Shopping centres and retail parks developer Hammerson PLC (LON:HMSO) saw its 2016 profits more than halve after it took a revaluation loss on its properties as the bite of online shopping takes its toll.
The FTSE 100-listed firm reported a 56% drop in pretax profit to £322.8mln for the full-year to December 31, down from £731.6mln a year earlier, despite gross rental income increasing to £251.3mln from £236.0mln.
The big profits decline came from a £24.7mln revaluation loss on its property portfolio, compared to a £245.1mln revaluation gain made in 2015, stripping that out the adjusted profit figure rose 9.4%, better than market expectations.
Hammerson said the loss came primarily from a fall in the value of its shopping centres and retail parks, which includes the Bicester Village premium outlets in Oxfordshire.
The firm pointed out that the retail market was polarising, with retailers placing a premium on destinations which deliver "shoppers' needs and the best locations".
Unlet outlets …
At the year-end, Hammerson said its portfolio was 97.5%, slightly down from 97.7% at the same stage a year earlier, due to a number of unlet outlets at its recently completed developments in Leeds and Southampton.
Hammerson chief executive, David Atkins, said; "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.”
Despite the profits fall, the group declared a final dividend of 13.90p per share, up from 12.80p per share a year earlier, taking its total dividend for 2016 to 24p a share, up 7.6% on 2015.
In early trading, Hammerson shares were up over 3%, or 17.5p at 582p.
In a note to clients, analysts at Liberum said: “Growth in online retail continues to impede capital utilisation for the majority of bricks-and-mortar retail, but Hammerson does have a portfolio of largely defensive retail assets, which generate higher income return vs. diversified peers, less cycle volatility and greater opportunity for efficiency gain.”
But they added: “We nevertheless remain cautious on the sustainability of rental growth, as weaker consumer confidence could be compounded by higher retailer input costs, reducing marginal tenant demand, through 2017.”
Liberum repeated a ‘hold’ rating at 570p price target on Hammerson shares.
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