Hammerson, one of Britain’s biggest shopping centre owners, has slashed its dividend and written down the value of its portfolio after taking a further hit from Britain’s depressed retail sector.
The company, which owns the Bullring shopping centre in Birmingham and Brent Cross in London and also has a stake in the Oxfordshire designer discount outlet Bicester Village, sold properties worth nearly £1bn last year as it offloaded its out-of-town retail parks to shield itself from the crisis in UK retail. This helped reduce its £3.4bn debt pile by a third to £2.4bn.
However, Hammerson disappointed shareholders by announcing it would slash its dividend payment this year by almost 50%, from 25.9p to 14p. The cut is far bigger than analysts had expected.
About £828m was wiped off the value of the firm’s property portfolio last year and its net rental income fell by 6.7% on a like-for-like basis.
Hammerson blamed Britain’s retail crisis, noting that last year 33 of its retailer tenants undertook an insolvency procedure known as a company voluntary arrangement (CVA) or went into administration, which affected 94 shops and reduced its rent by £7.5m over the year. CVAs enable retailers to negotiate rent cuts and close shops to stay in business.
The past two years have been torrid for Britain’s retail industry, as scores of retailers collapsed into administration. Some chains were rescued but had to shut shops to survive. Retailers are under pressure from a shift to online shopping, weaker consumer spending and rising business rates and labour costs.
David Atkins, the Hammerson chief executive, said: “The magnitude of the challenge facing UK retail is significant.” The company plans to sell off more underperforming retail assets to reduce its debt pile further, and will focus on its city shopping centres and offering more “aspirational fashion”, food and drink and leisure.
Just over half Hammerson’s portfolio is now outside the UK, in Ireland and France, where malls have fared better.
Stifel analyst John Cahill said: “Hammerson management has taken bold steps to refocus the business as it tackles the structural difficulties faced by the retail property sector. But, alas, there is a price to pay for everything, and in this case disposals mean loss of income, resulting in the dividend cut.”