Birmingham shopping centres boost full year results for Hammerson

Retail property company Hammerson – part owner of Birmingham’s Grand Central and Bullring – has seen a rise in income levels from its various sites although annual profits fell by more than half.

The group’s final results for 2016 show net rental income of £346.5m (2015: £318.6m), up 8.8%. However, IFRS (International Financial Reporting Standards) profit was £317.3m (2015: £727.8m).

Adjusted earnings per share 29.2p (26.9p), up 8.6%. Final dividend per share was 13.9p (2015: 12.8p), an increase of 8.6%.

The group’s property portfolio valued at £9,971m (2015: £8,374m), and increase of 19.1%.

The group said 2016 was a busy year for UK shopping centres with the Grand Central acquisition, the opening of two new centres and another set of strong operating results from its existing portfolio.

It said it had also seen a good second half performance, with retailers keen to take space in our prime centres.

Across it UK retail operations, there was like for like RI growth of 2.4% and occupancy levels were above target (97%) at 97.8% – although several sites did struggle to achieve this, principally Victoria Gate in Leeds (where four units remain unlet) and Westquay, Southampton were a number of units remain unlet. Occupany rate at Victoria Gate at year-end was 90.5%.

Investment volumes in 2016 totalled £2.7bn, which was approximately 40% lower than in 2015, with the only prime centres traded being Grand Central, Birmingham and Merry Hill, Dudley.

However, the group said demand for prime assets continued, with investment yields broadly unchanged during 2016, although secondary shopping centres had suffered outward yield shift.

Net rental income across the retail division totalled £148.4m in 2016, and on a like-for-like basis increased by 2.4%, compared with a 2.1% increase in 2015. The growth in 2016 was driven by rent review settlements, income from new lettings and increased car park income.

Four of its centres achieved annual like-for-like NRI growth of more than 5% with the best performing centres being Bullring and Union Square, which benefited from recent lettings and rent review uplifts.

Tenant demand for space remained strong, with 141 leases signed representing £9m of annual rental income and 48,300m2 of space. The reduction in activity compared with 2015 was due to the timing of lease renewals and expiries at a number of centres.

In February 2016, the group acquired Grand Central for £350m. The 38,400m2 shopping centre in Birmingham is anchored by a 23,200m2 John Lewis and sits above New Street Station, the redeveloped major railway hub. The centre includes 40 premium stores including Kiehls, L’Occitane en Provence and MAC and also contains 20 casual dining brands including Paul, Pho and Tortilla.

In December 2016, it completed the sale of 50% of the scheme to CPPIB, one of the existing joint venture partners in Bullring, for £175m.

David Atkins, chief executive of Hammerson, said: “I am pleased to report another set of strong financial results, with sector-leading earnings and dividend growth reflecting robust operational performance across all parts of the portfolio.

“During the year we have significantly grown and enhanced the portfolio, adding new retail space in faster-growth markets including Dublin, Leeds and Birmingham, and extending our presence in the European outlets market. To fund these growth opportunities, we successfully refinanced over £1.2bn of debt and executed our planned disposal programme, generating £635m.

“Looking ahead, despite some UK retail headwinds and geopolitical uncertainty, I am confident that we have a resilient and adaptable business with multiple opportunities to drive similar levels of growth and therefore continue to deliver sector-leading income-focused returns.”