Hammerson 2013 Full-Year Results Presentation

2013 Half-year results

Results2013 Full-year

Monday 17 February 2014

ResultsMonday 17 February 2014

2013 Full-year

1Section

Introduction and market overview David Atkins, CEO

Financial results Timon Drakesmith, CFO

Today’s presentation

2Section

2013 half year results 2

Financial results Timon Drakesmith, CFO

Performance drivers David Atkins, CEO

2013 Full-year results

2

3Section

4Section

Conclusion David Atkins, CEO

Vision

Our vision is to be the best owner-manager and developer of retail property within Europe


By capitalising on our strengths we aim to provide industry-leading shareholder returns

LfL NRI+2.1%

NAV/share+5.7%


Dividend+7.9%

EPS+10.5%

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

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


Household disposable income increased throughout 2013 80

Jul 12 Jan 13 Jul 13 Jan 14

Total disposable income (Source: INSEE, France)


80

€bn

310000

315000

320000

325000

330000

335000

340000

Jan 08 Jan 10 Jan 1231

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

Stronger Christmas trading in the UK

Robert DyasCarphone Warehouse

ArgosThorntons

GreggsRyman

SuperdrugMothercare

WH Smith

Topps TilesHalfords

DixonsMaplin

Dunelm

WaitroseM&S FoodSainsbury

TescoMorrison

Foodstores

OOT retailers

Non fashion retailers


Source: PMA (from company statements)% p.a. like-for-like sales change, Christmas trading period 2013 vs 2012


-10 -5 0 5 10 15 20 25

SelfridgesLiberty

John LewisHouse of FraserM&S Gen merch

Debenhams

Boux AvenueMoss Bross

Mountain WarehouseJaeger

Karen MillenNext

Ted BakerWhite Stuff

JD SportsBon Marche

Blue IncNew Look

LushThe Works

Fragrance ShopRobert Dyas

Carphone Warehouse retailers

Fashion retailers

Departmentstores

Moss BrosBoux Avenue

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-1

2

Apr-

12

Jul-

12

Oct

-12

Jan-1

3

Apr-

13

Jul-

13

Oct

-13

Deep investor demand and firming yields

%

Shopping centre investment in Europe (Source: DTZ research)

€bn

250

30020

Volume Number of dealsNumber of deals

Net initial yield (Source: PMA)

6.0

6.5Prime Shopping centres Retail WarehousingPrime shopping centres Retail warehousing

LHS RHS


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

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


0

5

10

15

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018


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


Prime towns

Secondary towns

Tertiary


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


-1.2

-0.9

-0.1-0.1

1.1

2.0

-0.2

0.8

-0.2-0.8

1.3

1.9 1.81.6

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2010 2011 2012 2013 2014 2015 2016 2017

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


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%

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

Summary

Improving economic fundamentals

Growing consumer confidence

Increasing tenant demand


Increasing tenant demand

Limited supply pipeline

Hammerson positioned to outperform

Conditions for selected ERV growth

2Section


Financialresults

Timon Drakesmith

Growth in NRI of 2.1%Marseille opening May 2014On track to meet our £320m NRI forecast for 2015

Drive top line growth

Finance agenda and progress

Focus area Progress in 2013

Control operating costsCost 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 2013Further actions announced today to reduce cost income ratio

Manage interest expenseWAIR falls by 20bps to 4.8%Increased % of fixed debt for protection as rates rise

Optimise capital structure

Over £500m of new debt financingLTV below 40% targetWell funded to support development schemes


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


Solid uplifts in like-for-like NRI

YoY

change (

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

Key

dri

vers


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

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


2012

Earnings +20% since 2011

Cost management delivering results

26

27

28

29

84

86

88

Operating costs(1)

£m

EPRA Cost/incomeratio(1)(2) %

28.3%

27.0%86.1

EPRA cost/income


79.8

20

21

22

23

24

25

74

76

78

80

82

2011 2012 Year 2013

78.6

24.6%

79.8


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

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


Resources redeployed to growth areas

Expense reductions push cost income ratio down to 21-22%


Share incentive plans and pension benefits

London/Paris integration

Implementation costs of £5m in 2014

- Mobilisation of project teams

Digital marketing and multichannel

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)


(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


DividendsDevelopments revaluation

Adjusted profit

573

560

570

580

590

Value Retail revaluation

Profit on disposals

Investment portfolio

revaluation2323

EPRA NAV per share vs 2012

+5.7%

2

(18)

11

573573


EPRA NAV per share (pence)

542

4

520

530

540

550

560

2012

2013


9

4

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


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%


(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

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)


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

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


Note: Croydon expenditure in 2013 and 2014 reflects property acquisitionsOther on site developments: Abbotsinch Retail Park, Paisley; Cyfarthfa Retail Park, Merthyr Tydfil; Silverburn, Glasgow; O’Parinor, ParisNew extensions/redevelopments: Elliott’s Field Retail Park, Rugby; Watermark WestQuay, Southampton; Brent Cross leisure extension


New extensions/redevelopments

Whitgift, Croydon

Brent Cross extension

Future developments

0

50

100

150

2013 2014 2015 2016 2017 2018

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%


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

3Section


Performancedrivers

David Atkins

Performance drivers

Contribution from extensions and refurbishments

Growth from existing portfolio

Major developmentsValue Retail


Selected examples

Capital deployment

Prime Shopping Centres

Convenient Retail Parks

Premium Designer Outlets

Extension and

refurbishmentSilverburn

Silverburn AbbotsinchRetail Park

La Roca Village


Development

Acquisition


Kildare Village

Les Terrasses du Port

Bullring Junction Fund

Cyfarthfa Retail Park

La ValléeVillage

Kildare Village

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


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


Explore opportunity to increase leisure offering

and add a cinema

2015

Saint Sébastien, Nancy

105shops and

restaurants

£7mannual rents

99%let

24,000m2

centre

%%%%6%

initial yield

Development potential

2013 Half-year results 322013 Full-year results

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


7.3% yield on cost

Anchor store Printemps and MSUs have commenced fitting out of units


Transforming Marseille’s retail offer

190 units

53 43 222281

1

30


53fashion brands

43international

brands

22brands taking 1st

store in a French shopping centre

22catering units

81brands new to the portfolio

Brands recently signed include

30brands new to

Marseille

Construction commenced at Leeds and Beauvais

Victoria Gate, Leeds Jeu de Paume, Beauvais


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

Advancing the development pipeline

Silverburn, Glasgow O’Parinor, ParisCyfarthfa Retail Park, Merthyr Tydfil

Abbotsinch Retail Park, Paisley


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


Completion Q4 2014

Yield on cost 5%

14,500m2 extension

4,300m2 Marks and Spencer anchor store

46% pre-let


Completion Q1 2015

Yield on cost 10%

5,000m2 extension

5 retail units in adjacent existing retail park

87% pre-let


Completion Q2 2014

Yield on cost 13%

Key milestones at Brent Cross and Croydon

Brent Cross Whitgift, Croydon


Agree masterplanBrent

Cross/Cricklewoodphasing

Submit planning

Complete S106


2013

Establish JV

2014

Acquire RLAM stake

Secure planning resolution

Conclude land

assembly

Conclude anchor

negotiations

Complete design

2013

2014


S73 approval Complete S106

Submit leisure

planning application

Secure CPO resolution

Attractive future pipeline: The Goodsyard

£6m per acre valuation

Spring 2014Planning submission

Total development area 260,000m2

1,400residential

units

60,000m2

office space19,000m2

Retail space(90 shops)

50/50joint venture with

Ballymore Properties

10 acresite in heart of

Shoreditch


90

120

£m

annual

rents

Additional income from developments

£15m

£56m £63m


Notes: Annualised passing rents assuming 100% occupancy in year of project completion, post any rent free periodsAssumes completion of all medium-term developments and extensions2014 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 Gate2017-2019 Croydon, Brent Cross Leisure, Brent Cross extension

2014 2015 2016 2017-2019

30

60

£m

annual

rents

2013 Half-year results2013 Full-year results

£11m

£30m

2014 2015 2016 2017-2019


Conclusion

Key messages

ERV growth returning to our markets

On track with previous income growth guidance

Major development activity amplifies returns


Conclusion

ERV growth from existing portfolio

Contribution from extensions and refurbishments

Overhead cost control


refurbishments

Major developments

Value Retail

Liability management

Strong returns

Confident outlook


Questions

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


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.


Hammerson 2013 Full-Year Results Presentation

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Transcript of Hammerson 2013 Full-Year Results Presentation