Hammerson plc · LSE:HMSO
Hammerson — H1 2014 Earnings Presentation
48 slides from Hammerson's earnings presentation, Jul 24, 2014
Slide 1: 2014 Half-year Results
2014 Half-year Results 24 July 2014 LesTerrasses Les Terrassesdu du Port, Port, Marseille Marseille Les Terrasses du Port, Marseille
Slide 2: Agenda
Agenda Section Overview and H1 highlights 1 David Atkins, CEO Section Financials Timon Drakesmith, CFO 2 Section 3 Our markets and capital allocation David Atkins, CEO Section 4 Conclusion David Atkins, CEO 2014 Half-year results 2
Slide 3: Vision, strategy and results
Vision, strategy and results Experience Convenience Convenience Luxury Our vision is to be the best owner-manager and developer of retail property within Europe By capitalising on our strengths we aim to provide industry-leading shareholder returns Interim EPS dividend NAV ps TSR(1) +4.5% +6.0% +6.8
Slide 4: H1 highlights
H1 highlights Best in class retail portfolio Advancing developments Launch of Les Terrasses du On site at Victoria Gate, Leeds Port, Marseille Planning approval granted at Acquisition of Saint Sébastien, Watermark WestQuay Nancy Strong valuation uplift, leasing, Submission of planning occupancy and
Slide 5: Overview of occupier and investor markets
Overview of occupier and investor markets Occupier market Investment market Existing occupiers requiring increased space Strong global demand for winning retail locations New market entrants adding to demand H1 investment volumes significantly up on prior year Yields hardening for both shopping cent
Slide 6: Financials
Section New VR pic 2 Financials Timon Drakesmith, CFO 2014 Half-year results La Roca Village, Barcelona La Roca Village, Barcelona
Slide 7: Headline results
Headline results Income statement 30 Jun 2014 30 Jun 2013 % change Net rental income(1) (£m) 146.9 147.7 +1.5%(2) Adjusted profit before tax(1) (£m) 85.0 81.3 +4.6% EPRA EPS (p) 11.6 11.1 +4.5% Interim dividend (p) 8.8 8.3 +6.0% Balance sheet 30 Jun 2014 31 Dec 2013 % change Portfolio value(3) (£m)
Slide 8: Key drivers YoY change (LfL)
Growth in like-for-like income YoY change (LfL) 2.0% 1.5%(1) 1.2% 1.1% UK Shopping centres UK Retail parks France Shopping centres Total H1 2014 total(2) £62.3m £41.8m £36.4m £146.9m(3) Manor Walks Highcross Key drivers Growth Italie Deux Falkirk Central dampened by Cabot Circus tenant rotation Plac
Slide 9: Adjusted PBT vs 2013
Adjusted PBT vs 2013 up Net disposals Developments Value Retail Admin cost - total (0.5) 4.6% LfL NRI Financing Exchange and other £m Underlying Pension gain Restructuring 90 2.4 (5.2) 2.3 0.3 85 0.9 1.5 85.0 2.0 (3.8) 3.3 80 81.3 75 JUN 2013 JUN 2014 2014 Half-year results 9
Slide 10: Expense rebalancing on track
Expense rebalancing on track Activities in H1 2014 Benefits Leases signed for moves in Reading (Q4 2014) Cost reductions provide funding for growth areas and London (Q2 2015) including: • Development leasing Headcount reductions • Project management DB pension scheme closed to future accrual • Multi
Slide 11: Portfolio valuation change
Portfolio valuation change Value at H1 2014 Components of change 30 June 2014 (%) (£m) Yield shift (%) Income (%) Other (%) UK shopping centres +6.6 +5.9 +0.8 - 2,598 UK retail parks +3.9 +3.9 +0.1 -0.1 1,552 France retail -0.3 +0.5 +0.6 -1.4 1,777(1) Other interests(2) +1.2 -0.1 -0.2 +1.5 204 Inves
Slide 12: EPRA NAV per share movement
EPRA NAV per share movement up Investment Development Value Retail Exchange & other 6.8% portfolio Adjusted profit Dividends revaluation revaluation Pence valuation 640 9 11 (11) (2) 1 605 612 31 570 573 535 DEC 2013 JUN 2014 2014 Half-year results 12
Slide 13: Value Retail review
Value Retail review Operational achievements Financial performance Brand sales +11% Hammerson share H1 2014 YoY % La Roca (Barcelona) Phase 3 extension opened in Net rental income £21.7m +11%(1) May, plus Sunday trading EPRA Net income(2) £9.4m +16% Fidenza (Milan) sales growth of >15% due to remerc
Slide 14: Healthy financing ratios
Healthy financing ratios Financing polices 30 Jun 2014 31 Dec 2013 Net debt - £2,355m £2,252m Gearing <85% 54% 56% Loan to value <40% 38% 38% Cash/undrawn facilities - £980m(1) £716m Weighted average cost of finance - 4.6% 4.8% Interest cover >2.0x 2.8x 2.8x Net debt/EBITDA <10x 8.8x 8.2x Fixed rate
Slide 15: Refinancing benefits
Refinancing benefits We are refinancing our long term debt at cheaper rates Recent debt issues by Hammerson Upcoming maturities Amount Amount (1) Date Coupon Description Date Coupon Description (£m) (£m) 2012 400 2.75% €500m bond, 2019 Private placement, 2013 263 3.6% 2015 560 4.875% € bond 2021-26
Slide 16: Our markets and capital allocation
Section 3 Our markets and capital allocation David Atkins, CEO 2014 Half-year results Les Terrasses du Port, Marseille
Slide 17: Occupier market overview
Occupier market overview Improving Hammerson occupier sales in both territories(1) And strong Hammerson leasing activity % UK France £m H1 2013 H1 2014 4 15 +2.5% 3 2 12.1 1 10 10.2 0 -1 -2.4% 5 6.0 5.6 -2 4.1 -3 3.3 1.8 -4 1.1 0 H1 12 FY 12 H1 13 FY 13 H1 14 UK Shopping UK Retail France Group(2) ce
Slide 18: Occupier theme 1: Existing tenants increasing space
Occupier theme 1: Existing tenants increasing space Experience Convenience Luxury Union Square Fife Central Retail Park Bicester Village trebled unit size new 50,000ft2 home and 80% increase to flagship size fashion store doubling unit size in discussion with 5 other parks new flagship store 2014 Ha
Slide 19: Occupier theme 2: Impact of new market entrants/formats
Occupier theme 2: Impact of new market entrants/formats Experience Convenience Luxury Brent Cross Thurrock Retail Park Bicester Village Oracle and Highcross Brent South Retail Park Victoria Quarter in discussion with 3 other centres 2014 Half-year results 19
Slide 20: Occupier theme 3: Continued demand for catering
Occupier theme 3: Continued demand for catering Experience Convenience Luxury Highcross Wrekin Retail Park, Telford Les Terrasses du Port Union Square Brent Cross new catering units added 1st in Scotland, 2nd in UK Champagne bar opening this summer 2014 Half-year results 20
Slide 21: Meeting consumer demand at O’Parinor
Meeting consumer demand at O’Parinor Preparatory asset management initiatives Mall enlargement to ease flow Facilitated tenant departures to create adequate space A new offer Primark UGC multiplex Catering Primark success Tenant sales +20% swing in Q2 Footfall +17% YoY for H1 Recovered from Aérovill
Slide 22: Leasing at improving levels
Leasing at improving levels Leasing vs ERV Leasing vs previous passing Commentary H1 ERV uplift in specific locations UK Shopping +15% +2% UK SC ERV up 0.7% LfL centres 9 UK catering deals 15-20%>ERV Stabilising market backdrop France Shopping +1% +9% Demand supported by new market centres entrants
Slide 23: Investment markets
Investment markets 2014 Half-year results Bullring, Birmingham
Slide 24: Investment market overview
Investment market overview UK shopping centre average prime UK retail parks average prime France shopping centre average prime yields (%)(1) yields (%)(1) yields (%)(1) 6.25 6.25 6.00 5.50 5.50 5.75 5.75 5.50 5.25 5.25 5.00 4.50 4.50 4.50 4.50 4.50 4.50 4.40 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q1 13
Slide 25: Disciplined use of shareholders’ capital
Disciplined use of shareholders’ capital Acquisitions/Disposals Development Hammerson net retail investments (£m) Acquisitions Other disposals London office proceeds Investment portfolio yields 700 UK Shopping centres 4.5% FR Shopping centres 4.4% 478 350 432 UK Retail parks 5.5% 248 111 0 (58) Deve
Slide 26: Proven track record of successful investment
Proven track record of successful investment Bullring Junction Fund Value Retail Les Terrasses du Port Total new investment Total investment cost Total new investment of Total investment cost cost £154m £260m £267m(1) to June 2014 €485m Ungeared IRR Ungeared IRR Ungeared IRR Ungeared IRR 14% 18% 22%
Slide 27: Les Terrasses du Port exceeding expectations
Les Terrasses du Port exceeding expectations Successful launch 150,000 visitors in the first weekend Over 2 million visitors since opening 15% of visits on Sundays Average dwell time 1h40, 15% higher than Italie Deux or Brent Cross Positive trading comments “Extremely satisfied with first results, a
Slide 28: Les Terrasses du Port: amazing customer experience
Les Terrasses du Port: amazing customer experience Top 10 lifestyle apps in France Comprehensive services Unique catering experience Personal shopper Smart parking system Child care 170,000 total app opens Mother and baby facilities 38,000 promotion views Gift vouchers 22 catering units 10% offer re
Slide 29: Progressing major schemes
Progressing major schemes Victoria Gate, Leeds Le Jeu de Paume, Beauvais On site 34,300m2 luxury retail 23,800m2 development venue 86 shops and restaurants John Lewis anchor store Completion Q3 2015 Completion Q3 2016 Brent Cross Whitgift, Croydon The Goodsyard Pipeline 90,000m2 extension 200,000m2
Slide 30: Increasing value of parks through development
Increasing value of parks through development Abbotsinch, Paisley Elliott’s Field, Rugby Cyfarthfa, Merthyr Tydfil Completed terrace development Successful conclusion of planning Completed extension within 20 months Secured major retail line-up B&Q’s first low-energy store Value uplift of £11m since
Slide 31: Forecast development expenditure
Forecast development expenditure £m 300 Completed developments Les Terrasses du Port, Marseille On site developments 225 Victoria Gate, Leeds Le Jeu de Paume, Beauvais Other on site developments 150 Future developments Other extensions/developments 75 Watermark WestQuay, Southampton The Goodsyard Wh
Slide 32: Additional income from developments
Additional income from developments £54m £63m £15m £m annual rents £28m £11m 2014 2015 2016 2017-2019 Notes Annualised passing rents assuming 100% occupancy in year of project completion, post any rent free periods Assumes completion of all medium-term developments and extensions: 2014 O’Parinor, Le
Slide 33: Conclusion
Section 3 Conclusion 2014 Half-year results Bullring, Birmingham
Slide 34: Realising our vision
Realising our vision Capital allocated to high quality retail that delivers high returns and low volatility High occupancy and strong leasing performance Modest leverage and healthy liquidity Competitive advantage in each of Hammerson’s three focus areas Improving occupier market coupled with strong
Slide 35: Questions
Section 3 Questions 2014 Half-year results Les Terrasses du Port, Marseille
Slide 36: 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 37: Appendices
Section 3 Appendices 2014 Half-year results WestQuay, Southampton
Slide 38: Our assets
Our assets £6.3bn property portfolio Assets in UK and France 22 shopping centres 22 retail parks Investment in Value Retail 250m annual visitors 2014 Half-year results 38
Slide 39: Developments and extensions
Developments and extensions Estimated Value at Estimated cost Ownership Lettable area Potential annual Let(3) Scheme % m2 Earliest start completion 30/6/2014 to complete (1) income(2) % £m £m £m On site O’Parinor, Aulnay-sous-bois, Paris 25 7,200 Commenced Q4 2014 n/a 1 1 100 Siverburn extension, Gl
Slide 40: Hammerson’s investment in Value Retail
Hammerson’s investment in Value Retail Hammerson €58m Holding companies shareholder loan 22% equity Bicester La Roca Las Rozas La Vallée Masmechlen Fidenza Wertheim Ingolstadt Kildare Village Village Village Village Village Village Village Village Village Village ownership via LPs (%) 33 23 19 11 13
Slide 41: Value Retail share of results
Value Retail share of results 6 months ended 6 months ended Income statement 30 Jun 2014 30 Jun 2013 £m £m Share of results of associate 59.8 44.8 Less: EPRA adjustments (53.4) (39.3) EPRA adjusted earnings of associate 6.4 5.5 Interest receivable 3.0 2.6 Total impact of Value Retail on income state
Slide 42: Lease expiries and breaks as at 30 June 2014
Lease expiries and breaks as at 30 June 2014 Rents passing that ERV of leases that Weighted average expire/break in expire/break in unexpired lease term to break to expiry 2014 2015 2016 2014 2015 2016 years years £m £m £m £m £m £m Notes (1) (1) (1) (2) (2) (2) (1) (1) United Kingdom Retail Shopping
Slide 43: Rent reviews as at 30 June 2014
Rent reviews as at 30 June 2014 Projected rents at current ERV of leases Rents passing subject to review in subject to review in Outstanding 2014 2015 2016 Outstanding 2014 2015 2016 £m £m £m £m £m £m £m £m Notes (1) (1) (1) (1) (2) (2) (2) (2) United Kingdom Retail Shopping centres 36.1 11.5 8.4 8.
Slide 44: Operational statistics
Operational statistics UK France Tenant sales +2.5% -2.4% Footfall -1.5% -0.1% Rent:sales 13.1% 11.5% Non rental income £9.6m (2013: £9.2m) £1.0m (2013: £0.7m) Occupancy (%) France UK Shopping UK Retail Total Shopping Other UK centres parks portfolio centres 30 June 2014 97.7 96.6 98.2 91.6 97.2 31
Slide 45: Maturity profile of debt
Maturity profile of debt Bank drawn debt Secured debt Euro bonds Sterling bonds USPP 500 375 250 125 0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Shown on a pro-forma basis to include new bond issued on 1 July 2014 maturing in 2022, but without adjustment for repaymen
Slide 46: Valuation data
Valuation data Total UK Shopping UK Retail France retail Other UK continuing centres parks portfolio True equivalent yield (%) 30 June 2014 5.4 5.4 5.9 7.0 5.6 31 December 2013 5.8 5.5 6.1 7.4 5.9 Change (bps) -40 -10 -20 -40 -30 ERV (£m)(1) 30 June 2014 145.9 107.4 89.1 16.0 358.4 31 December 2013
Slide 47: 2014 components of valuation change
2014 components of valuation change Yield Income Development and other Total 225 224 209 159 145 58 58 7 7 8 27 19 1 -10 (5) (6) (1) Notes (12) UK Shopping centres France Shopping centres UK Retail parks Total portfolio Note: The total portfolio movement includes the movement in the UK Other portfol
Slide 48: Tenants in administration as at 30 June 2014
Tenants in administration as at 30 June 2014 30 June 2014 43 units in administration (0.7% passing rents) 15 units unoccupied (0.2% passing rents) 31 December 2013 49 units in administration (1.2% passing rents) 22 units unoccupied (0.5% passing rents) 30 June 2013 63 units in administration (1.6% p