Retail property landlord Hammerson reported a record year of leasing, which contributed to an 11% uplift in adjusted earnings in annual results to 31 December 2023.
The group completed 306 lettings, which generated £46m of headline rent up 23% on a like-for-like basis. Permanent deals signed were 37% above the previous passing rent and 12% above the estimated rental value (ERV) for the space.
The company also reported encouraging footfall and sales numbers across its centres, with footfall up 3% year-on-year; dwell time up 5% and like-for-like sales up 1% in its UK asset and up 3% in France.
This all resulted in adjusted earnings growth of 11% to £116m, or 2.3p per share (up 10%), with like-for-like gross rental income up 6%, and net rental income up 4%.
The group’s portfolio valuation was down 2.6% to £4.7bn, with EPRA net tangible asset (NTA) per share of 51p (2022: 53p).
Disposals during the year has resulted in a reduction in net debt of 23% to £1,326m, equating to an LTV of 34% (2022: 39%). The balance sheet has been further strengthened since the year-end with the exchange for the sale of Union Square shopping centre for £111m.
The company continued to make headway with its cost reduction programme, with gross administration cost down 14% year-on-year bringing total cost reduction since 2020 to 24%. The company has guided a further 10% cost reduction in 2024.
Dividend
In July 2023, the board reinstated a cash dividend with a new dividend policy of 60-70% of annual adjusted earnings. Today, the board has recommended a final cash dividend of 0.78p per share, bringing the full year cash dividend to 1.50p per share, representing a 64% payout.
Outlook
The company stated: “We had a strong 2023. City centres remain the dominant locations for commerce and lifestyle. Our destinations are in high demand by occupiers and visitors. The importance of a physical presence in a digitally-integrated strategy for best-in-class operators is undeniable. Over time, we have a unique opportunity to complement our retail core with a broader mix of uses by repurposing existing space and unlocking value on adjacent land.
We have a strong platform with long term visibility of income. We remain operationally disciplined and expect further cost reductions in 2024. We are confident in our ability to grow top line and earnings off a new base, and therefore create value for shareholders.”
Rita-Rose Gagné, chief executive, added:
“Our city centre destinations are in high demand. This year we delivered a positive performance across our key strategic, operational and financial metrics. Like-for-like gross rental income was up 6%, following another record year of leasing. Occupancy remains strong and footfall and sales were up again. We’ve strengthened our operational platform, whilst reducing costs by 14%. As a result, adjusted earnings rose 11% to £116m, whilst net debt was down 23%, with ample liquidity.
“Over the last three years, we have delivered against all strategic milestones. We now have a core portfolio focused on urban locations which are evolving into my vision: vibrant, 24/7 multi-use estates. These destinations are fast growing, and part of the fabric and infrastructure of the cities in which we operate.
“Whilst our eyes are open to the current macro-economic environment, our occupiers are thriving and our visitor numbers are on the rise in our realigned portfolio. We are reaping the rewards of the investments we are making in our core portfolio alongside best-in-class occupiers, which underpins the high levels of demand for our space. We expect this trajectory to continue in the year ahead. We have a strong pipeline of leasing and repurposing opportunities. There is still more for us to do, but we are now entering a time where having the capability to invest and operate with discipline and conviction will be rewarded.”