Retail property firm Hammerson has unveiled a radical strategy shake-up as it acts to appease investors after profits plunged 80 per cent.
The overhaul, which involves disposing of over £1bn in retail assets and handing millions back to shareholders, is aimed at future-proofing the Birmingham Bullring owner in a fast changing and highly challenged retail market.
Hammerson, which backed out of plans to buy shopping centre group Intu earlier this year, said today it plans to eventually exit the retail park sector altogether and focus instead on flagship retail destinations, premium outlets and non-UK assets.
Hammerson owns the Birmingham Bullring, Bicester Villiage and Brent Cross shopping centre
It wants to cut its exposure to department stores by a quarter, and High Street fashion by a fifth, letting loose the firms that have continued to struggle amid a slowdown in consumer spending. It has also put its plans to expand Brent Cross shopping centre on hold.
Hammerson said it was targeting £1.1bn in disposals by the end of 2019, having already offloaded £300m this year and, in an effort to share the proceeds, will hand up to £300m back to investors through a share buyback programme.
The strategy update was unveiled alongside Hammerson’s half-year results, in which the firm exposed an 80 per cent plunge in pre-tax profits to £55.8m, and a 5 per cent decline in sales to £152.5m.
It put the losses down to its UK shopping centres and retail parks being hit by the ‘turbulent retail market’ and the recent raft of Company Voluntary Arrangements (CVAs), which have seen retailers demand lower rents or shut stores completely.
As a result, Hammerson will strive to diversify its portfolio by increasing its non UK retail exposure by around 10 per cent.
Boss David Atkins said: ‘Through increasing the level of disposals, including exiting the retail parks sector, we will now focus solely on winning destinations of the highest quality: flagship retail destinations and premium outlets.
Shoppers at Bicester Village, which generates strong tourist numbers and where retailer demand remains high
‘These are the venues we believe will maintain relevance and outperform against the shifting retail backdrop. Our customer and retailer offer will be amplified, and this includes a step change in our retailer line-up.’
‘We are taking tough decisions and have absolute conviction in our ability to deliver,’ he added.
The strategy update forms part of Hammerson’s efforts to address shareholder anger after the company ditched a £3.4bn deal to buy rival Intu, which operates the Trafford Centre in Manchester.
While it would have created Britain’s biggest property company with £21bn worth of assets across Europe, Hammerson said it was ‘no longer in the best interest of shareholders’, citing growing dismay over the health of the UK retail property market.
French shopping centre firm Klepierre also walked away from a potential deal with Hammerson in April, after holding a meeting with its takeover target to table a £5.04bn proposal.
Klepierre said it would not make a formal offer because Hammerson – which also owns the the Bicester Village and Brent Cross shopping centres – ‘did not provide any meaningful engagement’.
Shares in Hammerson were up nearly 2 per cent in early trading after the update.