16th Feb 2015 11:04
LONDON (Alliance News) - Hammerson PLC on Monday reported a jump in pretax profit for 2014, boosted by gains made on the valuation of its property portfolio, as its net rental income also ticked higher over the year despite some weakness in its French business.
The FTSE 100-listed property developer said its pretax profit for the year to the end of December was GBP703.1 million, more than double the GBP341.2 million posted a year earlier. The profit was driven higher by a big gain on the revaluation of its portfolio, which added GBP436.8 million to the pretax profit for the year, against only GBP90.3 million last year. Its portfolio was valued at GBP6.7 billion at the end of the year, up from GBP5.9 billion a year earlier.
The group net rental income from continuing operations was GBP305.6 million for the year, up from GBP282.8 million last year, and up 2.1% on a like-for-like basis. Like-for-like net rental income from its UK shopping centres business rose 2.2%, boosted by leasing activity, rent reviews and higher rent and commercial income, notably from its Cabot Circus centre in Bristol, the Highcross centre in Leicester, and the Union Square scheme in Aberdeen. That growth was offset somewhat by the impact of lease expiries and tenant reconfigurations, it said.
Hammerson said leases for the year were signed at 6% above estimated rental value over the year, along with being around 5% above previous passing rents.
The company said its occupancy rate remains strong at 97.5%, albeit slightly lower than the 97.7% reported at the same time last year. The occupancy rate was pulled back by a weaker performance in its French retail business, where occupancy fell to 96.6% from 97.4% last year. Occupancy in its UK portfolio was broadly flat year-on-year.
Hammerson said its like-for-like estimated rental value growth in the year flipped, with a stronger UK performance offsetting weaker conditions in France. Like-for-like estimated rental value growth in the UK over the year was 1.8%, compared to a 0.2% decline a year earlier, but French growth was only 0.2%, down from 1.3% last year.
The same story was seen in the retail sales performance from its properties in the year, with UK retail sales growing 2.6% in the year but French retail sales down 1%, albeit a slight improvement on the 2.7% decline a year ago.
Hammerson said the weakness in the French business was caused by a sluggish performance in the French economy.
The group hiked its final dividend per share to 11.6 pence from 10.8 pence last year. The increase brings its total dividend for the year to to 20.4 pence per share, up from 19.1 pence last year.
"We have delivered strong results on the back of a significant uplift in asset valuation and continuing income growth. The recovery in UK consumer sentiment has continued to strengthen, driving increased demand from retailers for prime space, which is now translating into estimated rental value growth across the whole portfolio," said Hammerson Chief Executive David Atkins.
Hammerson shares were down 0.4% to 688.50 pence on Monday.
Brokers said the results were in line with expectations, though raised some concerns on the rental growth rate and the performance of its French business.
Societe Generale said the company is on track to hit its 10% EPS and net asset value growth over the next two years, but says the operational and equity story of the company will need to be leveraged up by merger and acquisition activity in order for Hammerson to achieve is goal of being Europe's top retail property manager.
SocGen has a 710 pence price target and a Buy rating on the stock.
Investec also said the results were in line with the market, with a slowing portfolio growth rate in the second half against the first offset by a rise in UK estimated rental value growth. It reiterates its Add rating on the stock with a 723 pence price target.
By Sam Unsted; [email protected]; @SamUAtAlliance
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