Hammerson to offload assets worth £1.1bn after profits plunge 80%
The property firm is also launching a £300m share buyback programme.
Hammerson has unveiled a sweeping strategy overhaul that will see it offload £1.1 billion in assets and hand millions back to shareholders in a move meant to appease investors after profits plunged 80%.
The Birmingham Bullring owner made the announcement alongside its half-year results, where it outlined plans to exit the retail parks sector and instead focus on flagship retail destinations and premium outlets.
Hammerson said it was targeting £1.1 billion in disposals by the end of 2019, having already offloaded £300 million this year and increased its overall 2018 target to £600 million.
It will also hand up to £300 million back to investors through a share buyback programme in an effort to share the proceeds.
The company is now targeting at least £7 million in annual cost savings, which will be achieved through “operational efficiencies”, aided by the disposal programme as well as management changes that include cutting the number of executive directors from four to two.
Chief investment officer Peter Cole and executive director Jean-Philippe Mouton will both step down from the board at the end of the year.
It comes as Hammerson reported a whopping 80% drop in pre-tax profits to £55.8 million over the six months to June 30, compared with £289.7 million a year earlier.
On an adjusted basis, profits rose a mere 0.5% to £120 million.
The company said its UK shopping centres and retail parks were affected by the “turbulent retail market” and the recent raft of Voluntary Arrangements (CVAs), which have seen retailers demand lower rents or shut stores completely.
Hammerson said it was cutting the floor space let to department stores by a quarter, and high street fashion by a fifth, letting loose firms that have continued to struggle amid a slowdown in consumer spending.
It also plans to diversity its portfolio by increasing its non UK retail exposure by around 10%.
Revenue for the period fell from £160.1 million to £152.5 million.
We will now focus solely on winning destinations of the highest quality: flagship retail destinations and premium outlets Hammerson chief executive David Atkins
Chief executive David Atkins said: “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.”
The strategy update is part of efforts to address shareholder anger after the company ditched a £3.4 billion deal to buy rival Intu, which operates the Trafford Centre in Manchester.
While it would have created Britain’s biggest property company with £21 billion worth of assets across Europe, Hammerson said it was “no longer in the best interest of shareholders”, citing growing dismay over the health of the UK retail property market.
French shopping centre firm Klepierre also walked away from a potential deal with Hammerson in April, after holding a meeting with its takeover target to table a £5.04 billion proposal.
Klepierre said it would not make a formal offer because Hammerson – which also owns the the Bicester Village and Brent Cross shopping centres – “did not provide any meaningful engagement”.
Shares in Hammerson were up nearly 2% in early trading after releasing its strategy update.
Mr Atkins added: “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.”