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Pigs fly as Hammerson posts a profit

The bloodletting at this shopping centre landlord may have come to an end
July 29, 2022
  • Report suggests shopping centre values have bottomed
  • Hammerson still struggling with falling rental income
IC TIP: Hold

Is that light at the end of the tunnel? After five years in the darkness, Hammerson (HMSO) has finally posted a pre-tax profit in its half-year results. Shares in the beleaguered shopping centre developer leapt 10 per cent on the morning of the announcement, but there remain reasons to be bearish.

Let’s start with the good-ish news. According to property agency Lambert Smith Hampton, the value of shopping centres may have bottomed out with the amount of money being invested into the asset class having slowly increased over the past few quarters. There is also evidence in Hammerson’s recent results that we have reached a floor on shopping centre values. The company lost £14.5mn in the revaluation of its assets which, while far from ideal, is much better than the £140mn revaluation loss it suffered this time last year.

The bad news is that the slowing of its valuation freefall has not been matched by an uptick in rent with non-adjusted net rental income falling by a further 6 per cent. Meanwhile, the percentage of its portfolio, which is not leased to any tenant, has increased to 7.2 per cent as at 30 June 2022 from 5.7 per cent as at 31 December 2021.

Yet, there are signs that the shopping centre vacancy rate trend may have peaked as well. According to the Local Data Company, vacancy reached a record high of 19.4 per cent in Q2 2021 and has since dipped 19 per cent as at Q1 this year. If this trend continues, Hammerson may be able to decrease its own vacancy rate and increase its rent roll. It’s a big if, but it’s also hard to imagine the stock's value falling any lower. Hold.

Last IC View: Sell, 35p, 04 Mar 2022

HAMMERSON (HMSO)   
ORD PRICE:24pMARKET VALUE:£1.1bn
TOUCH:23p-24p12-MONTH HIGH:40pLOW: 18.24p
DIVIDEND YIELD:1.7%TRADING PROP:£35.1mn
DISCOUNT TO NAV:-60.6%NET DEBT:52%
INVESTMENT PROP:£1.5bn   
Half-year to 30 JunNet asset value (p)Pre-tax profit (£mn)Earnings per share (p)*Dividend per share (p)**
202163.0-354-8.200.20
202260.650.61.10.20
% change-4---
Ex-div: 06 Oct   
Payment: 03 Nov   

*2021 figure adjusted from -8.70p to include scrip dividends

**The board intends to offer a 2p enhanced scrip dividend alternative