Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Another issue that Hammerson, along with the entire retail property sector, faces is business rates. Earlier this month, chancellor Rishi Sunak kicked that can down the road yet again, but Gagné is confident something positive will come of all the lobbying this year.
“It’s clearly so unfair to penalise physical retail and not online that politically, and now fiscally as well, something has to be done. And I think ministers are recognising that,” she says.
Almost as soon as Gagné took over from David Atkins, she announced a strategic review. While some had thought it may have been due to reach its conclusion by the middle of this year, the pandemic has knocked it back a few months.
“We’ll give an update at the half-year,” she says. “After we’re out of lockdown, we’ll get a better understanding of how the market evolves. It would be safe to say that from mid-year to year-end we’ll have a better idea of where we are.”
When it comes to selling chunks of the portfolio or entering joint ventures, Gagné says “nothing is off the table”.
One analyst, who asked not to be named, says Brexit is a possible reason that Hammerson may want to offload one particular asset. He believes the loss of duty-free shopping has made value retail propositions, such as the group’s Bicester Village, “a whole lot less attractive to the hordes of tourists that once flocked to them”.
Gagné does not rule out a sale of the Oxfordshire outlet centre, but she does not rule it in either. “I think it’s difficult to say what the ultimate impact of Brexit has been during the pandemic,” she says.
“Value retail in general has been aligning its strategy way more on domestic sales, and I know this is a strong platform. It remains a good operator with a good business. But all options are on the table.”
ENDS
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When shopping centre giant intu collapsed into administration all eyes turned to Hammerson, the other major retail mall operator that was struggling even before Covid-19 hit.
So, the obvious question to ask new Hammerson chief executive Rita-Rose Gagné is whether her company will survive the double blow of the growth in online retail and the pandemic lockdowns. “Yes,” is all she says. OK then, how about: will Hammerson be around in five years? A single word again. “Yes.” In 10 years? “Yes,” she insists.
Gagné is clearly confident in her ability to turn Hammerson around, despite having presented a set of full-year figures that showed the largest falls in rental income and asset values at Hammerson in its history. However, asked whether the business has hit the bottom and the only way is up, her answer is surprising.
“No, we’re not calling the bottom,” says Gagné. “While we are still cautious and making sure we’re following downside risk at this point in time, we’re still not out of the pandemic and 2021 still has some uncertainty. But there is definitely a recovery at the end of this.”
In some ways, Gagné cannot lose. She took the top job at Hammerson little more than four months ago, just as England entered its second lockdown and after much of the damage caused by the Covid-related spike in ecommerce had been felt by the retail sector.
If Gagné turns Hammerson around, she will become one of the property world’s most respected figures. If she does not, few would disagree it was one of the toughest jobs in real estate.
Those disappointing figures for the past year showed a 49% fall in net rental income to £157.6m at Hammerson’s malls and retail parks. The group’s portfolio value slumped from £8.3bn to £6.34bn and losses more than doubled to £1.7bn.
Despite all those miserable numbers, Gagné remains upbeat, especially about the estimated £250bn UK consumers are supposedly desperate to spend when lockdown restrictions on non-essential retail are lifted.
So, how much of the £250bn does Gagné want? “All of it,” she jokes. “Traditionally, physical retail sales are still over and above ecommerce sales, so I feel optimistic with how people will come back to properties and to discretionary spending.”
I think that 130p rather than 1,300p is your top whack for the foreseeable future.
Analysts and their back of the fag packet calculations aren't really as reliable as a set of numbers produced by the Company over a period of time which will have been directly lifted from the Annual Accounts which will have been audited before being released today. (I'm a FCA and former auditor so I would say that, wouldn't I? :-)
It's possible that someone has at HMSO ****ed up, but that's not the way to bet.
I suspect that the confusion is how the proceeds from the Rights Issue, the shares issued at the RI and the messing around with the Bonus Issue are accounted for when restating last year's number.
82p is the number to use when comparing the share price to NAV and then assessing how much of a discount he market will apply to get to the SP when the fog of Covid has lifted.
I think HMSO historically traded at around 40% discount to NAV before Covid, which is more than other REITs because the market hates retail.
Based on that I would guess that 50p is a reasonable target price for July when all the restrictions are lifted and the malls are full of people enjoying not being locked up.
Anything over that will be based on R-R G and her new team transforming HMSO which will be a long haul, but potentially quite profitable.
IMHO etc
As it is a REIT structure they are required to distribute 90% or more of heir tax exempt net income. Capital gains (or in this case losses) are ignored for this calculation. Obviously as HMSO is short of cash they offer a much enhanced scrip dividend instead to encourage people to take that instead of the cash, whilst still maintaining their REIT tax benefits. Just about everyone ought to take the scrip div and if you need the cash you can always sell the extra shares to manufacture income, although there are tax implications.
I thought that the issue the analysts had with the per share valuation was with the restated comparator.
I don't think that the 82p was challenged, as that's a pretty straightfoward calculation from the Balance Sheet.
Adjusting for the Rights Issue and the Bonus Issue part way through the year to get the comparative is obviously more involved.