No Hammerson payout as it tries to leave UK
The owner of malls in the UK, Ireland and France says its dividend payouts won't grow in 2019 or in 2020
UK and Europe shopping centre owner Hammerson’s dividend will not grow over the next two years while the company, the fourth-largest property group on the JSE, sells more than R9bn worth of of its weaker UK and Irish assets.
The group has been trying to invest outside of the UK while the retail market there undergoes a restructuring and while uncertainty around the Brexit process continues, according to CEO David Atkins, who was speaking on the sidelines of the release of financial results for the year to December 2018.
Hammerson, which has market capitalisation of R51.6bn, declared a final dividend of 14.8p per share for the reporting period, 1.6% higher than the dividend declared for the year to December 2017.
Atkins said dividend growth would be flat in 2019 and 2020 as Hammerson continued to operate in a depressed UK retail environment. About 52% of Hammerson’s portfolio by value is in the UK and many of its shopping centres in that region were its worst performers last year. UK property owners have seen the value of their property portfolios drop in the past year while the UK government struggles to negotiate a Brexit deal with the EU.
Atkins said Hammerson sold £570m worth of retail assets in 2018, many of them in the UK. Its disposal programme would continue in 2019 as it looked to sell upwards of £500m worth of assets. Asset sales would help to lower the company’s debt levels as measured by its loan-to-value from about 38% to 34%.
"Over the past couple of years, we have restructured our portfolio to move away from the UK. This is so that we could maintain a solid dividend for our shareholders while UK retail came under pressure," he said.
"There have been a number of tenant failures in the UK, such as those of Nu Look, Toys R Us and various food and beverage companies. How people shop and what they buy from brick and mortar stores is changing. We believe that the UK will make it through a very difficult period over the long term but right now we feel there are better investment opportunities elsewhere," Atkins said.
In the meantime, Hammerson had replaced struggling tenants such as midmarket fashion retailers with car dealerships, electronics stores and consumer product shops.
A number of fund managers said Hammerson’s results were relatively strong given the company’s challenges.
"We believe that Hammerson has both the portfolio of quality assets and the skilled and experienced management team needed to navigate the current challenging retail environment," said Karl Leinberger, chief investment officer at Coronation Fund Managers.
Coronation owns 6% of Hammerson.
Keillen Ndlovu, head of listed property funds at Stanlib, said Hammerson’s results reflect a tough environment in the UK but they were better than rival Intu Properties’ financials which were released last week.
Intu made a £1.17bn loss last year compared with a £227.2m pretax profit in 2017.
"Hammerson’s property values have fallen less, they continue to pay dividends and their loan to value ratio is lower. However, we remain cautious on the UK," Ndlovu said.
Jay Padayatchi, executive director at Meago Asset Management said Hammerson’s premium outlets had shown resilience.