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Earth shifting beneath Hammerson

The commercial property landlord has proposed a raft of measures to placate disaffected shareholders
July 24, 2018

Ahead of publication of its half-year figures, Hammerson (HMSO) revealed that it had offloaded Imperial Retail Park, Bristol and Fife Central Retail Park, Kirkcaldy, for a total consideration of £164m, representing a discount of around 10 per cent to the December 2017 book value.

IC TIP: Hold at 531.8p

David Atkins, chief executive of the commercial property landlord, said it was “already over halfway” to reaching the planned disposal target for 2018, but given the discount you would be justified in asking whether management has ditched the regular sales rationale in favour of placating activist investors dissatisfied with the decision to scupper a £3.4bn deal to acquire rival Intu. Indeed, it would be somewhat surprising if the collapse of the proposed Intu tie-up hadn’t stoked investor disquiet given the news came a few days after French shopping centre group Klepierre decided not to pursue a proposed cash/shares deal with Hammerson worth 635p a share.

However, to imply that the measures being undertaken by management simply amount to a sop is probably disingenuous given that the UK retail property sector just suffered one of its biggest monthly falls in years, amid faltering footfall on the high street. To counter what may eventually be viewed as ‘structural decline’, Hammerson has decided to exit the retail parks sector over the medium term, with the focus solely on its flagship and premium sites.

The owner of the Birmingham Bullring is also targeting £1.1bn in disposals by the end of 2019, along with £7m in annual cost savings, which will be aided by a reduction in the number of board members. A portion of the sale proceeds will help fund a proposed £300m share buyback programme, but none of this is likely to draw attention away from the collapse in reported profits and a 3 per cent drop in net rental income.

HAMMERSON (HMSO)   
ORD PRICE:531.8pMARKET VALUE:£4.22bn
TOUCH:531-531.8p12-MONTH HIGH:596pLOW: 430p
DIVIDEND YIELD:4.9%DEVELOPMENT PROPERTIES:£362m
DISCOUNT TO NAV:29%NET DEBT:60% 
INVESTMENT PROPERTIES:£4.26bn  
Half-year to 30 JunNet asset value (p)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
201775729036.210.7
201875055.87.011.1
% change-1-81-81+4
Ex-div:30 Aug   
Payment:8 Oct