Interim Management Statement

RNS Number : 6499R

Hammerson PLC

08 November 2011

 



For immediate release 8 November 2011

Hammerson plc

Interim Management Statement for the period from 1 July 2011 to 8 November 2011

Key points:

·     Occupancy across the portfolio remains high at 97.1% (30 June 2011: 97.2%)

·     81 new leases signed representing 23,000m², worth £4.4 million per annum

·     Planning applications submitted for 26,000m² of asset improvements and reconfigurations in the retail parks portfolio

·     New multi-channel initiatives implemented including the opening of the UK's first House of Fraser  "buy and collect" store in Union Square, Aberdeen, and Boden's first pop-up store at The Oracle, Reading

·     Disposal of a further 24% of O'Parinor has improved liquidity and financial flexibility, resulting in a pro forma loan-to-value ratio of 37%

David Atkins, Chief Executive, said:

"Over the period, the economic environment has weakened and consumer confidence has fallen in both the UK and France. Nevertheless, we continue to deliver on our strategic objectives of maximising income growth and creating value from our high quality portfolio, whilst reducing costs and retaining financial flexibility. Polarisation in consumer markets is benefitting our regionally dominant shopping centres and convenient retail parks, both of which continue to attract successful retailers."

Maximising income

Overall occupancy in the portfolio remains high and was stable at 97.1% at 30 September 2011 (30 June 2011: 97.2%). Our occupancy target is 97%.

Occupancy (%)	UK Retail	France Retail	UK Office	Group
30 September	96.9	97.7	97.3	97.1
30 June	97.2	97.3	97.3	97.2

During the quarter, footfall and sales in our UK shopping centre portfolio declined 1.9% and 3.8% respectively, in part reflecting the impact of the riots in August and strong prior year comparisons at some retailers. In France, footfall and sales fell 4.9% and 6.5% respectively, heavily impacted by the different timing of the national summer sales period.

Demand for space from retailers has remained encouraging. We signed 81 new leases in the period representing 23,000m² and worth £4.4 million of rental income per annum. In the UK we signed 18 long-term leases in the retail portfolio with rents, overall, 5% above ERV as at December 2010. In France, we signed 39 long-term leases also at rents 5% above December ERV. 

Across the portfolio the number of units in administration has fallen to 40, from 53 at 30 June, representing less than 1% of passing rents. Collection rates have remained excellent.

Significant new lettings in the UK include: Basler, Hawes & Curtis and Footlocker at Brent Cross, London; Cult at Bullring, Birmingham; Pandora and Oliver Bonas at Cabot Circus, Bristol; Hush Puppies at Oracle, Reading; Fat Face at Queensgate, Peterborough; Fossil at Silverburn, Glasgow; and Dunelm at Central Retail Park, Falkirk.

At Bercy 2, Paris, we have exchanged contracts for a 1,200m² letting to TATI, the French general merchandise retailer. The French ILC index, which applies to circa 80% of our leases, has been announced at 2.56% for 2012. The ICC index, on which the remainder of leases are based, has been set at 5.01%. This will result in meaningful rental growth for the Company's French assets with effect from January 2012.

Over the period, we have continued to develop our multi-channel initiatives. In October, the UK's first House of Fraser.com store opened in Union Square, Aberdeen. The 150m² store utilises ipads, laptops and interactive screens to order products that can be collected in store. Also in October the catalogue retailer Boden opened its first pop-up store at The Oracle, Reading. The store will be open in the run up to the Christmas period and will provide customers with the opportunity to browse product ranges as well as utilise click and collect facilities.

Enhancing the portfolio

We continually aim to improve the returns from our portfolio by selling mature assets to invest in acquisition, development or asset management opportunities which offer superior returns.

In line with this strategy, we sold a further 24% stake in O'Parinor shopping centre, Aulnay-sous-Bois, near Paris, in October, bringing liquidity into the business.

Our major retail development at Les Terrasses du Port, Marseille, is progressing well. During the quarter, pre-letting agreements were exchanged with Kiko, Sephora and Pepe Jeans bringing the project to 56% pre-let. Tenant interest remains strong and discussions are progressing with a number of major space retailers. The project is on programme to complete in 2014.

We are making good progress with pre-letting at our other proposed French retail developments. At Le Jeu de Paume, Beauvais, a 22,000m² scheme north of Paris, we have agreed a pre-letting with Carrefour for a 3,000m² store. At Halle en Ville, Mantes, a 30,000m² scheme west of Paris, we have signed Leclerc as a 4,000m² food anchor. Discussions with other prospective tenants remain encouraging.    

In London, negotiations are progressing with CMS Cameron McKenna in respect of the pre-letting agreement for Principal Place, London EC2. We have also started discussions with potential development partners for the residential component of this project.

At 99 Bishopsgate, London EC2, where we acquired the virtual freehold in July, Deutsche Bank has now vacated the majority of its 13,500m² office space, and we will shortly begin refurbishment works which are due to complete by autumn 2012.

We have started construction on the extension and reconfiguration of Queensgate Shopping Centre, Peterborough.  The extension will be anchored by a 5,000m² Primark, and the new floorspace will be handed over to retailers in July 2012 to enable trading to commence in Autumn 2012.

We continue to capitalise on increasing demand for quality catering within our portfolio. At Spiceal Street, Birmingham, units have been handed over to occupiers for fitting out. The new restaurant quarter will open to the public in November, in time for Christmas trading. Planning applications have also been submitted for two restaurant units at Fife Central Retail Park, Kirkcaldy, and a restaurant unit at Ravenhead Retail Park, St Helens.

We have advanced a number of other development opportunities within the retail parks portfolio, with planning applications submitted for: the extension and reconfiguration of Westmoreland Retail Park, Cramlington, to include the provision of a nine-screen multiplex Cinema and four restaurant units; a joint 18,850m² development adjacent to the Company's St Oswald's Retail Park in Gloucester; and a 2,700m² reconfiguration of the Focus unit at Drakehouse Retail Park, Sheffield.

Efficiency initiatives

Over the period we have made progress improving the operational efficiency of the business. A review of UK retail, legal and agency services resulted in the Company bringing a greater part of the leasing process in house, broadly halving the average period of time taken to conclude lease negotiations to around 40 days. We have also completed a reorganisation of the London based finance, company secretarial and legal teams that has streamlined reporting processes and improved response times. As a result of our initiatives we anticipate reducing administration costs by around £3 million per annum from 2012.

Financing

Borrowings were £2.3 billion at 30 September 2011 and cash balances were £58 million, to give net debt of £2.2 billion (30 June 2011: £2.2 billion).

We realised £142 million from net disposals in the period, and including these proceeds the pro forma loan-to-value and gearing ratios at 30 September were 37% and 58% respectively (based on 30 June portfolio values). Cash and committed unutilised bank facilities following recent disposals totalled £563 million.

Outlook

Despite the weakening economic conditions, our regionally dominant shopping centres and conveniently located retail parks continue to attract successful retailers. Occupancy levels across the portfolio are stable and we remain confident of our operating prospects and ability to capitalise on prevailing retail trends.

While we remain confident in the long-term outlook for the London office market, occupier demand has been muted and remains susceptible to fluctuations in the global economy. In this environment we will maintain our prudent approach to securing pre-lets before commencing developments.

Investment markets are demonstrating a similar polarisation to the occupier markets, where demand has concentrated on prime, well-let assets. The value of prime assets such as Hammerson's is being supported by continued demand from international capital combined with limited supply.

We will continue to seek to recycle capital through selective asset disposals. However, if there is continuing stress in the euro-zone financial system we may see some attractive acquisition opportunities across our markets in 2012.

Conference call

There will be a conference call for investors and analysts at 07.30 GMTtoday. To participate in the call, please dial:

UK	[phone]
US	[phone]
Netherlands	+ 31 20 713 9243
France	[phone]

The participant code is 994956

For a replay of the conference call, please visit: www.hammerson.com

For further information

David Atkins, Chief Executive Timon Drakesmith, Chief Financial Officer Morgan Bone, Director of Corporate Communications

Tel: [phone] Tel: [phone] [e-mail]

Financial information

The financial information contained in this statement is based on unaudited management accounts for the three months ended 30 September 2011.

Forward-looking statements

This document contains certain statements that are neither reported financial results nor other historical information. These statements are forward-looking in nature and are subject to risks and uncertainties. Actual future results may differ materially from those expressed in or implied by these statements. Many of these risks and uncertainties relate to factors that are beyond Hammerson's ability to control or estimate precisely, such as future market conditions, currency fluctuations, the behaviour of other market participants, the actions of governmental regulators and other risk factors such as the Company's ability to continue to obtain financing to meet its liquidity needs, changes in the political, social and regulatory framework in which the Company operates or in economic or technological trends or conditions, including inflation and consumer confidence, on a global, regional or national basis. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this document. Hammerson does not undertake any obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date of this document. Information contained in this document relating to the Company should not be relied upon as a guide to future performance.

 

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