Hammerson (HMSO) H2 2011 earnings summary

Executive summary

• Strategy reset toward a specialist retail REIT focused on prime UK and French retail assets; offices to be sold over the medium term, with proceeds redeployed into retail.

• Portfolio value rose to £5.7bn; occupancy reached 97.9%, and like-for-like net rental income increased 2.5% YoY.

Financial highlights

• Net rental income was £296.0m vs £284.7m; gross rental income was £344.1m vs £332.0m.

• Profit before tax was £346.3m vs £620.2m, mainly reflecting a lower property valuation gain of £186.3m vs £447.1m.

• Adjusted profit before tax was £141.6m vs £144.5m; adjusted EPS was 19.3p vs 19.9p.

• Profit attributable to equity shareholders was £335.7m vs £615.4m; reported diluted EPS was 47.3p vs 87.2p.

Outlook and guidance

• Revised focus on income growth and efficiency supports an expectation of dividend growth above recent historical rates.

• 2012 outlook remains exposed to macro uncertainty and fiscal tightening; prime, modern locations expected to attract occupier and investor demand, while weaker assets may lose rental and capital value.

• Retail income expected to benefit from French indexation; the portfolio’s retail parks and dominant shopping centres continued to attract successful retailers.

• 2012 restructuring and cost initiatives were expected to reduce overall expenses by around £3.0m; restructuring programme savings estimated at around £4.5m annually when fully implemented.