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Hammerson starts to crank up shop rents

Buoyed by an improving retailing environment, the blue-chip landlord has made solid gains in its investment portfolio.
July 25, 2014

Retail landlord Hammerson (HMSO) delivered a solid, if unspectacular, performance over the first six months of 2014. Reported earnings were flattered by £222m in revaluations within its investment portfolio, which includes London's Brent Cross shopping centre and the Bullring in Birmingham. But the group also booked a 4.6 per cent year-on-year increase in net rental income to £147m, including 1.5 per cent of organic growth.

IC TIP: Buy at 609p

The steady improvement in the retailing environment has enabled Hammerson to crank up rents in select locations. The company pulled in £12m in new rental deals during the period - a fifth more than last year, even though the contracts relate to 4 per cent less floor space. Hammerson's prospects are also picking up across the Channel. In May, it opened Les Terrasses du Port, a huge retail centre in Marseille, with an unusually high initial occupancy rate of 98 per cent.

Net debt has crept up since the year-end, but Hammerson's loan-to-value ratio, at 38 per cent, remains just below the 40 per cent target. That's just as well given upcoming capital requirements. The company is due to start work on two projects this autumn: a mixed-use project next to its WestQuay mall in Southampton - for which it received planning in June - and an extension to a retail park in Rugby.

Oriel Securities expects adjusted book value of 647p at the year-end, rising to 691p in December 2015.

HAMMERSON (HMSO)

ORD PRICE:609pMARKET VALUE:£4.3bn
TOUCH:608-609p12-MONTH HIGH618pLow:    477p
DIVIDEND YIELD:3.2%TRADING PROPERTIES:na
PREMIUM TO NAV:0.2%NET DEBT:53%
INVESTMENT PROPERTIES:£6.89bn*  

Half-year to 30 JunNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
2012 (restated)54781118.3
2013607363518.8
% change+11+349+362+6

Ex-div: 20 Aug

Payment: 2 Aug

*Includes leaseholds, joint ventures and shares in associates.