m pleased to announce we have just signed Heads of Terms for a revised scheme with John Lewis in Leeds. We now intend to bring this forward in two phases, with the first phase anticipated for start on site in 2014. This will contain the John Lewis store and 13,000m2 of additional retail, providing
Slide 31: Conclusion
Hammerson Conclusion 31
Slide 32: Wrap up of first half 2012
Thanks Peter. So to wrap up the first half of 2012, it has been a period of decisive activity and significant progress for the company. We announced and then implemented our revised strategy, through the transformational deal to sell London offices and create a focused retail business. That strategy
Slide 33: Questions
Hammerson Questions 33
Slide 34: 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
Slide 35: Appendices
Hanmerson Appendices Beene TORR 35
Slide 36: Portfolio at a glance
actors report | Ata glance Majo ret trans psn at 0 Dur principal p > PN ons Union Square Siverburn Aberdeen Reading = Bulring ot sree 36
Slide 37: Retail reversion 2012 to 2014
Retail reversion - 2012 to 2014 2012 2013 £m £m Expiries and breaks (UK and France) ERV 35.9 16.4 Passing rents 32.4 16.0 Uplift 3.5 0.4 Rent reviews (UK only) ERV S15] 42.4 Passing rents 55.9 41.0 Uplift 3.6 14 Total uplift 71 1.8 37 =——= ————— 2014 £m 16.5 15.9 0.6 28.4 25.6 2.8 3.4 Hanmerson 37
Slide 38: London offices portfolio
a London offices portfolio Area Ownership Partners Occupancy Unexpired (m2) % lease term to break (years) Standing investments 10 Gresham Street 23,600 30% CPPIB 99.9 78 10 Grosvenor Street, London W1 6,000 50% Grosvenor 100 6.4 99 Bishopsgate, London EC2 31,500 100% 99.9 5.1 125 Old Broad Street, L
Slide 39: Developments
Developments Potential Value Entimated cost Eatimated on Scheme Lettable area Earliest start completion at 3006/12 to complete! nual income? Let im £m £m £m % COMMITTED Les Terrasses du Port, Marseile 61000] Commenced Apri 2014 175 28 Or 2 Manor Walks, Cramiington 6,000] Commenced Dec 2012 na 7 1 43
Slide 40: Debt Maturity
Debt Maturity 900 ill 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2028 mBankdrawndebt mSecureddebt mEurobonds wmSterlingBonds OUndrawn facilities Hanmerson 40 == ee 40