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Hammerson: FY17 adjusted EPS rises 6.5 percent

By Prachi Singh

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Business

In 2017, Hammerson Plc said that adjusted EPS increased by 1.9 pence or 6.5 percent to 31.1p driven by increased net rental income, particularly from its Irish shopping centres, higher earnings from the company’s premium outlets and favourable foreign exchange movements partly offset by income foregone from property disposals during 2016 and 2017. Like-for-like NRI grew by 1.7 percent slightly below the company’s target of 2 percent. Income at its UK and French shopping centres grew by 1.8 percent and 2.6 percent respectively, while NRI at Hammerson’s UK retail parks fell by 2.5 percent.

Commenting on the results, David Atkins, Chief Executive of Hammerson, said in a statement: "By creating the space that today's retailers need to showcase their brands, we achieved the highest level of lettings this year than in any other in Hammerson's 75-year history and group occupancy is at a 17-year high at 98.3 percent. This activity contributed to a 6.5 percent uplift in earnings per share, which has risen on average by 8.3 percent per annum over the past five years.”

Highlights of Hammerson’s annual performance

The group's IFRS profit for the year, attributable to equity shareholders, was 388.4 million pounds (545.3 million dollars), 71.1 million pounds (99.8 million dollars) higher than for the prior year due to higher revaluation gains on the group's premium outlets portfolio which generated a net revaluation gain of 225.2 million pounds (316.3 million dollars) in 2017 compared with 138.4 million pounds (194.3 million dollars) in 2016.

The group performance of 1.7 percent includes growth of 7.4 percent from the company’s Irish centres. During the year, the group's properties produced a total return of 6.8 percent and the group's investment and development portfolios produced total returns of 4.3 percent and 6.9 percent respectively. Premium outlets produced the highest return of 16.9 percent. During 2017, the ratio reduced by 100bp to 21.6 percent due to lower property costs, which, as a percentage of the gross rental income denominator, have fallen from 10.7 percent to 9.7 percent.

Occupancy remained above Hammerson’s 97 percent target, with the portfolio 98.3 percent occupied at the end of 2017, higher than the prior year due to the strong leasing performance during 2017. The most significant increase was in France, where the level of occupancy increased from 96.5 percent to 97.9 percent. The company added that 2017 was a record year for leasing, with increased volumes at each of its sectors. During the year the company secured 33.3 million pounds (46.7 million dollars) of income, which is 8.4 million pounds (11.8 million dollars) or 34 percent, higher than 2016. In total, the company signed 460 leases representing and for principal leases, the rent was 8 percent higher than December 2016 ERVs and 7 percent higher than the previous passing rent.

The company’s directors have proposed a final dividend of 14.8 pence per share. Together with the interim dividend of 10.7 pence, the total for 2017 is 25.5 pence, representing an increase of 6.25 percent compared with the prior year.

Acquisition of Intu to boost Hammerson’s portfolio

The recently announced acquisition of Intu, the company said, will create a 21 billion pounds (29.4 billion dollars) pan-European portfolio of high-quality retail destinations, in line with its strategy to focus on growing consumer markets.

"The highlight of 2017 was the announcement of our proposed acquisition of Intu. In line with our strategy, the transaction will further enhance our portfolio and operating platform, providing further opportunity to expand in higher growth markets. We are on track with our acquisition timetable and integration planning,” added Atkins.

Hammerson’s performance across markets

In 2017, like-for-like net rental income in the UK increased by 1.8 percent. All UK centres generated growth with the exception of Bullring, Cabot Circus and Union Square. Strong demand from tenants, the company said, underpinned significant leasing progress in 2017, with 181 leases contracted, representing 13.4 million pounds (18.8 million dollars) of annual rental income. In respect of principal leases, rents were secured at 8 percent above December 2016 ERVs and 6 percent above previous passing rents.

New brands secured at Bullring included Russell & Bromley and Coach. The trend at Brent Cross for retailers to seek additional space continued, with major operators, including Zara and JD Sports, upsizing their stores. Since the year, end Hammerson also announced that Next and River Island have chosen to relocate from Broad Street, Reading and significantly increase their physical presence at The Oracle as part of a major enhancement of the centre.

On a same-centre basis, retail sales at the UK shopping centre portfolio as a whole fell by 2.7 percent but increased by 3 percent when the new extensions at Westquay, Southampton and Victoria Gate, Leeds are taken into account. Benchmark UK retail market sales fell by 3 percent over the year. Like-for-like net rental income at the Hammerson retail parks decreased by 2.5 percent in 2017.

At December 31, 2017, the three largest centres, Les Terrasses du Port in Marseille, Italie Deux and Les 3 Fontaines in Paris, accounted for over 85 percent of the value of the portfolio. Net rental income in France totalled 95.3 million pounds (133.8 million dollars) in 2017 and on a like-for-like basis increased by 2.6 percent. Les 3 Fontaines and Les Terrasses du Port were the two strongest performing centres with higher gross rental income associated with recent leasing activity. Retail sales, calculated on a same-centre basis, increased by 0.1 percent, 110 basis points higher than the CNCC Index which fell by 1 percent. Footfall in the company’s centres increased by 1.6 percent in 2017.

In 2017, the Ireland portfolio generated net rental income of 34.8 million pounds (48.8 million dollars). On a pro-forma basis, Hammerson added, the like-for-like net rental income growth from 2016 to 2017 would be 7.4 percent, primarily driven by Dundrum, where additional income arose from the settlement of rent reviews and new lettings as well as active asset management and increased car park and commercialisation revenue.

Picture:Hammerson website

Hammerson