HAMMERSON
H
ammerson is listed on both the LSE and JSE and owns and manages a portfolio of 20 shopping centres in the UK, France and Ireland. It has a 25% investment in Value Retail, a premium outlets retail property business that owns nine assets outside major Western European cities. Hammerson was founded in 1942 by Lewis Hammerson, a residential developer. The company went public in 1954 and was the first to develop and own a covered mall in the UK, with the opening of Brent Cross in north London in 1976. Since then it has assembled a diversified portfolio in various countries extending to Australia and the US. In 2010, it refocused to become a pure UK and Western European retail play. The company has maintained a relatively aggressive balance sheet management approach throughout its history. This has led to heavily dilutive rescue rights issues and disposals in 2009 and again in 2020. It’s therefore no surprise that the company’s CEOs have resigned after both events. Hammerson owns eight of the top 50 UK shopping centres (GlobalData ranking) and top centres in Ireland and France. Its Value Retail investment, however, is the highest returning portfolio in the group. It also owns a 100-acre land bank that has potential for residential and/or mixed use developments. Though still carrying too much debt, the company’s FINANCIAL MAIL July 2021
balance sheet was recapitalised with £532m of fresh equity and £328m of disposals in 2020. A further £330m of disposals were concluded in April 2021. While dilutive to prospective earnings, these disposals should give it enough covenant headroom to reposition the portfolio for growth after a decade of under-management. The company’s first female CEO, Rita-Rose Gagné, and the new CFO, Himanshu Raja, were appointed in the past nine months. They are tasked with restoring growth prospects through strategic portfolio repositioning and cost-cutting. It’s important to remember that after hotels, shopping centres were the property sector that was hardest hit by pandemic-related lockdowns. As a result, lower rental values
PORTFOLIO SPLIT Total value: £6.338m
Retail — 100% Flagships UK — 24% Flagships France — 18% Flagships Ireland— 12% UK retail parks — 6% Developments & other (UK) — 10% Premium outlets (value retail) — 30% Source: Hammerson
led capital values down 21% for the group in 2020 (UK shopping malls were down 36%). Also, UK uptake of online shopping as a proportion of total retail sales is the second highest in the world after China, which makes the UK’s retail property owners more vulnerable to rental income and capital value drops than retail property owners in continental Europe. Rental collections should, however, improve in 2021, providing Hammerson with enough cash to meet its debt service obligations and its committed capex of £115m. As a result, any dividend will take the form of shares in 2021 as recovery concerns linger and the company tries to retain as much cash as it can to cut debt. Hammerson remains a risky investment given its high debt and exposure to a sector facing secular headwinds. However, it is a typical property recovery play as its tenants, and thus portfolio, are likely to benefit disproportionately from a bounce-back in consumer spending. Furthermore, its prime portfolio and new management team should be able to manage these risks relatively well. Nicolas Lyle, senior equity analyst, Stanlib
HAMMERSON PLC (JSE code: HMN) As at December 31 2020 Head of company and title Market capitalisation Dividend per share NAV per share Total return (12 months to May 31 2021) (%) Total vacancy (%) Loan-to-value ratio (%) Tel no & website
25
Rita-Rose Gagné (CEO) £1.68bn (as at June 18 2021) 0.4p (FY2020), 4.0p (FY2019 enhanced scrip) 82p -4 5.7 40 +44 (0) 20 7887 1000; www.hammerson.com
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