Interim Management Statement

RNS Number : 5279W

Hammerson PLC

10 November 2014

 



Embargoed until 0700 Monday 10 November 2014

Hammerson plc

Interim Management Statement for the period from 1 July to 9 November 2014   

Highlights

·     Consumer and occupier market conditions are improving in prime UK retail whilst remaining subdued but stable in France

·     UK shopping centre sales up +2.6% with France down -2.8%YTD

·     Substantial year on year growth in total rent from new group lettings (+37%) and total area of lettings (+21%)

·     Long term group leases YTD were struck at 9% above ERV

·     Creation of VIA Outlets, a new European outlet venture in partnership with Value Retail, APG and Meyer Bergman; pursuing acquisition strategy of European outlet assets

·     Acquisition of remaining 40% stake in Highcross shopping centre, Leicester

·     Acquisition of a 10% stake (totalling £24 million) in Nice Etoile shopping centre in Nice, France, forming a new joint venture with Allianz. Hammerson will asset manage the property

·     Sale of final office asset, 10 Grosvenor Street to facilitate office moves in London and Reading and further reduce cost base

·     Successful completion of share placing raising £399 million; early redemption of 2015 Euro bond triggered

David Atkins, Hammerson Chief Executive, said: "Our investment activity during the period demonstrates our ambition to accelerate future growth which will be further enhanced by our extensive development pipeline where we have continued to make good progress. Earlier in the year we saw signs of improvement in the UK retail market and since then we have experienced further growth in retailer sales, tenant demand and rental values in our winning retail locations."

"In France, there is continued appetite from both consumers and retailers for outstanding retail destinations despite a more muted consumer backdrop. The outperformance of our Les Terrasses du Port development in Marseille since opening and the acquisition of a stake in the prime Nice Etoile shopping centre, underlines our commitment to vibrant retail locations in France."

Capital strength and investment

Investment and capital management transactions were the key feature of group activities during this period focusing on our three defined areas of retail: Experience, Convenience and Luxury.

We completed a successful share placing, raising proceeds of £399 million before expenses, which were principally used to acquire the remaining 40% interest in Highcross in Leicester, make further investments in the fast-growing outlet sector and provide additional capital for our development pipeline.

In September, we announced that Hammerson is a lead investor and partner in VIA Outlets (47% economic interest), a major new venture that will acquire existing European outlet centres with growth potential. VIA Outlets has already acquired two assets: Batavia Stad in Amsterdam and Fashion Arena in Prague.

VIA Outlets continues to actively pursue its European expansion strategy and is in advanced discussions regarding further acquisitions with Hammerson having already committed over £70 million towards the new venture.  

As also previously announced, we agreed to provide £30 million to Value Retail to assist with new extensions at Bicester Village and Kildare Village and for the new Value Retail village in Shanghai, which is due to open in 2015.

During the period, Hammerson acquired the remaining 40% share of Highcross shopping centre in Leicester for £180 million, marginally below the half year valuation. The asset continues to attract strong retailer demand and new retailers already opened since the acquisition include Hugo Boss with new signings including Pandora and Bill's Restaurant, which is making its debut in Hammerson's portfolio.  

We have entered into a partnership with Allianz to acquire the Nice Etoile shopping centre in Nice, France. Allianz is purchasing the majority stake in the 17,600m² shopping centre with Hammerson acquiring 10% (for £24 million) and acting as asset manager for the city's prime shopping centre. This transaction will provide an attractive return on capital, extend our relationship with an existing JV partner and expand our footprint of major French retail destinations.

We completed the sale of our 50% stake in our last remaining office asset and Hammerson's head office, 10 Grosvenor Street in Mayfair, to our joint venture partner Grosvenor Fund Management's London Office Fund for £54 million. The sale is in advance of our forthcoming office moves to Reading later this month and Kings Cross next summer as we look to enhance our operational efficiency and retail focus. The moves also form part of our drive to reduce costs and increase earnings.

Maximising income

The lettings and sales performance of the portfolio in the year to date is better than the same period in 2013.

Group Key Metrics	Sept 2014 (YTD)	June 2014 (YTD)	Sept 2013 (YTD)
Total rent from new lettings	£21.7m Up 37% on Sept 2013	£12.1m	£15.8m
Total new lettings by area (000m²)	128.9 Up 21% on Sept 2013	67.8	106.9
UK retail sales	+2.6%	+2.5%	0%
France retail sales	-2.8%	-2.4%	-3.9%
Group vacancy rate	3.3%	2.8%	3.3%

Long term group leases were struck 9% above ERV (UK retail +15% vs ERV; France retail +1% vs ERV) and 8.5% ahead of previous passing rents. Rent from new leases signed at UK shopping centres to September 2014 have already surpassed the total figure achieved for 2013, demonstrating continued retailer confidence and appetite for strong retail space.  

Significant lettings in the period include Zara taking a new 1,860m² (20,000ft²) menswear store at Bullring and a new flagship Jessop's store at The Oracle.    

For the three months to 30 September 2014, UK shopping centre sales were +2.8%, driven by successful 'Back to School' performance from retailers and menswear, catering and jewellery delivering strong growth. Year to date UK sales have seen an uplift of +2.6%. French shopping centres have seen a positive footfall uplift of +0.5% and a subdued sales performance of -2.8% for the first nine months.  

Overall occupancy in the portfolio was 96.7% as at 30 September 2014 consistent with our September 2013 performance, with units in administration representing 1.2% of passing rent and unoccupied units accounting for 0.6%, lower than the same time last year (0.8%).

At Les Terrasses du Port, retailer performance has been strong during the initial trading period with a number of well-known brands including The Kooples, Princesse tam-tam and Michael Kors reporting that their new Marseille store is already one of their best performing from a sales perspective, within their French portfolios.

Union Square in Aberdeen celebrated its fifth year of trading in October. Since opening in 2009, the centre has attracted 71 million visitors and has established itself as the leading retail location in the city with sales growing at an average rate of 5% per annum and sustained footfall growth.

Also in October, Hammerson took over the management of Cabot Circus in Bristol (where ownership remains 50%) including property and asset management, leasing and marketing, following the purchase of a 50% stake by AXA Real Estate. There is the potential to further strengthen the centre's position by upgrading the tenant mix and reinforcing it as Bristol's prime retail destination.

Value Retail continues to perform strongly with brand sales up over 10% on a year on year basis. Following the opening of the 5,700m² extension at La Roca Village in Barcelona, which is substantially occupied with 22 new units trading, the Village has experienced double digit sales increases. Elsewhere in the Value Retail portfolio, the 5,500m² extension at Kildare Village in Dublin has started on site and the new 33,000m²  Suzhou Village in China celebrated its official opening in October and is trading well.

Creating high-quality property - Development

At Victoria Gate in Leeds construction continues on our aspirational development adjacent to Victoria Quarter, Leeds' leading luxury retail destination. The £150 million development is now over a third let and we are encouraged by the interest from premium brands that have identified Victoria Gate as a key retail destination within their future store portfolio.   

Construction at our 23,800m² French development Jeu de Paume in Beauvais is progressing well. The development north of Paris is currently 54% let by income with Swarovski announcing they will be opening a new store within the Carrefour and H&M anchored scheme.

In Croydon, we have received confirmation on the timing of the CPO Inquiry for February 2015. Detailed designs for the 200,000m² centre will evolve, while the land assembly process continues next year.

At Brent Cross Cricklewood, we have a secure planning consent following the successful expiry of the Judicial Review challenge period. Consultation on the detailed designs for the first phase has been completed and a detailed application will be submitted later this year, with the first phase of works starting in 2016.

Creating high-quality property - Extensions and refurbishments

Enabling works have begun at Watermark WestQuay which will feature a 10-screen cinema and up to 20 restaurants. Construction on the 17,000m² catering and leisure extension is anticipated to complete by the end of 2016.

Construction has started on site for the redevelopment of Elliott's Field Retail Park in Rugby. The scheme will transform the location into a superior fashion park anchored by Marks & Spencer and Debenhams, alongside brands including Next, Outfit and TK Maxx. 

At Silverburn in Glasgow, the first wave of new restaurants have opened as part of the major leisure extension which will complete next spring.

The 7,200m² extension and refurbishment at O'Parinor is nearing completion and the centre relaunched in early November. The new 14-screen cinema opened last month, adding to the vibrancy of the centre which has already been enhanced following the opening of Primark earlier in the year.

Capital strength and liability management

Borrowings were £2.5 billion at 30 September 2014 and cash balances were £317 million, to give net debt of £2.2 billion (30 June 2014: £2.4 billion).

The loan-to-value and gearing ratios at 30 September 2014 were 33% and 46% respectively (based on 30 June 2014 portfolio values). Cash and committed unutilised bank facilities totalled £1,147 million (31 December 2013: £716 million).

In order to manage our balance sheet liabilities and optimise debt structure, we announced on Friday 7 November that we are exercising a call option to redeem the EUR480 million 4.875% bond maturing in June 2015. The bonds will be redeemed in full on 24 December 2014. This redemption utilises significant liquidity to manage near term debt maturities and achieve a lower running cost of debt.

Conference call

There will be a conference call for investors and analysts at 0800 GMT today. To participate in the call, please dial:

UK	[phone]
US	[phone]
Netherlands	[phone]
France	[phone]

The participant code is 578433. For a replay of the conference call, please visit: www.hammerson.com                            

For further information

David Atkins, Chief Executive Timon Drakesmith, Chief Financial Officer Catrin Sharp, Head 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 2014.

Financial Calendar

2014 Full Year results            16 February 2015

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. 

 

END

 

 

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