Hammerson plc · LSE:HMSO
Hammerson — Investor Presentation (October 2018)
35 slides from Hammerson's investor presentation, Oct 19, 2018
Slide 1: Insights into UK retail
Insights into UK retail 19th October 2018 Victoria, Leeds
Slide 2: Today's presentation
Today’s presentation 01 Introduction and strategy update David Atkins – CEO 02 Meeting the challenge in UK retail Mark Bourgeois – MD UK and Ireland 03 Continued demand for the right retail space Iain Mitchell – UK Commercial Director 04 It’s more than just shopping Mark Bourgeois – MD UK and Irelan
Slide 3: Current backdrop is tough but we have a clear strategy
Current backdrop is tough but we have a clear strategy Tough market backdrop in the UK Footfall -2.1% High street fashion sales -7% CVAs, 2018 NRI impact -£7 million Department stores: House of Fraser CVA Positive UK shopping centre leasing volumes £11.4m, +23% YoY Proactively enhancing retailer lin
Slide 4: In July we set out our agenda to boost returns
In July we set out our agenda to boost returns Optimised Operational Capital portfolio excellence efficiency Focus on flagship retail destinations and Premium Step change retailer Implement £300m Outlets line-up share buyback Exit retail parks Accelerate disposals: £1.1bn over two years Devoting mor
Slide 5: We are delivering on our strategy
We are delivering on our strategy Optimised Operational Capital portfolio excellence efficiency Focus on flagship retail Opportunities for department destinations and Premium store rotation Share buyback ongoing Outlets Live discussions with £80m already complete Exit retail parks operators Disposal
Slide 6: Delivering disposals in a challenging market
Delivering disposals in a challenging market UK retail investment volumes, £bn Highcross transaction key facts UK shopping centres UK retail parks 10 50% stake sold for £236m 9.2 9 5.5% NIY 8.5 8 JV with new Asian investor introduced by M&G Real Estate 7 Detailed due diligence extended 6.0 period of
Slide 7: Differentiation of prime shopping centre yields driven by quality
Differentiation of prime shopping centre yields driven by quality UK shopping centre yield analysis (%) (1) ERV growth Footfall Footfall Catchment (% p.a.) (2) growth (m) (3) (m) 7.5 (% p.a.) (2) 7 Bullring 2.3 2.7 37 3.6 6.5 Highcross 1.5 0.9 18 1.4 6 Hammerson portfolio 1.8 0.3 16 2.4 5.5 Benchmar
Slide 8: High quality flagship destinations
High quality flagship destinations Hammerson UK shopping centre asset quality by grade (1) A+ 50% A 25% A- 25% B+ B B- Victoria, Leeds 1 Source: Green Street Advisors database, Quality grade, weighted by Hammerson ownership 8
Slide 9: Meeting the challenge in UK retail
Cabot Circus, Bristol 02 Meeting the challenge in UK retail Mark Bourgeois – MD UK and Ireland 9
Slide 10: Understanding the drivers
Understanding the drivers Long term structural Polarised retail Cyclical challenges shifts landscape Brexit disruption Continued acceleration of Flagship destinations will Currency movement: -16% (1) online outperform Subdued GDP growth: 1.3% (2) Online penetration 17% (7) Consumers want a ‘big day
Slide 11: Trading environment remains turbulent
Trading environment remains turbulent Footfall YTD 2018 (1) Hammerson UK shopping centres category sales (5) 20% Hammerson -2.1% Range of sales performance for retailers within category Index (2) -3.3.% 15% Sales YTD 2018 (3) 10% Hammerson -2.7% 13.9% Index (4) -2.8% 5% 9.2% 0.2% 0% 0.1% -3.2% -4.1%
Slide 12: Increase in CVAs and administrations in 2018
Increase in CVAs and administrations in 2018 Units impacted by CVAs and administrations Current position (1) across Hammerson UK retail portfolio (1) Number of units in CVA/administration Fashion Catering Non-fashion Department store 71 % units trading 80 75% Rent at risk 70 £8.6m % group passing re
Slide 13: Refreshing the F&B offer across the portfolio
Refreshing the F&B offer across the portfolio F&B units impacted by CVAs and administrations Recent re-lettings of units in CVA/administration across Hammerson UK retail portfolio (1) Holy Moly Macaroni Mod Pizza Units Grand Central Highcross Still trading 15 £1.2m rent at risk Previous tenant: Prev
Slide 14: Diversity of department store performance
Diversity of department store performance Hammerson exposure to department stores in UK shopping centre Department store key facts portfolio Number of Floorspace Average rent <£10 per sq ft stores (‘000 sq ft) Target to reduce exposure by a quarter Harvey Nichols 2 85 Reconfiguration of former House
Slide 15: Proactively reconfiguring department store space
Proactively reconfiguring department store space House of Fraser Highcross, Leicester Proactively took back underperforming House of Fraser unit 11,000 sq. m across 3 floors Upsized Zara store now trading Replaced with upsized Zara and JD Sports flagships, Adventure Golf, restaurants and additional
Slide 16: Continued demand for the right retail space
The Ivy, Victoria Leeds 03 Continued demand for the right retail space Iain Mitchell – UK Commercial Director 16
Slide 17: Continuing demand for space in our UK shopping centres
Continuing demand for space in our UK shopping centres 2018 YTD UK shopping centre leasing and cumulative vs. 2017 (£m) (1) Leasing key facts Monthly leasing 2018 (LHS) 2017 cumulative (RHS) 2018 cumulative (RHS) Leasing vs Dec 17 ERV +4.5% 3.5 16.0 Leasing vs previous passing +0.7% 3.0 14.0 Average
Slide 18: Leasing to quality operators in 2018
Leasing to quality operators in 2018 Fashion and footwear Personal luxuries International brands F&B and leisure 18
Slide 19: Barbour, Grand Central; NYX, Bullring; Holy Moly Macaroni
Barbour, Grand Central NYX, Bullring Holy Moly Macaroni, Grand Central Holy Moly Macaroni, Grand Central 19 Gucci, Selfridges Bullring The Ivy, Victoria Leeds
Slide 20: Over 80% of leases signed YTD are at or above ERV
Over 80% of leases signed YTD are at or above ERV UK shopping centre principle leases signed above/below ERV (%, YTD to September 2018) 100% 80% 60% 40% 20% Average 4.5% above ERV 0% -20% -40% 20
Slide 21: It's more than just shopping
Riverside, The Oracle, Reading 04 It’s more than just shopping Mark Bourgeois – MD UK and Ireland 21
Slide 22: Enlivening our centres with leisure and events
Enlivening our centres with leisure and events Successful pilot super events programme at Westquay delivering positive changes in shopper behaviour +40% longer dwell time +10% uplift in footfall around events such as “Skate” at Westquay +20% higher catering spend amongst leisure users vs. all visito
Slide 23: Digital supporting retail and driving consumer relationships
Digital supporting retail and driving consumer relationships Style Seeker visual search Digital innovation is PLUS app continues to drive loyalty & supporting retailers & positive behaviour driving sales 250k 550k Visual product search PRODUCT supporting DOWNLOADS VIEWS retailers +70% £2m register 9
Slide 24: City Quarters: leveraging our land bank
City Quarters: leveraging our land bank Opportunity Selected schemes c.70 acres adjacent to our flagship destinations Victoria Leeds, phase 2 Dundrum, phase 2 Creating mixed use schemes - residential, workspace, retail, leisure Deliver additional value and income streams Enhance the performance of o
Slide 25: The City Quarters opportunity
The City Quarters opportunity Area (acres) Retail/F&B Residential Offices Leisure Hotel Education Culture The Goodsyard 10 Martineau Galleries, 7 Birmingham Westquay Phase 2, 4 Southampton UK Broadmead, Bristol 9 Victoria Phase 2, Leeds 10
Slide 26: Bullring estate: a flagship destination
05 Bullring estate: a flagship destination 26
Slide 27: The Bullring Estate
The Bullring Estate Estate Bullring The Selfridges 227 37 Debenhams shops and John Lewis restaurants 1.7 £5.4 million footfall bn 3.5 available spend million sq ft in catchment UK ’s Europe's youngest million residents One of UK’s largest and most second city affluent retail catchments population 27
Slide 28: Initiatives across the estate to create a flagship destination
Initiatives across the estate to create a flagship destination Ladywood Rotunda House Square Plaza 28
Slide 29: Growth opportunities in Birmingham
Growth opportunities in Birmingham Paradise Martineau Galleries Ladywood House Grand HS2 Arrival Site Central New Street station Bullring Moor Street station 29
Slide 30: Questions
Victoria, Leeds Questions 30
Slide 31: Appendices
Selfridges, Bullring Estate, Birmingham Appendices 31
Slide 32: Step change in UK retailer line up
Step change in UK retailer line up Category Current mix Future mix Rent/sq ft Department stores 38% c.28% <£10/sq ft Fashion (high street) 25% c.20% c.£30/sq ft Fashion (aspirational) 5% c.10% +£30/sq f Non-fashion and consumer brands 16% c.20% +£50/sq ft F&B 10% c.12% c.£40/sq ft Leisure/events 6%
Slide 33: Collection performance across UK retail portfolio
Collection performance across UK retail portfolio Collection performance (7 days) across UK retail portfolio UK shopping centres UK retail parks 100% 99% 98% 97% 96% 95% 94% 93% 92% 91% 90% Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18 33
Slide 34: 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 35: H1 2018 operational statistics
H1 2018 operational statistics UK shopping France Sales UK France centres densities(4) £/ft2 £/ft2 Sales (1) −2.5% +2.9% 2018 245 – 523 498 – 596 Footfall (2) −1.6% +2.3% 2017 240 – 490 395 – 620 Rent:sales (3) 12.9% 11.2% 2016 250 – 515 350 – 715 OCR (3) 22.0% 14.3% Occupancy (%) UK shopping UK ret