Hammerson plc · LSE:HMSO
Hammerson — H1 2016 Earnings Presentation
63 slides from Hammerson's earnings presentation, Jul 25, 2016
Slide 1: 2016 Half-year Results
2016 Half-year Results 25 July 2016 Dundrum, Dublin
Slide 2: Agenda
Agenda 01 H1 highlights, markets and positioning David Atkins – CEO 02 Financial results Timon Drakesmith – CFO 03 Portfolio update David Atkins – CEO 04 Conclusion and Q+A David Atkins – CEO 2
Slide 3: H1 highlights
H1 highlights Consistent growth profile EPS +5.1% DPS +6.3% NAVPS +2.4% Premium space attracting more long-term lettings Leasing volumes +19%; LfL NRI +2.1%(1) Adding super-prime assets Dundrum, Dublin Capital profile strengthened £500m disposal programme close to completion; £830m long-dated debt T
Slide 4: Market backdrop
Market backdrop UK contrast with rest of Europe Support from yield spreads Moderate bank lending Shopping centre NIY (%) Commercial property yields relative to Bank lending to commercial real estate 10 year gilts (%) (£’000m) 9 10 350 40 300 30 8 8 20 7 6 250 10 6 4 200 0 5 2 150 -10 4 0 -20 100 -30
Slide 5: Hammerson income resilience
Hammerson income resilience Hammerson retail like-for-like NRI track record Hammerson’s diversified European portfolio 6% 5% 4% 3% 40% 2% 1% 0% -1% -2% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 UK retail sales growth(1) Hammerson LfL NRI growth France retail Ireland retail Other EU retail UK
Slide 6: A superior retail property portfolio positioned for growth
A superior retail property portfolio positioned for growth Fast-growth end markets 5 years ago Today Growth driver Ireland exposure 0% 10% 5% Ireland retail sales growth(1) Premium outlets exposure 1% 14% 15% retail sales CAGR(2) High quality assets Average shopping centre asset size(3) £350m £440m
Slide 7: Consistent track record
Consistent track record NAVPS (pence) EPS (pence) DPS (pence) +2.4% H1 H2 H1 H2 750 30 25 727 700 25 20 650 20 15 600 +5.1% 15 +6.3% 550 14.3 10 10.1 10 500 5 450 5 400 0 0 2011 2012 2013 2014 2015 H1 16 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 Dec 2011 - H1 2016 CAGR +7.3% H1 CAG
Slide 8: Financial results
02 Financial results Timon Drakesmith – CFO • Review of H1 2016 financial performance • Analysis of valuation trends • Debt position • Overview of Group risk management measures
Slide 9: Headline results
Headline results Income statement 30 Jun 2016 30 Jun 2015 Change Net rental income (£m) 167.7 159.5 +5.1% Adjusted profit (£m) 112.6 106.2 +6.0% Adjusted EPS (p) 14.3 13.6 +5.1% Interim dividend (p) 10.1 9.5 +6.3% Balance sheet 30 Jun 2016 31 Dec 2015 Change Portfolio value (£m) (1) 8,964 8,374 +0.7
Slide 10: Positive LfL net rental income growth
Positive LfL net rental income growth H1 2016 LfL NRI growth by sector (%) 7 6 6.0 5 4 3 2.8 2.7 2 2.1 1.9 1 1.2 0 (1) (2) (1) UK shopping centres UK retail parks France Total exc. premium Premium outlets Total outlets (1) (2) Includes LfL movement of UK other properties of 2.8% – principally assets
Slide 11: Strong profit growth
Strong profit growth Adjusted profit movement (£m) 116 +6.0% 114 0.4 1.6 (0.5) 112 (0.6) 112.6 2.4 110 3.1 108 106 106.2 104 102 100 H1 2015 LfL NRI Developments Net finance FX and Premium Admin H1 2016 and net costs other outlets expenses acquisitions Financial results 11
Slide 12: Valuation analysis
Valuation analysis H1 2016 Components of underlying valuation Value at capital return (1) change 30 Jun 2016 (2) (%) Yield shift Income and Stamp duty (£m) (%) other (%) (%) UK shopping centres −0.4 +0.1 +0.3 −0.8 3,332 UK retail parks −3.0 −1.5 −0.6 −0.9 1,526 France +2.9 +3.4 −0.2 −0.3 2,070 UK ot
Slide 13: NAVPS uplift
NAVPS uplift EPRA NAV movement (pence per share) 745 +2.4% 740 6 (13) 735 730 14 725 727 720 6 715 4 710 710 705 700 695 Dec 2015 Portfolio Premium Adjusted FX and Dividends Jun 2016 revaluation outlets profit other revaluation Financial results 13
Slide 14: Financing ratios
Financing ratios Financing policy 30 Jun 2016 31 Dec 2015 Net debt - £3,360m £2,968m Gearing <85% 59% 54% Loan to value <40% 40% 38% Cash/undrawn facilities - £945m £931m Weighted average cost of finance - 3.2% 3.8% Interest cover >2.0x 3.8x 3.6x Net debt/EBITDA <10x 9.7x 9.6x Fixed rate debt >50% 6
Slide 15: Lowering cost of debt and extending maturities
Lowering cost Debt maturity profile (£m) (1) of debt and 1000 Recent financing (£0.8bn) extending 900 • €500m Euro bond 1.75% maturing in March 2023 maturities • £420m revolving credit facilities maturing in 2021 with an initial margin of 90bps 800 Cost of debt down 60bps (3.2%) 700 Refinanced acqui
Slide 16: £500m disposal programme to fund Ireland acquisition
£500m disposal programme to fund Ireland acquisition On-going disposals in line with capital recycling strategy 500 450 2011 – 2015 Additional average assets under c.£270m offer £300m disposals (2016) 400 disposals p.a. Cramlington £78m(1) 350 Folkestone £7m(1) Thurrock £93m 300 Additional assets un
Slide 17: Hammerson resilience to a UK downturn
Hammerson resilience to a UK downturn Greater geographic diversity June 2016 December 2007 UK property/total property assets (1) 60% 71% Property value outside UK (1) £3.9bn £2.1bn London Office exposure 0% 22% Lower committed development Development properties/total property assets 5% 14% Developme
Slide 18: Portfolio update
03 Portfolio update David Atkins - CEO UK shopping centres UK retail parks France Premium outlets Developments Ireland 18
Slide 19: Retail market overview
Retail market overview UK retail sales (1) France retail sales (2) Ireland retail sales (3) 10% 10% 10% 8% 8% 8% 6% 6% 6% 4% 4% 4% 2% 2% 2% 0% 0% 0% -2% -2% -2% -4% -4% -4% -6% -6% -6% Apr-14 Feb-15 Nov-13 Jul-15 Sep-14 Oct-11 Jan-13 Jun-13 May-11 Mar-12 Aug-12 Dec-15 May-16 Apr-10 Apr-11 Apr-12 Apr
Slide 20: Consumer insight around the Referendum
Consumer Hammerson UK retail sales and footfall around the date of UK Referendum (1) insight around 10% 5.0% the Referendum 5% 2.5% 0% 0.0% -5% -2.5% -10% -5.0% -15% -7.5% -20% -10.0% Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat 19/6 20/6 21/6 22/6 23/6 24/6 25/6 26/6 27/6 28/6 29/6 30/6
Slide 21: Structural trends in retail sector favour Hammerson's portfolio
Structural trends in retail sector favour Hammerson’s portfolio Total leasing activity H1 2016 (£m) Post-Referendum 3.5 14 +19% Leases signed 20 3 12 Income £2.8m 2.5 10 2 8 1.5 6 1 4 0.5 2 0 0 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 UK shopping centres UK retail parks UK other France Cumulative l
Slide 22: Portfolio update: UK shopping centres
Portfolio update: UK shopping centres Brent Cross, London Grand Central, Birmingham The Beach at Brent Cross
Slide 23: Attracting leading retailers and driving rental growth
Attracting H1 leasing highlights leading retailers and driving rental Bullring Oracle Silverburn Highcross growth [Barburrito] Union Cabot Circus WestQuay Brent Cross Square Hammerson UK shopping centres Retail sales −0.8% Leasing vs ERV +6% ERV growth +0.5% (+2.3% rolling 12 mths) LfL NRI +2.8% Por
Slide 24: Innovative asset management
Innovative asset management Taking new restaurant concepts into regional cities Pop-ups for entrepreneurs and start-ups WestQuay Watermark Portfolio update: UK shopping centres 24
Slide 25: Portfolio update: UK retail parks
Portfolio update: UK retail parks Elliott’s Field, Rugby
Slide 26: Retail parks leasing momentum continues
Retail parks H1 leasing highlights leasing momentum continues Elliott’s Field Fife Central, Cyfarthfa, Rugby Kirkcaldy Merthyr Tydfil Hammerson UK retail parks Customer visits +3.1% Leasing vs ERV +4% ERV growth −0.1% (+0.5% rolling 12 mths) LfL NRI +1.2% Portfolio update: UK retail parks 26
Slide 27: Versatile retail park developments deliver low-risk, attractive returns
Versatile retail park developments deliver low-risk, attractive returns Future development opportunities Description TDC Estimated £m YOC % Orchard Centre, 10,000m2 extension with fashion-led offer 45 7 Didcot Elliott’s Field, 9,000m2 homeware focused extension 30 9 Rugby (Phase 2) Oldbury, Dudley 1
Slide 28: Portfolio update: France
Portfolio update: France O’Parinor, Paris
Slide 29: Continuing to introduce new international brands
Continuing to H1 leasing highlights introduce new international brands Les Terrasses du O’Parinor Espace St Les Trois Port Quentin Fontaines Hammerson France Retail sales +3.0% Leasing vs ERV +4% ERV growth +0.1% (+0.5% rolling 12 mths) LfL NRI +1.9% Portfolio update: France 29
Slide 30: Continuing exceptional performance at Les Terrasses du Port, Marseille
Continuing exceptional performance at Les Terrasses du Port, Marseille Les Terrasses du Port: year 2 sales performance 35% 30% 25% 20% Annual sales +11.7% 15% 10% 5% 0% Jul-15 Apr-16 Sep-15 Jun-15 Nov-15 Jan-16 Jun-16 Aug-15 Oct-15 Dec-15 Feb.'16 Mar-16 May-16 YoY sales growth Occupancy 99% 2016 lea
Slide 31: Portfolio update: Premium outlets
Portfolio update: Premium outlets 31 Fashion Arena, Prague
Slide 32: Differentiated investment in premium outlets
Differentiated investment in premium outlets Value Retail VIA Outlets Sales growth YoY +5% +7% Sales density €14,600/m2 €3,600/m2 Sales density growth YoY +2% +16% Capital return +3.4% +3.7% Recent leasing deals Maasmechelen Fashion Arena La Roca Hede Portfolio update: Premium outlets 32
Slide 33: Extension opportunities offer additional growth for premium outlets
Extension opportunities offer additional growth for premium outlets Q4 2016 Q1 2017 Q4 2017 Fidenza Village, Milan Batavia Stad, Amsterdam Bicester Village, UK 3,300 m2 5,600 m2 5,500 m2 20% incremental space 22% incremental space 23% incremental space 25 new boutiques 43 new boutiques 33 new boutiq
Slide 34: Portfolio update: Developments
Portfolio update: Developments 34 Victoria Gate, Leeds
Slide 35: Victoria Gate, Leeds opening October 2016
Victoria Gate, Leeds opening October 2016 Pre-let / Advanced negotiations 74% / 90% Income £11m Yield on cost 6.2% Portfolio update: Developments 35
Slide 36: WestQuay Watermark, Southampton opening Q1 2017
WestQuay Watermark, Southampton opening Q1 2017 Pre-let / Advanced negotiations 91% / 97% Income £6m Yield on cost 6.0% Portfolio update: Developments 36
Slide 37: Work on-going to prepare major London developments
Work on-going to prepare major London developments Brent Cross Croydon The Goodsyard CPO inquiry concluded New outline planning application Mayor of London deferred planning including new full-line Marks & Spencer application in April 2016 CPO decision expected late 2016/early store to be submitted
Slide 38: Portfolio update: Ireland
Portfolio update: Ireland Dundrum, Dublin 38 Dundrum, Dublin
Slide 39: Completed the consensual agreement in Dublin
Completed the consensual agreement in Dublin Strategic success Successful transfer of underlying prime retail properties and development land Executed on plan Costs and timing in-line with original assumptions Capital allocation Focused on enhancing income growth prospects Scale Delivers significant
Slide 40: Dundrum: exceptional growth driver
Dundrum: exceptional growth driver Premier scheme in Ireland 1,500,000sq ft / 158 units / 99% occupancy Strong retail sales Growth +5% (1) Ireland’s gateway centre New international retailers: 1st Five Guys in Ireland Strong demand for upsizings Zara, BT2, H&M, River Island Rental tension driving fo
Slide 41: Conclusion
04 Conclusion 41
Slide 42: Conclusion
Conclusion A well-positioned business… …opportunities for further growth Great geographic diversity Fast-growth end markets 40% outside UK 10% Ireland 100% retail 14% Premium outlets Low committed development High quality assets 1% committed capex Prime destination venues On-site schemes complete in
Slide 43: Questions
Questions 43
Slide 44: Disclaimer
Disclaimer This presentation contains certain statements that are neither 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 or implied by thes
Slide 45: Appendices
Appendices 45
Slide 46: Hammerson invests in prime retail assets throughout Europe
Hammerson invests in prime retail assets throughout Europe Portfolio overview (1) Our assets Other/ developments 6% Gross Asset £9.7bn Value Ireland retail UK UK shopping £3.3bn 10% centres shopping centres Premium 34% France £2.1bn outlets 14% UK Retail £1.5bn Parks UK retail Premium £1.4bn Outlets
Slide 47: Operational statistics
Operational statistics UK shopping France Sales densities(2) UK France centres £/ft2 £/ft2 Sales(1) −0.8% +3.0% H1 2016 310 - 625 350 - 635 Footfall +0.3% +4.1% 2015 310 - 620 220 – 621 Rent:sales(2) 12.3% 12.3% 2014 290 - 590 200 - 610 OCR(2) 19.3% 15.3% Occupancy (%) UK shopping UK retail France O
Slide 48: Portfolio leasing overview
Portfolio leasing overview Leasing vs Leasing vs ERV ERV growth Rent secured from previous passing new leases UK shopping centres +20.9% +6% +0.5% £4.5m UK retail parks +21.4% +4% −0.1% £2.5m France −10.4% +4% +0.1% £5.2m Group (1) −0.8% +5% +0.2% £12.6m (1) Including UK Other properties – principal
Slide 49: Dublin portfolio overview
Dublin portfolio overview Asset Description Size Hammerson Passing rent p.a. ownership (Hammerson share) Dundrum Ireland’s premier retail and leisure 140,000m2 50% JV with Allianz €30.1m destination Dundrum Village Strategic development opportunity 6 acres 50% JV with Allianz €1.0m adjoining Dundrum
Slide 50: Irish loan acquisition
Irish loan Hammerson costs acquisition €m £m(1) Initial loan acquisition (50%) 936 775 Balancing payment to Allianz, fees, transaction costs and 293 242 taxes – phased through H2 2016 Total consideration 1,229 1,017 (1) Converted at FX rate as at 30 June 2016, £1:€1.208 Appendices 50
Slide 51: Valuation data
Valuation data UK shopping UK retail parks France retail UK Other Total portfolio centres interests True equivalent yield (%) 30 Jun 2016 5.1 5.7 4.5 7.7 5.1 31 Dec 2015 5.2 5.6 4.7 7.6 5.2 Change (bps) −10 +10 −20 +10 −10 ERV (£m) 30 Jun 2016 177.4 85.1 107.3 13.4 383.2 31 Dec 2015 166.2 90.9 101.0
Slide 52: Components of valuation change
Components of valuation change Components of valuation change in H1 2016 – total portfolio (£m) 80 69 60 65 50 40 30 29 20 22 18 4 8 2 0 (1) (13) (14) (6) (4) -20 (25) (23) (38) -40 (51) -60 UK shopping centres UK retail parks France Developments Total Portfolio Yield Income & other Stamp duty & tra
Slide 53: On site and major developments
On site and major developments On-site developments(1) Lettable area m2 Potential completion Value 30 Jun 2016 Estimated cost to complete(2) Estimated annual income(3) Let(4) % £m £m £m Victoria Gate, Leeds 35,400 Q4 2016 170 45 11 74 WestQuay Watermark, Southampton 17,000 Q1 2017 58 43 6 91 Total 5
Slide 54: Development pipeline opportunities
Development pipeline opportunities Scheme Lettable area Key Facts m2 • Consent granted in October 2015 for a masterplan for a future extension of existing centre Silverburn (Phase 4), Glasgow 50,000 • Masterplan includes retail, hotel and leisure uses • Extension of existing shopping centre for reta
Slide 55: Retail supply
Retail supply Retail completions (net additional space, mil sq ft) 9.0 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Retail parks Shopping centres Source: PMA Appendices 55
Slide 56: Premium outlets overview
Premium outlets overview Value Retail Villages VIA Outlet centres Bicester Village, UK Hede, Gothenburg Kildare Village, Dublin Batavia Stad, Amsterdam Maasmechelen Village, Fashion Arena, Prague Brussels Wertheim Village, Festival Park, Majorca Frankfurt La Vallée Village, Paris Landquart, Zurich I
Slide 57: Hammerson's investment in Value Retail
Hammerson’s investment in Value Retail Hammerson €2m(1) shareholder loan Holding companies 22% equity La Roca Las Rozas La Vallée Maasmechelen Fidenza Wertheim Ingolstadt Kildare Bicester Village Village Village Village Village Village Village Village Village 33 23 19 11 13 20 31 0 27 45 35 31 22 24
Slide 58: Premium outlets share of results
Premium outlets share of results Income statement 30 Jun 2016 30 Jun 2015 Value Retail VIA Outlets Total Value Retail VIA Outlets Total £m £m £m £m £m £m Profit for the year 38.9 6.6 45.5 64.1 5.2 69.3 EPRA adjustments (30.8) (4.3) (35.1) (57.0) (1.5) (58.5) Adjusted earnings of premium outlets 8.1
Slide 59: Our sustainability vision
Our sustainability vision: creating retail destinations that deliver positive impacts economically, socially and environmentally 2015 highlights 2016 Plans 4% reduction in Group CO2e emissions 6% Reduction in electricity consumption intensity 5% reduction in landlord water intensity Four industry su
Slide 60: Our sustainability targets and performance
Our sustainability targets and performance Our 2015 targets Our 2015 performance Our 2015 – 2020 targets Reduce like-for-like carbon emissions -20% 20% reduction in carbon emissions v by 20% v. 2010 baseline by 2015 2015 baseline 45% of suppliers by value to be 87% Introduce refreshed sustainable en
Slide 61: Management of leverage
Management Actual Actual Proforma post 31 Dec 2015 (1) 30 Jun 2016 (1) further acquisitions of leverage and disposals (2) Net debt £2,968m £3,360m £3,218 LTV 38% 40% 39% Gearing 54% 59% 57% (1) (2) Value denominator includes €936m (£775m; Dec 15: £690m) acquisition cost of Irish loan portfolio Refle
Slide 62: Debt covenants
Debt covenants Description Tightest covenants Actual 30 Jun 2016 LTV None 40% Gearing 150% 59% Interest cover ratio >1.25x 3.8x Secured debt/net tangible assets <50% 1% Keeping all other variables constant, values would have to fall by 38%(1), or 57% for UK values only, before first breach of gearin
Slide 63: Tenants in administration
Tenants in administration 30 June 2016 % of passing rents 71 units in administration 1.4 5 units unoccupied 0.1 31 December 2015 51 units in administration 1.1 4 units unoccupied 0.1 30 June 2016 52 units in administration 1.0 10 units unoccupied 0.3 Appendices 63