Hammerson PLC (LON:HMSO) has confirmed that full-year trading is expected to be “in line with market expectations” as it paused its share buyback programme ahead of the publication of its final results in February.
In an update, the FTSE 250 retail property developer said at 31 December, it had executed around 43% of its £300mln buyback target, with the programme to run over the twelve months to July 2019.
Broker swings axe
There was little else positive for the firm, however, as HSBC slashed its target price to 543p from 618p, saying most of Hammerson’s business was susceptible to risks from “a faster than ever-changing retail landscape where few practitioners seem confident of exactly where it is headed”.
“The short retail trade has paid handsomely [year-to-date], and the post-Christmas quarter is fraught with walking wounded retailers unable to make it any further. However, a rational look at [a sum-of-the-parts] for HMSO is beginning to indicate that a pay-back from here may be looking a little skinny”.
However, the bank maintained its ‘Buy’ rating on the stock, with the company’s UK shopping centre portfolio the biggest concern.
Hammerson wasn’t the only retail developer under pressure, with HSBC also slashing its target price for fellow FTSE 250 firm Intu Properties PLC (LON:INTU) to 136p from 236p citing the group “unenviable predicament” following to aborted takeover attempts and ‘forced’ asset sales.
“Despite promoting relative operational resilience in a tough retail environment, the greater issue is that high balance sheet gearing ([loan-to-value ratio] in excess of 50%) and committed capex has resulted in the need for asset sales into a market where there is little, to no liquidity for large shopping centre assets (i.e., INTU’s assets) and as such the only means to harness working capital is to ‘substantially reduce’ the dividend payout.”
HSBC added that there was “little by way of an investment case that can be confidently proffered” for the firm adding that equity was pricing in “the possibility of the business failing, either financially or to meet its stated objectives”.
“The refinancing of the group’s debt has been inordinately costly, the land grab of shopping centres has turned out to be ill-timed and having made an advantageously early move to gain a footprint in Spain that is now ‘on the table’ for possible divestiture to address gearing.”
READ: Hammerson drives another nail into the coffin of retail parks
Both Hammerson and Intu have struggled this year as part of the general downturn that is afflicting the UK’s retail sector.
In July, Hammerson announced plans to pull out of the retail -parks sector over the medium-term, increasing its disposal target for 2018 to £600mln as half-year pre-tax profits slumped £55.7mln from £289.7mln the year before.
Meanwhile, Intu has said it will need to "substantially reduce” payment of dividends, starting with the final 2018 dividend, in November after a consortium led by billionaire shareholder John Whittaker had thrown out plans to buy the shopping centre owner due to market uncertainty.
READ: Intu to slash 2018 dividend after consortium ditches takeover plan
Hammerson itself pulled out of a £3.4bn acquisition of Intu in April, blaming the deterioration of the stock market’s view of the company.
The market reacted in line with HSBC in early deals, with Hammerson shares falling 3.2% to 318.7p while Intu was down 2.5% at 110.5p.