Hammerson plans to sell £1.1bn of properties by the end of 2019 and buy back up to £300m of shares as the shopping centre landlord tries to appease unhappy shareholders and the activist investors Elliott.
Setting out a new strategy after a turbulent period of failed takeovers earlier this year, the FTSE 250 group said it would increase non-UK exposure above half of its portfolio for the first time in its recent history.
It will also sell all of its retail parks, focusing instead on “flagship” shopping centres and outlets, and delay an extension of the Brent Cross shopping centre in London because of “increased market risks” in the UK, which saw a series of retailer insolvencies and store closures this spring.
The strategy represents an about-face from Hammerson’s attempt to acquire its rival Intu in a £3.4bn takeover earlier this year, which would have shifted its portfolio heavily towards the UK.
“We believe continental European and Irish markets are more stable than the turbulent UK retail market currently,” said David Atkins, chief executive, adding that the company was prepared to make “tough decisions” to speed up the return of value to shareholders.
Within its shopping centres, Hammerson — which also owns properties in France and Ireland — will cut down on department stores and high street fashion in favour of “differentiated brands, aspirational fashion, leisure, events and lifestyle spaces”.
Ahead of Tuesday’s results, Hammerson sold two UK retail parks for £164m, 10 per cent below their book value six months ago.
It also plans to make annual cost savings of at least £7m and cut borrowing.
Hammerson’s half-year pre-tax profit
Robert Duncan, analyst at Numis, said: “We are not entirely convinced management has done enough to placate some of the stronger voices in the market. [They appear] to have tried to pull out all the stops, but it is difficult to see how they can reverse near-term challenges to performance.”
The strategy announcement came as Hammerson said half-year statutory pre-tax profit had fallen 80 per cent from a year earlier to £55.7m at the end of June. Adjusted post-tax profit, which strips out property valuation changes, was up 0.5 per cent to £120m. Its shares were up 1.4 per cent at 533p by midday trading.
Net rental income fell 3 per cent to £178.5m in the six months to June from a year earlier, while net asset value per share was flat at 776p.
Hammerson said 104 of its stores are leased to companies that are in administration or in company voluntary arrangements, an insolvency procedure. It anticipates losing £5.8m, or 1.5 per cent of passing rent, in the full year to such store failures.
Hammerson has had a tumultuous year, initiating and then backing away from the proposed takeover of Intu, while repelling approaches from France’s Klépierre.
In April, it turned down a cash-and-shares approach from Klépierre worth 635p a share, saying it “very significantly” undervalued the company. But Hammerson’s share price has since fallen, though it rose 1.3 per cent to 533p in mid-morning trading on Tuesday.
Pressure on the group was heightened when activists Elliott used derivatives to acquire an interest in the company, which it has now increased to more than 5 per cent.
Hammerson will pay out an interim dividend of 11.1 pence a share for the six months to June, up 3.7 per cent from last year. It said dividend growth in future would be 3 to 5 per cent a year, below its previous growth rate.