Hammerson plc · LSE:HMSO
Hammerson — H1 2015 Earnings Presentation
65 slides from Hammerson's earnings presentation, Jul 24, 2015
Slide 1: 2015 Half-year Results
2015 Half-year Results 24 July 2015
Slide 2: Agenda
Agenda 01 Introduction and half-year highlights 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: 2015 Half-year highlights
2015 Half-year highlights EPS growth +13.3% LfL NRI growth(1) +3.0% UK Shopping Centre ERV growth(2) +3.3% Cost:income ratio reduced to 22.4% Total capital recycled(3) £155m Sales uplift at premium outlets +12% 4 developments completing in 2015 64,900m2 (1) (2) Including premium outlets 12 month rol
Slide 4: Product Framework delivering operational excellence
Product Framework delivering operational excellence iconic destinations Creating an aspirational retail destination at Victoria Gate, Leeds best@retail Introduced 5 new international brands to French market entertaining & exciting Dwell time +14% at Silverburn following leisure extension interactive
Slide 5: Financial results
02 Financial results Timon Drakesmith - CFO 5
Slide 6: Headline results underpinning our growth targets
Headline results underpinning our growth targets Income statement 30 Jun 2015 30 Jun 2014 Change Net rental income (£m) 159.5 146.9 +8.6% Adjusted profit before tax 108.2 87.8(1) +23.2% (£m) Adjusted EPS (p) 13.6 12.0(1) +13.3% Interim dividend (p) 9.5 8.8 +8.0% Balance sheet 30 Jun 2015 31 Dec 2014
Slide 7: Positive LfL NRI growth
Positive LfL NRI growth LfL NRI growth by sector (%) 10 9 8 8.6% 7 6 5 4 3 3.2% 3.0% 2 2.3% 2.1% 1 1.8% 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 Includes Value Retail only as VIA Out
Slide 8: Strong PBT growth
Strong PBT growth Adjusted PBT movement (£m)(1) +27.3% 110 0.7 3.2 (3) (1.3) 108.2 108.2 4.1 100 6.5 7.2 90 2.8 (2) 85.0 80 70 60 H1 2014 as LfL NRI Net Developments Premium Admin Financing FX H1 2015 reported investments outlets (1) (2) Movements shown at constant exchange rates Adjusted profit as
Slide 9: Managing and refocusing costs
Managing and refocusing costs Cost:income ratio (%) 30% 27.0% 12.5% 24.6% 25% 23.4%(1) 11.4% 22.4% 10.7% 21% 20% 11.2% 15% 14.5% 13.2% 12.7% 10% 11.2% 5% 0% FY 2012 FY 2013 FY 2014 H1 2015 Corporate expenses Operational costs 2016 target (1) Excludes one-off restructuring charge of £3.0m (at 31 Dece
Slide 10: Valuation analysis
Valuation analysis H1 2015 capital Components of underlying valuation Value at 30 Jun 2015(2) return(1) change (%) Yield shift Income (%) Other (%) (£m) (%) UK shopping centres +3.0 +2.0 +1.1 0.0 2,949 UK retail parks 0.0 - 0.3 +0.1 0.0 1,607 France +3.6 +5.0 - 0.6 - 0.8 1,734 UK other interests(3)
Slide 11: Solid uplift in NAV
Solid uplift in NAV Adjusted NAV movement (pence per share) 690 680 +4.7% 14 (12) 670 9 (2) 668 660 650 21 640 638 630 620 610 Dec 2014 Portfolio Premium Adjusted Dividends FX & other Jun 2015 revaluation outlets profit revaluation Financial results 11
Slide 12: Healthy financing ratios
Healthy financing ratios Financing policy 30 Jun 2015 31 Dec 2014 Net debt - £2,241m £2,265m Gearing <85% 43% 46% Loan to value <40% 33% 34% Cash/undrawn facilities - £450m £648m Weighted average cost of finance - 4.1% 4.7% Interest cover >2.0x 3.6x 2.8x Net debt/EBITDA <10x 7.3x 8.0x Fixed rate deb
Slide 13: Active protection against FX movement
Active protection against FX movement Balance sheet hedging (€m)(1) Euro earnings hedging (€m)(2) 3,500 60 3,000 50 55.0 90% hedged 2,500 2,892 72% hedged 2,603 40 2,000 39.4 30 1,500 20 1,000 500 10 0 0 EUR assets EUR liabilities EUR income EUR interest EUR has devalued over 9% vs GBP in H1 2015(3)
Slide 14: Portfolio update
03 Portfolio update David Atkins - CEO UK shopping centres UK retail parks France Premium outlets Developments 14
Slide 15: Portfolio update: UK shopping centres
Portfolio update: UK shopping centres 15 Bullring, Birmingham
Slide 16: Increasing consumer confidence
Increasing UK consumer confidence index(1) consumer 10 confidence 5 driving good 0 sales growth at -5 UK shopping -10 centres -15 -20 -25 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Hammerson UK shopping centres (YTD) Retail sales(2) +2.0% Footfall +1.2% Car park usage(3) +2.3% (1
Slide 17: Attracting leading retailers and driving rental growth
Attracting Leasing highlights leading retailers and driving rental growth Bullring Oracle Cabot Circus Highcross WestQuay Union Square Victoria Quarter Brent Cross Hammerson UK shopping centres (YTD) Leasing vs previous passing +16.0% Leasing vs ERV +2.2% ERV growth +1.5% (3.3% annualised(1)) (1) 12
Slide 18: Positioning our assets to deliver future ERV growth
Positioning our assets to deliver future ERV growth WestQuay Bullring Oracle ERV growth(1) -1.2% 3.2% 4.4% International brands draw Successful lease renewal Destination catering offer P Positive deals > ERV cycle completed Multiple new international New retailer concepts Low vacancy drivers brands
Slide 19: Driving footfall with new restaurant and leisure space
Driving footfall Silverburn extension driving incremental spend for the centre and dwell time Footfall (YTD LfL) with new +7% restaurant and Dwell time (YTD LfL) leisure space +14% Centre sales (YTD LfL) +5% Strong rental growth from catering leasing across the portfolio Space leased to catering and
Slide 20: Interacting with customers in real-time
Interacting Understanding customers is the Digital infrastructure rolled out with customers key to success across portfolio in real-time PLUS app rolled-out to all shopping Data gathering centres and leveraging More than 6,000 Bluetooth-enabled beacons installed valuable Tailoring content and offers
Slide 21: Portfolio update: retail parks
Portfolio update: retail parks 21 B&Q Eco learning store, Cyfarthfa retail park, Merthyr Tydfil
Slide 22: Retail parks: a major strength within our portfolio
Retail parks: a major strength within our portfolio Retail parks’ position with our portfolio Total area Scale: second largest portfolio in the UK 483,000m2 No. of parks over 20,000m2 Matched to consumer convenience 15 of 20 trends, in particular click & collect Occupancy 98.2% Leverage retailer rel
Slide 23: Driving performance at our retail parks
Driving performance at our retail parks Strong demand from traditional High-street retailers’ increased Actively applying Hammerson retailers confidence in parks retail expertise Homeware category Fashion anchor tenants Evolving the offer Homeware lettings in last 12 months upsizing Creating next ge
Slide 24: Retail parks developments deliver profitable returns
Retail parks developments deliver profitable returns Q3 2015 Q3 2015 2017 Elliott’s Field, Rugby Cyfarthfa, Merthyr Tydfil Orchard Centre, Didcot 15,700m2 retail space, an evolution of Phase 2 of 14,500m2 retail extension Additional 15,000m2 of retail and traditional shopping park catering floor spa
Slide 25: Portfolio update: France retail
Portfolio update: France retail 25 Les Terrasses du Port, Marseille
Slide 26: Consumer recovery still fragile in France but good leasing progress
Consumer French retail sales growth (%)(1) recovery still 4 3 fragile in 2 France but 1 0 good progress -1 -2 with leasing -3 -4 -5 Dec-11 Jun-12 Dec-12 Jun-13 Dec-13 Jun-14 Dec-14 Jun-15 Hammerson France (YTD) Retail sales(2) -1.6% Footfall -1.6% Leasing vs previous passing +5.2% Leasing vs ERV +0.
Slide 27: Securing multiple new international retailers
Securing multiple new international retailers delivers 21% sales uplift 8 international retailers Number of units re-tenanted across portfolio opening first store with 200 Target 20% of retail Hammerson offer renewed 180 160 50 units 140 120 36 units 100 5 international retailers 80 opening first st
Slide 28: Capital recycling to lift quality of French portfolio
Disposals Developments/Extensions Capital £90m total deal value Beauvais opening Nov recycling to lift 2015 – quality of 5.5% average NIY 6.5% YOC French 15% above book value Planned extensions at portfolio Nancy and Cergy Bercy 2, Paris Le Jeu de Paume, Beauvais Grand Maine, Angers Saint Sébastien,
Slide 29: Portfolio update: Premium outlets
Portfolio update: Premium outlets La Vallée Village, Paris
Slide 30: Premium outlets represents 13% of Hammerson's portfolio
Premium outlets represents 13% of Hammerson’s portfolio Value Retail : GAV £916 million VIA Outlets : GAV £141 million Invested since 1998 New in 2014 Hammerson exposure(1) : 38% Hammerson exposure : 47% Leading operator of luxury Villages across Europe Partnership between Hammerson, APG, Value 9 Vi
Slide 31: Exposure to the fast growing international shopping tourism market
Unique exposure to the fast growing international shopping tourism market Outlets market growth is structural, not cyclical 2014 European tax free sales by nationality(1) • Strong demand for discounted luxury goods • Expanding shopping tourism market • Growing retailer appreciation of outlets as par
Slide 32: Increasing sales densities at VIA Outlets
Active management of VIA Outlets assets delivering improved sales performance €30,000+ Value Retail International fashion and luxury Increasing sales densities €/sq m brands VIA Outlets sales densities(1) €2,000–€10,000 Mainstream fashion brand outlets +13% VIA Outlets Hugo Boss flagship, Batavia St
Slide 33: Extension opportunities offer additional growth for premium outlets
Extension opportunities offer additional growth for premium outlets Value Retail VIA Outlets Delivered Q4 2015 Q4 2017 Q1 2017 La Roca Village, Barcelona Kildare Village, Dublin Bicester Village, UK Batavia Stad, Amsterdam 5,800 m2 6,100 m2 5,200 m2 5,500 m2 25% incremental space 56% incremental spa
Slide 34: Portfolio update: Developments
Portfolio update: Developments WestQuay Watermark, Southampton 34
Slide 35: On site developments: Le Jeu de Paume, Beauvais
On site developments: Le Jeu de Paume, Beauvais Enhancing our French portfolio with attractive city centre retail 75% pre-let 86 shops and restaurants Anchored by H&M, Carrefour Latest brands signed: Size 23,800m2 Total Project Cost £60m Yield on cost 6.5% Opening Nov 2015 Portfolio update: developm
Slide 36: On site developments: Victoria Gate, Leeds
On site developments: Victoria Gate, Leeds Creating the premium and aspirational shopping offer for the north of England 51% pre-let Handover of John Lewis unit Q1 2016 Latest brands signed: Size 35,400m2 Total Project Cost £165m Yield on cost 6.5% Completion Q3 2016 Portfolio update: developments 3
Slide 37: On site developments: WestQuay Watermark, Southampton
On site developments: WestQuay Watermark, Southampton Consolidating WestQuay and Watermark as the city’s leading leisure & retail destination 75% pre-let Showcase Cinema de Lux opening Q1 2017 Catering brands signed include: Size 17,000m2 Total Project Cost £85m Yield on cost 6.0% Completion Q1 2017
Slide 38: Major developments: Croydon
Major developments: Croydon Transforming South London’s retail and leisure offer H1 2015 [high res image] CPO Inquiry concluded Mar 2015 Image to come of surrounding Croydon dev. Acquisition of further 50% interest in Whitgift centre Mar 2015 Croydon’s regeneration advancing H2 2015 Outcome of CPO I
Slide 39: Major developments: Brent Cross
Major developments: Brent Cross Regenerating North London’s iconic retail destination H1 2015 Infrastructure consents approved Mar and Jun 2015 CPO process started Advanced tenant mix proposals H2 2015 Final infrastructure consent Sep 2015 New CGI image to come Confirmation of date for CPO Inquiry (
Slide 40: Major developments: The Goodsyard
Major developments: The Goodsyard Opportunity to create a new London village H1 2015 GLA support for the scheme Revised planning application submitted Jun 2015 • 25,000m2 additional commercial space • Revised office buildings design and accelerated delivery • Revised residential buildings design; to
Slide 41: Proven track record in developments supports future delivery
Hammerson’s proven track record in developments supports future delivery Estimated additional income from developments (passing rent, £m) 22% of current 140 passing rent 120 100 80 7% of current 60 passing rent 40 20 0 (1) (2) (3) Developments completed since 2013 Schemes on site Major developments
Slide 42: Conclusion
04 Conclusion 42
Slide 43: Proven strategy delivering consistent shareholder returns
Proven strategy delivering consistent shareholder returns Improving end Operational Effective cost Strong markets excellence management development pipeline Delivering EPS and DPS growth EPS (pence) DPS (pence) CAGR 7.4% CAGR 7.1% 25 25 20 20 15 15 10 13.6 10 9.5 5 5 0 2011 2012 2013 2014 2015 2011
Slide 44: Questions
Questions 44
Slide 45: 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 46: Appendices
Appendices 46
Slide 47: Our assets
Our assets Property portfolio £7.9 billion Shopping centres 20 Retail parks 20 Premium outlet centres 15 Retail space 2.2 million m2 Annual visitors 250 million Portfolio breakdown by GAV UK Shopping Centres France Retail UK Retail Parks Premium Outlets Note: Map excludes Bercy 2, Paris and Grand Ma
Slide 48: Retail leadership and insight
Retail leadership and insight Ear to the ground with retailers Leadership Sales barometer Research Monthly sales tracker across 850 Annual retail research report units David Atkins, BCSC President 2015 Jean-Philippe Mouton, Co-Chair, CNCC Committee driving retail performance Debate Insight Thought l
Slide 49: Conditions for rental growth in UK shopping centres
Conditions for rental growth in UK shopping centres Macro backdrop Retailer profitability Rental tension Polarisation means less physical Consumer confidence Falling administrations space Value of space for ‘showrooming’ Low interest rates Sunday trading and ‘webrooming’ Adapting to multichannel Fal
Slide 50: Conditions for rental growth in UK retail parks
Conditions for rental growth in UK retail parks Economic backdrop Retailer strategies Retail Parks positioning Homeware and furnishing Increasing space to service Regional economic recovery retailers expanding online distribution Value retailers absorbing Ideally positioned for click & House price i
Slide 51: Positive uplift in rents for the group in H1 2015
Positive uplift in rents for the group in H1 2015 Leasing vs Leasing vs ERV ERV growth (1) Rent secured from previous passing new leases UK shopping centres +16.0% +2.2% +3.3% £5.4m UK retail parks n/a(2) +2.5% +0.2% £1.5m France +5.2% +0.5% +0.5% £3.3m Group (3) +10.2% 1.7% +1.6% £10.6m (1) (2) 12
Slide 52: On site and major developments
On site and major developments On site developments(1) Lettable area m2 Potential completion Current value (2) Estimated cost to complete(3) Estimated annual Let(5) % £m £m income(4) £m Cyfathfa retail park extension, Merthyr Tydfil 14,500 Q3 2015 n/a 6 2 66 Elliott’s Field shopping park, Rugby 15,7
Slide 53: Development pipeline opportunities
Development pipeline opportunities Scheme Lettable area Key Facts m2 • Determination due on Masterplan planning application made in July 2015 for future Silverburn (Phase 4), Glasgow 50,000 extension of existing centre in second half of 2015 • Masterplan also includes retail, hotel and leisure uses
Slide 54: Forecast development expenditure
Forecast development expenditure Forecast development expenditure 350 Forecast £303m £203m £194m £258m £277m 300 Future developments(2) The Goodsyard 250 Whitgift, Croydon 200 Brent Cross Other on site developments 150 On site developments Le Jeu de Paume 100 WestQuay 50 Victoria Gate Les Terrasses
Slide 55: Reducing interest costs and extending maturity
Reducing interest costs and extending maturity Debt maturity profile (£m) 700 New bank facility £415m 80 bps replacing 150bp 2016 facility 600 500 400 £415m RCF due 2020 undrawn £415m RCF due 2020 300 Undrawn facilities Bank drawn debt 200 USPP 100 Sterling bonds Euro bonds 0 Secured debt 2015 2016
Slide 56: Cost:ratio 2015
Cost:ratio 2015 UK shopping UK retail parks France Devs & other Group centres Net service charge expenses 2.0 1.0 1.8 1.5 6.3 Other property outgoings 7.5 1.0 3.9 1.5 13.9 Total property outgoings 9.5 2.0 5.7 3.0 20.2 Employee and corporate costs 23.0 Management fees receivable (2.9) Net administrat
Slide 57: Premium outlets overview
Premium outlets overview Value Retail Villages VIA Outlet centres Bicester Village, UK Kungsbacka, Gothenburg Kildare Village, Dublin Batavia Stad, Amsterdam Maasmechelen Village, Fashion Arena, Prague Brussels Wertheim Village, Frankfurt Excalibur Chvalovice La Vallée Village, Paris Landquart, Zuri
Slide 58: Hammerson's investment in Value Retail
Hammerson’s investment in Value Retail Hammerson €58m(1) shareholder loan Holding companies 22% equity La Roca Las Rozas La Vallée Maasmechelen Fidenza Wertheim Ingolstadt Bicester Village Kildare Village Village Village Village Village Village Village Village 33 23 19 11 13 20 31 0 3 45 35 31 22 24
Slide 59: Value Retail share of results
Value Retail share of results Income statement 30 Jun 2015 30 Jun 2014 £m £m Share of results associate 64.1 59.8 Less EPRA adjustments (57.0) (53.4) Adjusted earnings of associate 7.1 6.4 Interest receivable 2.6 3.0 Total impact of Value Retail on income statement – adjusted 9.7 9.4 basis Balance s
Slide 60: Lease expiries and breaks as at 30 June 2015
Lease expiries and breaks as at 30 June 2015 Weighted average Rents passing that expire/break in ERV of leases that expire/break in unexpired lease term Proportionally consolidated 2015 2016 2017 2015 2016 2017 To break To expiry excluding premium outlets £m £m £m £m £m £m years years Notes A A A B
Slide 61: Rent reviews as at 30 June 2015
Rent reviews as at 30 June 2015 Projected rents at current ERV of Rents passing subject to review in leases subject to review in Proportionally consolidated Outstanding 2015 2016 2017 Outstanding 2015 2016 2017 excluding premium outlets £m £m £m £m £m £m £m £m Notes A A A A B B B B United Kingdom Sh
Slide 62: Operational statistics
Operational statistics UK shopping France Sales densities(2) UK France centres £/ft2 £/ft2 Sales(1) +2.0% -1.6% 2015 295-620 222-630 Footfall +1.2% -1.6% 2014 290-590 200-610 Rent:sales(2) 12.6% 12.2% 2013 270-560 200-620 OCR(2) 20.1% 15.0% Occupancy (%) UK shopping UK retail France Devs & other Gro
Slide 63: Valuation data
Valuation data UK shopping UK retail parks France retail UK Other Total continuing centres interests portfolio True equivalent yield (%) (1) 30 June 2015 5.3 5.7 5.0 7.7 5.5 30 June 2014 5.4 5.9 5.4 7.0 5.6 Change (bps) (10) (20) (40) 70 (10) ERV (£m) (2) 30 June 2015 150.8 84.8 95.5 13.3 344.4 30 J
Slide 64: Components of valuation change
Components of valuation change Components of valuation change in H1 2015 – Total Portfolio (£m) 180 160 163 140 138 120 100 80 87 82 60 60 57 40 20 31 23 2 17 17 2 1 0 -1 -3 -10 -13 -5 -20 -40 UK Shopping Centres UK Retail Parks France Developments Total Portfolio Yield Income Development & other To
Slide 65: Tenants in administration as at 30 June 2015
Tenants in administration as at 30 June 2015 30 June 2015 52 units in administration (1.0% passing rents) 10 units unoccupied (0.3% passing rents) 31 Dec 2014 55 units in administration (1.0% passing rents) 13 units unoccupied (0.4% passing rents) 31 December 2013 49 units in administration (1.2% pa