Hammerson has announced a series of measures, including a £300m share buyback, a retail park sell-off, a delay to its Brent Cross development and an increased focused on non-UK retail as part of a new strategy.
The retail REIT said that following a comprehensive review it will focus solely on two retails segments comprising flagship retail destinations and premium outlets.
This will see it exit retail parks “over the medium term” with a disposal target of £1.1bn by the end of next year.
Its strategy will be supported by a £300m share buyback programme. Hammerson said it planned to deleverage over the medium term using disposal proceeds to pay down debt, alongside the aim to reduce the loan-to-value ratio to a mid-30% level.
Boardroom changes
The shopping centre owner has also reshuffled its board by axing two executive roles from its four-strong line-up, leaving chief executive David Atkins and chief financial officer Timon Drakesmith as its sole executive directors.
Chief investment officer Peter Cole will step down from the board on 31 December and retire in April 2019 after 30 years at the business.
Cole has been with Hammerson since 1989 and was appointed to the board in 1999. Following his retirement, he will be retained on a consultancy basis for the remainder of 2019 and early 2020 to provide development-related services.
Jean-Philippe Mouton will step down from the board at the end of the year. Mouton will remain in his role as managing director of the company’s French business and will continue to oversee group marketing.
The board changes will result in £3m in cost savings, as well as other management changes. On the whole, the REIT said it has identified opportunities for cost savings of at least £7m per annum from the end of 2019.
It plans to achieve this through £2m of operational savings relating to procurement, and £2m of savings from costs associated with its retail parks team upon its exit from the sector.
A one-off implementation cost to deliver these savings is estimated to be £4m.
Repositioning the portfolio
Chief executive David Atkins said: “Our reshaped strategy sees us taking decisive action to further reposition our portfolio.
“Through increasing the level of disposals, including exiting the retail parks sector, we will now focus solely on winning destinations of the highest quality: Flagship retail destinations and Premium Outlets.
“These are the venues we believe will maintain relevance and outperform against the shifting retail backdrop.
“Our customer and retailer offer will be amplified, and this includes a step change in our retailer line up. We will reduce the amount of floor space let to department stores and high street fashion as we actively focus on the latest consumer trends and take bolder steps to provide the best retail mix.
“Our results today demonstrate the resilience of our business. We are taking tough decisions and have absolute conviction in our ability to deliver. By reprioritising our capital deployment and repositioning our portfolio, we will accelerate future shareholder value and returns.”
Financial performance
It comes as Hammerson unveiled that its net asset value has held steady at £7.76 per share for the six months to 30 June, compared with the previous half-year to 31 December.
Adjusted earnings per share were also unchanged, at 15.1p. Adjusted profit climbed 0.5% to £120m compared with the same period in 2017.
Hammerson said 104 units across the portfolio are in administration or are subject to CVAs, with 87 of these units currently trading. These have reduced its net rental income by £2.1m, with the full-year impact anticipated to reach £5.8m (1.5% of passing rent).
On a like-for-like basis, net rental income at its UK shopping centres decreased by 0.1% in the six-month timeframe.
The board has declared an interim dividend of 11.1 pence per share for the six-month period.
Yesterday the company said it had sold off two retail parks in Bristol and Kirkcaldy for £164m, at a discount of around 10% to its December 2017 book value, to appease its investors.
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