Hammerson plc · LSE:HMSO
Hammerson — H1 2021 Earnings Presentation
60 slides from Hammerson's earnings presentation, Aug 5, 2021
Slide 1: 2021 half-year results
2021 half-year results 5 August 2021 1 The Oracle, Reading
Slide 2: Agenda
Agenda Overview Financial results Strategy update Q&A 2
Slide 3: Overview: Progress against FY20 priorities
Overview Progress against FY20 priorities Balance sheet Strategy Operational Strengthened capital structure Update on portfolio & organisational reviews Rent collection improving(1) £403m of disposals, including French presented today: FY20 now at 90% minority stakes Simplify organisatio
Slide 4: Half-year results
Half-year results Westquay, Southampton
Slide 5: H1 headline results
2021 half-year financial results H1 headline results 30 June 2021 30 June 2020 Change Income statement Adjusted net rental income (£m)(1) (2) 87.2 94.4 (8%) LFL NRI (£m) 67.7 0 67.60 0.1% Premium outlets earnings (£m)(3) (2.0) (7.4) 73% Adjusted earnings (£m) 20.1 17.7 14% IFRS loss (£m)(4) (375.5)
Slide 6: Adjusted earnings walk
2021 half-year financial results Adjusted earnings walk slide 41 H1 2021 Adjusted earnings walk (£m)(1) Surrender premiums 11.3 20.0 Provisions 6.2 Tenant failure, 18.0 leasing, and void (9.2) costs 16.0 Concessions (6.6) 14.0 11.3 7.8 Variable income (1.6) and other 12.0 LFL NRI 0.1 10.0 20.1 17.7
Slide 7: Premium outlets earnings walk
2021 half-year financial results Premium outlets earnings walk slides 56-60 H1 2021 Premium outlets earnings walk (£m)(1) 5.0 (2.0) 3.0 5.6 1.3 1.0 2.7 -1.0 (2.0) 1.3 (0.3) -3.0 (13.0) -5.0 2.7 -7.0 2.5 -9.0 -11.0 4.8 -13.0 VIA Outlets Value Retail GRI Property operating Net administration Interest
Slide 8: NTAPS walk
2021 half-year financial results NTAPS walk H1 2021 EPRA NTAPS walk (pence) 90 80 9 70 3 1 60 50 40 82 69 30 20 10 0 (1) Dec 2020 Revaluation deficit Scrip dividend Loss on disposal Jun 2021 EPRA NTA EPRA NTA 1 On a proportionally consolidated basis including Value Retail 8
Slide 9: Rent collection performance
2021 half-year financial results Rent collection performance(1) slides 42-43 Total Demanded Total Waived, Total Due Total Collected Total Outstanding Collected of due in Quarter Written Off and as at 30th July Not Yet Due £m £m £m £m £m % FY20 261 28 233 210 23 90% Q1 21 58 13 45 36 9 79% Q2 21 54 -
Slide 10: Portfolio valuation summary
2021 half-year financial results Portfolio valuation summary(1) Sector Value H1 2021 ERV & other Yield Peak to ERV Yield shift Yield range 30 June capital impact impact date decline from 30 June 2021 return decline(2) from peak(3) 2021(3) £m peak(2) Managed portfolio UK 1,320 (13.4%) (6.7%) (6.7%) (
Slide 11: Net debt analysis
2021 half-year financial results Net debt analysis Net debt analysis (£m)(1) 2,400 Adj. operating profit 62 2,300 Working capital (14) 2,200 changes 2,100 Cash generated from 48 operations 2,000 396 1,900 50 1,800 2,234 77 103 1,700 48 13 1,829 1,879 1,600 1,500 1,400 Net Netdebt debt Disposals (2)
Slide 12: Debt maturity profile
2021 half-year financial results Debt maturity profile Debt maturity profile - pro forma (£m)(1) (2) Refinancing achieved 1,200 Sterling Euro bonds • €700m 1.75% 6 year sustainability-linked bond bonds 1.8% avg 4.7% avg coupon • 2022 bonds repaid (62% in H1, 38% on 8th July, €500m total) coupon • 20
Slide 13: Balance sheet metrics
2021 half-year financial results Balance sheet metrics slide 50 30 June 2021 31 Dec 2020 Net debt £1,879m £2,234m Value Retail net debt £690m 0 £689m 0 Group debt Headroom Internal 30 June 2021 31 Dec 2020 covenants guidelines Gearing(1) <150%/175% 28% valuation decline <85% 68% 70% Unencumbered Ass
Slide 14: Modelling assumptions
2021 half-year financial results Modelling assumptions UK rental levels: declining c.35% peak to trough (29% to date), France and Ireland more stable Rent collections: rates continue to improve, absent further lockdowns, 80-90% by FY21 – provisioning rates flat Net admin costs: assume same run rate
Slide 15: Strategy update
Strategy update Martineau Galleries, Birmingham
Slide 16: Owner, operator, developer of focused, prime, urban estates
Strategy update Future of Hammerson Owner, operator, developer of focused, prime, urban estates Indicative long-term core portfolio Precarious capital structure Sustainable capital structure Costly, complex organisation Agile, lean, streamlined platform Complex, retail-only portfolio Reinvigorated m
Slide 17: Existing asset footprint and structural shift in retail underpins strategic choices
Strategy update Existing asset footprint and structural shift in retail underpins our strategic choices Area Strategic options Disposals to focus Scale Maintain status quo Consolidate on core assets Refocus / Enter logistics & Mix Grow emphasis industrial Re-enter office Enter lodging rebalance on r
Slide 18: Covid-19 has accelerated existing structural change
Strategy update Covid-19 has accelerated existing structural change DEMOGRAPHIC TRENDS CONSUMER TRENDS RETAIL TRENDS Ageing population Value for money Polarisation of retail markets Rise in single-person households Digitalisation Channel shift Increased digital penetration Experience over things Evo
Slide 19: Prime urban retail role in omnichannel environment
Strategy update Prime urban retail has an important role to play in the omnichannel environment, but reduction of space required Forecasts for UK retail space reduction Encouraging re-opening sales despite restrictions Low High -6% -14% Market CBRE Cushman & BNPP Savills UK May & June France June ov
Slide 20: Hammerson today – high quality assets; overexposed to fashion and department stores
Strategy update Hammerson today – high quality assets; strong locations; overexposed to fashion and department stores Asset quality by grade(1) Portfolio by city exposure(2) Portfolio mix by ERV and NIA(3) Birmingham London Leeds Aberdeen Other Value 7% 6% 3% 3% 1% B Retail 7% 14% 17% Southampton By
Slide 21: Positioning Hammerson as owner, operator, developer of prime urban estates
Strategy update Positioning Hammerson as an owner, operator, developer of focused, prime, urban estates Deliver Accelerate Create agile Reinvigorate sustainable development platform the assets capital structure pipeline • Disposals of non strategic • Flatter organisation • Generate incremental cash
Slide 22: A sustainable capital structure remains a core near term priority
Strategy update A sustainable capital structure remains a core near term priority FY 20 HY 21 €700m £834m rights Recycling £403m of sustainability- Further issue & VIA Refinancing capital disposals linked bond disposals disposal Refinancing issued Approach through the cycle: • Focus on total return
Slide 23: Strategic repositioning of portfolio
Strategy update Strategic repositioning of portfolio Near term disposals Optimise to sell Core • Minority stakes (lack of control) • Opportunities to create more • Prime city centre locations in most attractive catchments: value prior to disposal • Better off in the hands of others • >250k people wi
Slide 24: Create agile platform for the benefit of all stakeholders
Strategy update Create agile platform for the benefit of all stakeholders AMBITION Create an efficient & agile, fit for purpose organisation Develop a more empowered, accountable culture - conducive to delivering speed to value Current organisation Future organisation Capable, recognised platform
Slide 25: Significant value creation opportunities from reinvigorating current prime portfolio
Strategy update Significant value creation opportunities from reinvigorating current prime portfolio Generate incremental income Lease up & shift mix Repurpose • Commercialisation • Minimise void • Capital light & more intensive options • Last mile delivery • Try new concepts • Alternative use: resi
Slide 26: Leasing highlights
Strategy update Leasing highlights slide 35-39 Prime brands New anchors F&B, leisure, grocery, services Digitally - native 26
Slide 27: Wide variety of scale development opportunities
Strategy update Wide variety of scale development opportunities, yielding returns and upscaling existing assets to neighbourhoods Retail F&B Leisure Residential Workspace Hotel Education Culture Public spaces Outline Earliest (k sq ft) (k sq ft) (k sq ft) (units) (k sq ft) (beds) (k sq ft) (k sq ft)
Slide 28: Case study: Birmingham Estate
Case study: Birmingham Estate 28
Slide 29: Evolution of Hammerson: retail-centric assets to mixed use estates
Strategy update Evolution of Hammerson: retail-centric assets to mixed use estates Indicative evolution of identified core portfolio mix by NIA Core portfolio by current mix Indicative mid-term core portfolio Indicative long-term core portfolio Department store Fashion retail Non fashion retail F&B
Slide 30: Summary and priorities – Hammerson at inflection point
Strategy update Summary and priorities – Hammerson at inflection point Clear direction of travel: owner, operator, developer of focused, prime, urban estates H1 21 progress: Near-term priorities: Looking ahead: • Balance sheet strengthened: • Disposals to reduce debt • Sustainable capital structure
Slide 31: Questions
Questions Dundrum, Dublin
Slide 32: Additional disclosure
Additional disclosure Cabot Circus, Bristol
Slide 33: Contents
Contents Managed portfolio Net Positive Value Retail 33
Slide 34: Managed portfolio
Managed portfolio 34 The Oracle, Reading
Slide 35: Leasing cumulative activity – managed portfolio
Additional disclosure: Managed portfolio Leasing cumulative activity – managed portfolio H1 2021 managed portfolio leasing and cumulative vs. H1 2020 and H1 2019 (£m) Leasing volumes H1 21 H1 20 £m £m 5 12 UK 4.3 2.7 4.5 10 France 5.1 1.4 4 3.5 Ireland 0.4 0.3 8 3 Total 9.8 4.4 2.5 6 2 UK retail par
Slide 36: Leasing cumulative activity – UK flagships
Additional disclosure: Managed portfolio Leasing cumulative activity – UK flagships H1 2021 UK flagships leasing and cumulative vs. H1 2020 and H1 2019 (£m) H1 2021 leasing 5 5 £m 4.5 4.5 Principal leasing 2.5 4 4 Reconfigurations 0.5 3.5 3.5 3 3 Flexible and other 1.3 2.5 2.5 Total 4.3 2 2 1.5 1.5
Slide 37: Leasing cumulative activity – France flagships
Additional disclosure: Managed portfolio Leasing cumulative activity – France flagships H1 2021 France flagships leasing and cumulative vs. H1 2020 and H1 2019 (£m) H1 2021 leasing £m 1.2 4.5 Principal leasing 4.0 4 1.0 Reconfigurations 0.5 3.5 Flexible and other 0.6 0.8 3 Total 5.1 2.5 0.6 2 0.4 1.
Slide 38: Leasing cumulative activity – Ireland flagships
Additional disclosure: Managed portfolio Leasing cumulative activity – Ireland flagships H1 2021 Ireland flagships leasing and cumulative vs. H1 2020 and H1 2019 (£m) 2021 leasing £m 0.1 1.2 Principal leasing 0.1 0.1 1 Reconfigurations 0.1 0.1 Flexible and other 0.2 0.1 0.8 Total 0.4 0.1 0.6 0.0 0.0
Slide 39: Leasing analysis by type – flagships
Additional disclosure: Managed portfolio Leasing analysis by type – flagships UK France Ireland % vs previous % vs previous % vs previous £’000s % vs ERV £’000s % vs ERV £’000s % vs ERV passing passing passing Principal 2,470 -26% -24% 3,958 0% 3% 119 72% 16% Other 1,873 -76% -76% 1,125 -49% -28% 26
Slide 40: White box leasing – new metrics for digitally-native brands
Additional disclosure: Managed portfolio White box leasing – new metrics relevant to digitally-native brands Use of physical space is evolving in omnichannel world • Hammerson “white boxing” initiatives encouraging digitally native brands into physical space • Not only about legacy metrics, e.g. sal
Slide 41: LfL NRI analysis - flagships
Additional disclosure: Managed portfolio LfL NRI analysis - flagships H1 2021 LfL NRI analysis UK flagships France flagships Ireland flagships Total 27.0 6.2 (2.7 16.7 Surrender Premiums % % %) % 15.2 9.9 (7.8 9.2 Provision for incentives and arrears(1) % % %) % 2.1 (0.9 0.7 1.3 Other % %) % % (5.5
Slide 42: Rent collection performance - flagships
Additional disclosure: Managed portfolio Rent collection performance - flagships UK France Ireland Collected at 31 July Collected at 31 July Collected at 31 July (%) (%) (%) FY20 91 93 83 Q1 21 92 67 64 Q2 21 71 43 66 H1 21 79 56 65 Q3 21 67 60 67 2021 YTD 76 57 65 42
Slide 43: Provisions for arrears – managed portfolio
Additional disclosure: Managed portfolio Provisions for arrears – managed portfolio H1 2021 provisions vs FY 2020 Provision as % of Provision as % of Net trade Provisions at Provisions at Change since net trade net trade Change since receivables 30 June 2021 31 Dec 2020 31 December 2020 receivables
Slide 44: Tenant restructuring – leases in CVA/admin
Additional disclosure: Managed portfolio Tenant restructuring – leases in CVA/admin as at 30 June 2021 UK France Ireland UK Group NRI LfL impact of CVAs & admins (£m) flagship flagship flagship other s s H121 FY20 FY19 5 Passing rent impact of (0.6) (0.2) - - (0.8) new units in CVA/admin in H1 21(£m
Slide 45: Top tenants exposure
Additional disclosure: Managed portfolio Top 20 tenants exposure(1) Rental Rental % of passing % of passing Retailer Exposure % of NIA Retailer Exposure % of NIA rent rent (£m) (£m) Inditex 8.1 3.6% 2.7% TK Maxx 2.3 1.0% 1.6% H&M 6.1 2.7% 2.5% Superdry 2.3 1.0% 0.6% Next 4.5 2.0% 4.5% Signet 2.2 1.0
Slide 46: Top ten occupiers by region
Additional disclosure: Managed portfolio Top ten occupiers by region(1) UK France Ireland Rental % of Rental % of Rental % of Retailer exposure passing % of NIA Retailer exposure passing % of NIA Retailer exposure passing % of NIA (£m) rent (£m) rent (£m) rent Inditex 4.4 1.93% 1.60% Printemps 2.5 1
Slide 47: Valuation data (net initial & nominal equivalent yields)
Additional disclosure: Managed portfolio Valuation data (net initial & nominal equivalent yields)(1) NIY (%) UK flagships France flagships Ireland flagships UK other Managed portfolio(2) 30 June 2021 6.7 4.3 4.9 5.3 5.5 31 Dec 2020 6.6 4.4 4.6 6.2 5.7 30 June 2020 5.9 4.3 4.6 5.9 5.4 Change 6m (pp)
Slide 48: Valuation data (ERV)
Additional disclosure: Managed portfolio Valuation data (ERV) ERV (£m) UK flagships France flagships Ireland flagships UK other Managed portfolio(2) 30 June 2021(1) 122.0 59.6 37.4 9.9 228.9 31 Dec 2020(1) 132.4 62.9 39.0 10.0 279.7 30 June 2020(1) 144.2 64.7 42.0 10.2 299.3 LfL change 6 months (%)
Slide 49: Key disposals achieved 2019 – 2021 YTD
Additional disclosure: Managed portfolio Key disposals achieved 2019 – 2021 YTD NIY Gross proceeds Buyer (%) £m 2019: Dallow Road, Luton 7.6 24 Private equity Italie Deux, Paris (75%) 4.1 363 AXA Abbotsinch, Paisley 7.8 67 Ashby Capital St Oswald's Retail Park, Gloucester 8.5 54 Local authority Parc
Slide 50: LTV methodology
Additional disclosure: Managed portfolio LTV methodology 30 June 2021 31 December 2020 With Value Fully proportionally With Value Fully proportionally Retail net asset consolidated (£m) Retail net asset consolidated (£m) Net debt value (£m) value (£m) Managed portfolio 1,879 1,879 2,234 2,234 Value
Slide 51: Maintenance capex 2018- H1 2021: Flagships
Additional disclosure: Managed portfolio Maintenance capex 2018- H1 2021: Flagships H1 2020 2019 2018 2021 Service charge (maintenance) Service charge income (£m) 24 55 69 73 Maintenance expenditure within service charge (£m) 3.5 13 13 13 Examples: Painting, flooring upkeep, M&E: CCTV, wifi , IT sys
Slide 52: Net Positive
Net Positive Dundrum, Dublin
Slide 53: Our Sustainability Vision
Our Sustainability 2021 Half year update Vision: Operations remain affected by COVID-19 but strong sustainability platform has supported efficient operation and delivery of two key projects. We are continuing to focus on To create retail destinations delivering against out Net Positive carbon, water
Slide 54: Net Positive Sustainability-linked bond
Additional disclosure: Net Positive Sustainability-linked bond Issued in June 2021 and confirmed as being beyond business as usual and Paris aligned, our sustainability-linked bond (“SLB”) links ambitious Scope 1,2 and 3 targets to financing without restricting our use of proceeds. This was the firs
Slide 55: Value Retail
Value Retail 55 Bicester Village, Oxfordshire
Slide 56: H1 2021 operational update
Additional disclosure: Value Retail H1 2021 operational update 30 June 30 June Change Value Retail value creation (£m) 2021(1) 2020(1) Brand sales (£m) 626 585 +7% Footfall (m) 8.5 8.8 -3% 1,200 9 year IRR - 18% Sales density (£/m2) 3.1 3.3 -4% Like-for-like NRI (£m) 24.9 16.8 +48% 1,000 Occupancy (
Slide 57: Tiered European outlet market
Additional disclosure: Value Retail Tiered European outlet market Sales densities €/m2 €30,000+ International fashion and luxury brands €2,000–€10,000 Mainstream fashion brand outlets <€2,000 Low-end discount outlets 57
Slide 58: Value Retail villages
Additional disclosure: Value Retail Value Retail villages Bicester Village, Oxford GLA: 28,100m2 Boutiques: 163 La Roca Village, Barcelona GLA: 25,900m2 Boutiques: 148 Las Rozas Village, Madrid GLA: 16,600m2 Boutiques: 100 La Vallée Village, Paris GLA: 21,600m2 Boutiques: 105 Maasmechelen Village, B
Slide 59: Hammerson's total investment in Value Retail
Additional disclosure: Value Retail Hammerson’s total investment in Value Retail Holding companies 25% equity Bicester La Roca Las Rozas La Vallée Maasmechele Fidenza Wertheim Ingolstadt Kildare Village Village Village Village n Village Village Village Village Village 37 29 25 14 14 22 33 2 29 50 41
Slide 60: Absolute sales growth delivered through active management
Additional disclosure: Value Retail Absolute sales growth delivered through active management, acquisitions and extensions Sales and Sales Growth 2012 – 2021 (€m)(1) 3,500 +9% +8% 3,000 +8% +8% 2,500 +11% +11% +12% 2,000 -45% +13% 1,500 1,000 +7% 500 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 20