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Hammerson 2013 Full-Year Results Presentation

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Hammerson 2013 Full-Year Results Presentation to Investors and Analysts. …

Hammerson 2013 Full-Year Results Presentation to Investors and Analysts.
17 February 2014

Published in Real Estate
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  • 1. 2013 Half-year results Results 2013 Full-year Monday 17 February 2014 Results Monday 17 February 2014 2013 Full-year
  • 2. 1 Section Introduction and market overview David Atkins, CEO Financial results Timon Drakesmith, CFO Today’s presentation 2 Section 2013 half year results 2 Financial results Timon Drakesmith, CFO Performance drivers David Atkins, CEO 2013 Full-year results 2 3 Section 4 Section Conclusion David Atkins, CEO
  • 3. Vision Our vision is to be the best owner-manager and developer of retail property within Europe 2013 half year results 3 By capitalising on our strengths we aim to provide industry-leading shareholder returns LfL NRI +2.1% NAV/share +5.7% 32013 Full-year results Dividend +7.9% EPS +10.5%
  • 4. 2013 highlights Occupancy 97.7% Leasing +2% vs ERV 7% tenant rotation rate Les Terrasses du Port 93% let Commenced on site at Leeds and Beauvais Planning consent at Croydon and Best in class retail portfolio Advancing developments 2013 half year results 42013 Half-year results 42013 Full-year results rate at Croydon and Brent Cross WAIR reduced to 4.8% Reduction in cost ratio of 240bps Over £700m liquidity Queensgate disposal Leisure extensions on site Acquisition of Value Retail stakes, Bullring and Nancy Active financial management Capital recycling to enhance growth
  • 5. Market indicators Structural attractiveness of indexation Low personal debt levels Business confidence steady throughout 2013 Household disposable income increased French business confidence (Source: INSEE, France) Securing retail demand in France despite cyclical weakness 85 90 95 100 105 Index 90 85 95 100 105 2013 half year results 5 Household disposable income increased throughout 2013 80 Jul 12 Jan 13 Jul 13 Jan 14 Total disposable income (Source: INSEE, France) 2013 Full-year results 80 €bn 310000 315000 320000 325000 330000 335000 340000 Jan 08 Jan 10 Jan 12 31 32 33 34Portfolio initiatives Leasing progress at Les Terrasses du Port, Marseille and Jeu de Paume, Beauvais Repositioning existing assets through extensions and refurbishments Selective acquisitions Jan 14
  • 6. Stronger Christmas trading in the UK Robert Dyas Carphone Warehouse Argos Thorntons Greggs Ryman Superdrug Mothercare WH Smith Topps Tiles Halfords Dixons Maplin Dunelm Waitrose M&S Food Sainsbury Tesco Morrison Foodstores OOT retailers Non fashion retailers 2013 half year results 6 Source: PMA (from company statements) % p.a. like-for-like sales change, Christmas trading period 2013 vs 2012 2013 Full-year results -10 -5 0 5 10 15 20 25 Selfridges Liberty John Lewis House of Fraser M&S Gen merch Debenhams Boux Avenue Moss Bross Mountain Warehouse Jaeger Karen Millen Next Ted Baker White Stuff JD Sports Bon Marche Blue Inc New Look Lush The Works Fragrance Shop Robert Dyas Carphone Warehouse retailers Fashion retailers Department stores Moss Bros Boux Avenue
  • 7. UK GDP growth (Source: ONS) % Positive outlook driven by improving fundamentals 0.8 1.0 Falling UK unemployment (Source: ONS) 8 8.5 % 2013 half year results 72013 Full-year results -0.2 0.0 0.2 0.4 0.6 2012-Q1 2012-Q2 2012-Q3 2012-Q4 2013-Q1 2013-Q2 2013-Q3 2013-Q4 6 6.5 7 7.5 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13
  • 8. Deep investor demand and firming yields % Shopping centre investment in Europe (Source: DTZ research) €bn 250 30020 Volume Number of deals Number of deals Net initial yield (Source: PMA) 6.0 6.5 Prime Shopping centres Retail WarehousingPrime shopping centres Retail warehousing LHS RHS 2013 half year results 82013 Full-year results 0 50 100 150 200 0 5 10 15 1999 2001 2003 2005 2007 2009 2011 2013 4.0 4.5 5.0 5.5 2010 2011 2012 2013 2014
  • 9. 20 25 Shopping Centre / Unit Shop Retail Warehouse Combined with limited supply Retail completions expected to remain modest (Source: PMA) Mil ft2 p.a. net Shopping centres Retail warehouses 2013 half year results 9 0 5 10 15 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2013 Full-year results
  • 10. Increased space requirements in selected locations International retailers Fashion multiples Leisure and catering Aspirational brands Homeware and furnishings Discounters London Regional shopping centres Out of town retail parks 2013 half year results 10 Prime towns Secondary towns Tertiary 2013 Full-year results
  • 11. Forecast UK retail ERV growth per annum (Source: PMA) Leading to market ERV growth % 2.0 2.5 2.9 1.9 2.0 2.5 3.0 Prime shopping centres Retail warehouses 2013 half year results 112013 Full-year results -1.2 -0.9 -0.1 -0.1 1.1 2.0 -0.2 0.8 -0.2 -0.8 1.3 1.9 1.8 1.6 -1.5 -1.0 -0.5 0.0 0.5 1.0 1.5 2010 2011 2012 2013 2014 2015 2016 2017
  • 12. Hammerson positioned to support multichannel retail Click and collect sales not recordedHammerson 2013 tenants’ sales UK France -0.4% -2.7% Reported sales do not capture the whole picture 2013 half year results 122013 Full-year results Overall estimated benefit to reported sales of 1-2% increase Online purchases returned to store reduce recorded sales Adjusted sales capture underlying picture Adjusted sales Reported store sales Retailer 1 Retailer 2 -0.7% +4.7% +1.7% +5.7%
  • 13. 12 months to 31 December 2013 vs ERV vs previous rents UK retail +4% +1% France +0% +6% Group +2% +2% Leasing ahead of both ERV and previous rents 2013 half year results 132013 Half-year results2013 Full-year results UK shopping centres UK retail parks French retail Five Guys at The Oracle, Reading Homebase at Battery Retail Park, Selly Oak Eram at Place des Halles, Strasbourg
  • 14. Summary Improving economic fundamentals Growing consumer confidence Increasing tenant demand 2013 half year results 142013 Full-year results Increasing tenant demand Limited supply pipeline Hammerson positioned to outperform Conditions for selected ERV growth
  • 15. 2 Section 2013 Half-year results Financial results Timon Drakesmith
  • 16. Growth in NRI of 2.1% Marseille opening May 2014 On track to meet our £320m NRI forecast for 2015 Drive top line growth Finance agenda and progress Focus area Progress in 2013 Control operating costs Cost income ratio declined by 240 bps to 24.6% Operating costs reduced by 1.5% in 2013 2013 half year results 162013 Half-year results 16 Control operating costs Operating costs reduced by 1.5% in 2013 Further actions announced today to reduce cost income ratio Manage interest expense WAIR falls by 20bps to 4.8% Increased % of fixed debt for protection as rates rise Optimise capital structure Over £500m of new debt financing LTV below 40% target Well funded to support development schemes 2013 Full-year results
  • 17. Income statement 2013 2012 % change Net rental income(1) (£m) 290.2 282.9 +2.1%(2) Adjusted profit before tax(3) (£m) 168.9 152.5 +10.8% EPRA EPS (p) 23.1 20.9 +10.5% Final dividend (p) 10.8 10.0 +8.0% Headline results 2013 half year results 172013 Half-year results Final dividend (p) 10.8 10.0 +8.0% Balance sheet 31 Dec 2013 31 Dec 2012 % change Portfolio value (£m) 5,931 5,653(4) +2.0%(5) EPRA NAV (pence per share) 573 542 +5.7% LTV (%) 38 36 - 17 (1) Continuing and discontinued operations (2) On a like-for-like basis for continuing operations (3) Continuing and discontinued operations (4) Includes £195m for discontinued operations (5) Underlying capital growth for total portfolio excluding Value Retail 2013 Full-year results
  • 18. Solid uplifts in like-for-like NRI YoYchange(LfL) 3.2% 2.6% 2.1%(1) 0.2% UK shopping centres UK retail parks France retail Total 2013 Half-year results 182013 Half-year results 18 Union Square Brent Cross Silverburn GRI up 2.2% LfL Cleveland Thanet 2012 administrations Cergy O’Parinor Indexation In line with previous guidance Keydrivers 2013 Full-year results 2013 total(2) £124.7m £82.1m £62.7m £282.8m(3) (1) Includes other interests LfL of £7.2m which declined YoY by 4.0% (2) Total NRI for continuing portfolio (not LfL) (3) Continuing operations, including other interests total of £13.3m
  • 19. 22.5 24.0 Net investment LfL NRI Value Retail Administration costs Net financing Exchange and other 1.0 0.6 0.2 (0.5) 0.2 23.1 0.7 EPRA EPS vs 2012 +10.5% 2013 half year results 18.0 19.5 21.0 192013 Half-year results 19 EPRA EPS (pence) 20.9 1.0 2013 2013 Full-year results 2012 Earnings +20% since 2011
  • 20. Cost management delivering results 26 27 28 29 84 86 88 Operating costs(1) £m EPRA Cost/income ratio(1)(2) % 28.3% 27.0% 86.1 EPRA cost/income 2013 half year results 20 79.8 20 21 22 23 24 25 74 76 78 80 82 2011 2012 Year 2013 78.6 24.6% 79.8 2013 Full-year results EPRA cost/income target for 2016 21-22% (1) Continuing operations (2) Cost ratio is defined as: (net service charge expense + property outgoings + administration expenses – management fees receivable)/Gross rental income 2013
  • 21. New resource management measures Efficiency improvements Target savings - £6m p.a. from 2016 Senior management reorganisation London office relocation in 2015 Share incentive plans and pension benefits Additional investments to grow business Expected incremental costs - £5m p.a. from 2015 Expanded development programme - Headcount increases - Mobilisation of project teams 2013 half year results 21 Resources redeployed to growth areas Expense reductions push cost income ratio down to 21-22% 2013 Full-year results Share incentive plans and pension benefits London/Paris integration Implementation costs of £5m in 2014 - Mobilisation of project teams Digital marketing and multichannel
  • 22. FY 2013 % H2 2013 % H1 2013 % Value at 31 Dec 2013 (£m) UK shopping centres +2.4 +1.7 +0.7 2,524 UK retail parks +1.7 +3.2 -1.5 1,471 France retail -0.3 +0.8 -1.1 1,240 Current developments +10.4 +6.8 +3.4 497 Portfolio valuation change 2013 half year results 222013 Half-year results Current developments +10.4 +6.8 +3.4 497 Other UK interests(1) -6.5 -1.6 -5.0 199 Discontinued operations +3.7 -1.2 +5.0 - Total +2.0 +2.2 -0.2 5,931 Value Retail(2) +12.6 +6.8 +5.4 788(3) 2013 Full-year results (1) Principally assets held for redevelopment (2) Underlying overall portfolio valuation change for Hammerson interests (3) Hammerson’s share of portfolio valuation at 31 Dec 2013 2013 Full-year results
  • 23. DividendsDevelopments revaluation Adjusted profit 573 560 570 580 590 Value Retail revaluation Profit on disposals Investment portfolio revaluation 2323 EPRA NAV per share vs 2012 +5.7% 2 (18) 11 573573 2013 half year results 232013 Half-year results 23 EPRA NAV per share (pence) 542 4 520 530 540 550 560 2012 2013 2013 Full-year results 9 4
  • 24. Financing policies 31 Dec 2013 31 Dec 2012 Net debt - £2,252m £2,036m Gearing <85% 56% 53% Loan to value <40% 38% 36% Cash/undrawn facilities - £716m £696m Healthy financing ratios 2013 half year results 242013 Half-year results 24 Cash/undrawn facilities - £716m £696m Weighted average cost of finance - 4.8% 5.0% Interest cover >2.0x 2.8x 2.8x Net debt/EBITDA <10x 8.2x 7.9x Fixed rate debt >50% 82%(1) 80% 2013 Full-year results (1) Fixed rate debt percentage at 31 December 2013 was 70% but is shown on a pro forma basis for £275m US private placement issue arranged in November 2013
  • 25. 350 400 450 500 Bank drawn debt Secured debt Euro bonds Sterling bonds USPP £m Maturity profile of debt Credit markets attractive Weighted average coupon of 2015/2016 bonds 5.0% USPP will refinance 2014 bank debt (1) 2013 half year results 2525 0 50 100 150 200 250 300 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2013 Half-year results2013 Full-year results (1) Undrawn committed US private placement due to fund February and June 14
  • 26. Forecast development expenditure On site developments Les Terrasses du Port, Marseille Victoria Gate, Leeds Jeu de Paume, Beauvais Other on site developments 200 250 300 £m 2013 half year results 26 Note: Croydon expenditure in 2013 and 2014 reflects property acquisitions Other on site developments: Abbotsinch Retail Park, Paisley; Cyfarthfa Retail Park, Merthyr Tydfil; Silverburn, Glasgow; O’Parinor, Paris New extensions/redevelopments: Elliott’s Field Retail Park, Rugby; Watermark WestQuay, Southampton; Brent Cross leisure extension 2013 Full-year results New extensions/redevelopments Whitgift, Croydon Brent Cross extension Future developments 0 50 100 150 2013 2014 2015 2016 2017 2018
  • 27. Focus on Value Retail Value Retail Villages 2013 YoY change Brand sales €1.9bn +13% EBITDA €111m +12% Total portfolio value €3.1bn +12% Future growth drivers Forecast 72% growth in Chinese visits to Europe by 2018(2) Village remerchandising with more premium brand stores More flagship stores Extensions at Barcelona and Dublin Hammerson investment plans Hammerson share of(1) EPRA net income £19m +51% 2013 half year results 272013 Full-year results EPRA net income £19m +51% EPRA net assets £634m +29% (1) Including benefit of new investments, interest receivable and loans (2) Source: European Travel Commission
  • 28. 3 Section 2013 Half-year results Performance drivers David Atkins
  • 29. Performance drivers Contribution from extensions and refurbishments Growth from existing portfolio Major developmentsValue Retail 2013 half year results 29292013 Half-year results2013 Full-year results Selected examples
  • 30. Capital deployment Prime Shopping Centres Convenient Retail Parks Premium Designer Outlets Extension and refurbishment Silverburn Silverburn Abbotsinch Retail Park La Roca Village 2013 Half-year results 30 Development Acquisition 2013 Full-year results Kildare Village Les Terrasses du Port Bullring Junction Fund Cyfarthfa Retail Park La Vallée Village Kildare Village
  • 31. Acquisition of a further stake in Bullring Acquired additional 33% stake in 2013 in 50/50 JV with CPPIB, taking ownership to 50% 9% total property return Recent lease renewals +10% above previous rent Continues to attract new brands 2013 Half-year results 31 Bullring opens, with 1.5 million visitors in first week New £100 million John Lewis store opens for trade in city 2011 Spiceal Street opens, a 1,900m2 leisure and catering development 2003 2013 2014 Bullring celebrates 10 years of trading 2013 Full-year results Explore opportunity to increase leisure offering and add a cinema 2015
  • 32. Saint Sébastien, Nancy 105 shops and restaurants £7m annual rents 99% let 24,000m2 centre %%%% 6% initial yield Development potential 2013 Half-year results 322013 Full-year results
  • 33. Nearing completion at Les Terrasses du Port Countdown to launch Opening 3 May 2014 93% pre-let and 95% construction complete £28 million annual rents €460 million total development cost 2013 Half-year results 33 7.3% yield on cost Anchor store Printemps and MSUs have commenced fitting out of units 2013 Full-year results
  • 34. Transforming Marseille’s retail offer 190 units 53 43 222281 1 30 2013 Half-year results 342013 Full-year results 53 fashion brands 43 international brands 22 brands taking 1st store in a French shopping centre 22 catering units 81 brands new to the portfolio Brands recently signed include 30 brands new to Marseille
  • 35. Construction commenced at Leeds and Beauvais Victoria Gate, Leeds Jeu de Paume, Beauvais 2013 Half-year results 352013 Full-year results Out-turn financials Total development cost £150m Annual income £10m Yield on cost 6.7% 34,300m2 luxury retail venue John Lewis anchor store 28% pre-let Completion Q3 2016 Out-turn financials Total development cost £70m Annual income £5m Yield on cost 7.1% 23,800m2 retail and leisure venue 80km north west of Paris Large catchment and poor retail provision 42% pre-let Completion Q3 2015
  • 36. Advancing the development pipeline Silverburn, Glasgow O’Parinor, Paris Cyfarthfa Retail Park, Merthyr Tydfil Abbotsinch Retail Park, Paisley 2013 Half-year results 362013 Full-year results 10,900m2 extension 14 screen cinema 84% pre-let Total development cost £13m Completion Q1 2015 Yield on cost 7% 7,200m2 extension 14 screen cinema 100% pre-let Total development cost £4m Completion Q4 2014 Yield on cost 5% 14,500m2 extension 4,300m2 Marks and Spencer anchor store 46% pre-let Total development cost £23m Completion Q1 2015 Yield on cost 10% 5,000m2 extension 5 retail units in adjacent existing retail park 87% pre-let Total development cost £9m Completion Q2 2014 Yield on cost 13%
  • 37. Key milestones at Brent Cross and Croydon Brent Cross Whitgift, Croydon 2013 Half-year results 3737 Agree masterplan Brent Cross/Cricklewood phasing Submit planning Complete S106 2013 Half-year results 2013 Establish JV 2014 Acquire RLAM stake Secure planning resolution Conclude land assembly Conclude anchor negotiations Complete design 2013 2014 2013 Full-year results S73 approval Complete S106 Submit leisure planning application Secure CPO resolution
  • 38. Attractive future pipeline: The Goodsyard £6m per acre valuation Spring 2014 Planning submission Total development area 260,000m2 1,400 residential units 60,000m2 office space 19,000m2 Retail space (90 shops) 50/50 joint venture with Ballymore Properties 10 acre site in heart of Shoreditch 2013 Half-year results 382013 Full-year results
  • 39. 90 120 £mannualrents Additional income from developments £15m £56m £63m 2013 half year results 3939 Notes: Annualised passing rents assuming 100% occupancy in year of project completion, post any rent free periods Assumes completion of all medium-term developments and extensions 2014 Les Terrasses du Port, O’Parinor, Abbotsinch Retail Park; 2015 Silverburn, Jeu de Paume Beauvais, Elliott’s Field Rugby, Cyfarthfa Retail Park Merthyr Tydfil 2016 Watermark WestQuay, Victoria Gate 2017-2019 Croydon, Brent Cross Leisure, Brent Cross extension 2014 2015 2016 2017-2019 30 60 £mannualrents 2013 Half-year results2013 Full-year results £11m £30m 2014 2015 2016 2017-2019
  • 40. 2013 Half-year results Conclusion
  • 41. Key messages ERV growth returning to our markets On track with previous income growth guidance Major development activity amplifies returns 2013 half year results 41
  • 42. Conclusion ERV growth from existing portfolio Contribution from extensions and refurbishments Overhead cost control 2013 half year results 42422013 Half-year results2013 Full-year results refurbishments Major developments Value Retail Liability management Strong returns Confident outlook
  • 43. 2013 Half-year results Questions
  • 44. This presentation contains certain statements that are neither 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 Disclaimer 2013 half year results 4444 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 revision to these forward-looking statements to reflect events or circumstances after the date of these materials. Information contained in this presentation relating to the company or its share price, or the yield on its shares, should not be relied upon as a guide to future performance. 2013 Half-year results