Hammerson plc

Good morning, everyone, and welcome to our call this morning. I am with Himanshu Raja, our CFO; and Josh Warren, our IR Director.

We had a strong half year, and you will have seen our acquisition of Bullring and Grand Central funded in part by the proposed placing launched this morning. Turning first to key highlights.

I'm really pleased with these results. We are clearly seeing the growth flow through from consistent execution of our strategy, particularly the realignment of the portfolio, the investment in repositioning and the benefit of our recent JV buyouts at attractive yields.

Our destinations are in the top 20 and 1% of retail venues where retail spend is concentrated. We attract the best occupiers.

In turn, this drives greater footfall, higher sales and sales densities for our occupiers. We are ultimately growing rental income, values and earnings.

Gross rental income is up 11%. Net rental income is up 10%.

Portfolio valuation is up 11%. Our first portfolio valuation gain since half year '17.

Earnings per share are flat, but following the acquisition of Bullring and Grand Central, we will have more than replaced the loss of contribution from the disposal of Value Retail last year, and there is more to come. The 5% increase in the interim dividend reflects the Board's confidence in the continued strong earnings growth ahead.

Demand for our space has never been stronger. We have grown like-for-like gross and net rental income, up 5% and 4%, respectively.

It was particularly pleasing to see U.K. GRI up 9% and NOI up 8%.

This comes from dialing up our active asset management and leasing. We are shifting our leasing mindset from filling space to driving rents up.

We call it lease-up to rent up. Like-for-like leasing volume was up 13% and value up 3% -- using the insights from our proprietary data-driven platform, we bring together the right brands and experiences.

That results in occupancy going up 1% to 95% year-on-year. This all translates to footfall and sales growth.

We welcomed 79 million visitors in the first half, 1 million more than last year. This strengthened as the year progressed with Q2 up 3%.

We are outperforming national averages. Group like-for-like sales were up 1% with Q2 up 2%.

Let's now turn to capital deployment. We have deployed capital at high yields and/or ungeared double-digit returns.

Our in-flight repositionings at the Oracle and Cabot Circus are replicating our success at Dundrum and Bullring. The acquisitions of WestQuay and Brent Cross alone were at an average destination yield of 8.5%.

Bullring and Grand Central is at a blended topped-up yield of 7.7%, which will add another growing income stream on the short term. Together, this adds around GBP 49 million of annualized net rental income, which informs today's guidance upgrade, but we're not done.

We have a clear capital allocation strategy to maximize further opportunities to unlock value. Immediately ahead, there are the next phases of redevelopments and repositionings.

The Ironworks enters lease-up in the second half. We gained planning permission for Quakers Friars in Bristol.

At Cergy in France, we have secured planning for the redevelopment, also already majority pre-let to Primark in the first half. We see further recycling opportunities in our portfolio or selective monetization of our 70 acres of strategic land.

In the first half, we realized GBP 26 million of proceeds from Leeds Eastgate land at a 23% premium to book, a case in point of that strategy. On that note, let's talk about the consolidation of our position in Birmingham announced this morning.

Bullring is a top 5 U.K. destination and has benefited from over GBP 30 million of landlord investment in recent years alongside GBP 75 million investment from trusted brand partners.

This has driven the impressive operational and financial performance. Growing footfall up 5% for the first half and strengthening through the period, up 8% in Q2 and 12% in June.

Like-for-like sales are up 4% for the half and again strengthening to 5% in Q2. Total sales were up 6%.

Like-for-like gross rental income was up 12% in the first half. Valuation was up 12% or GBP 33 million since full year '21, while yields have remained flat.

Another half of strong leasing with recent long-term deals signed 25% ahead of previous passing and 22% over ERV. And we expect more going forward.

Grand Central performs strongly as part of the overall estate, also benefiting from spillover demand from Bullring. F&B is a particular feature due to its location above Birmingham New Street station with some of the highest sales density in our portfolio.

Together, both assets attract around 50 million visitors per year. In terms of the transaction, the pricing of GBP 319 million will be funded by balance sheet, suspension of the share buy program and the proposed 10% placing.

The transaction will be immediately 4% earnings accretive for a minimal NTA dilution. This transaction isn't just about Bullring and Grand Central, but it's about cementing our dominant position at the heart of the U.K.'

s second city. On this slide, you see a picture of our wider Birmingham estate, which really represents everything about who we are.

Centered with a top 5 retail anchored destination with a growing income stream, a mixed-use estate that dominates a city center connected with exceptional transport links, including the U.K.' s busiest regional station, an affluent growing young and highly educated immediate catchment of 4.5 million, supplemented by adjacent opportunities and strategic development land.

The estate has a rich seam of opportunity. Looking to the bottom left side of this slide, Edgbaston Street car park is an opportunity to create enhanced public realm and more than 700 homes.

Above that, around 50% of the space at Grand Central is the vacant former John Lewis Partners store. Strip-out was completed in 2023.

Planning is in place for an office-led mixed-use redevelopment with a GDV potential around GBP 100 million. To the right is Martineau Galleries, a mixed-use regeneration site.

It represents the gateway to the city next to the forthcoming HS2 station. The site has outlined planning consent for around 1,100 homes and up to 1.3 million square feet of commercial space.

There is high optionality for delivery, funding, monetization or further densification. Let's now turn to our upgraded guidance.

We are today raising our guidance for 2025 as a result of the growth in like-for-like GRI, NRI and acquisitions. Including today's acquisition of Bullring and Grand Central, total GRI growth this year will be around 17%, up from our previous guidance of 10%.

We now expect EPRA earnings of around GBP 102 million. Looking further ahead, this gives a clear direction for '26 and '27.

We expect to grow GRI and NRI in each of those years in line with our medium-term financial framework. In '26, we'd expect a further circa 15% GRI growth.

And for '27, we will see Cergy 3 delivered and drive further growth again. So in summary, we've delivered really strong results.

On the right-hand side of the chart, you see our portfolio and platform. We are the U.K.'

s largest listed pure-play owner and manager of city center destinations in the U.K., France and Ireland. We have high visibility of long-term income streams and multiple paths to value creation.

We are driving growth in rents, values, earnings and dividends. Our outlook is very positive indeed.

I'll come back and talk about how we are driving growth through our unique portfolio positioning and platform in a moment. But first, as usual, over to Himanshu for some granularity on the numbers.

Thank you, Rita-Rose, and good morning from me also. Turning to the financial summary.

We've already covered the growth in GRI and NRI. This translated to a gross to net of 79%.

We always said we'd get back into the 80s, and you can expect to see that in the full year as we complete our repositioning. The resulting EPRA earnings were GBP 48 million, with earnings per share at 9.9p, and this was in line with last year, benefiting from the share buyback.

IFRS profit was GBP 79 million. Our portfolio valuation is now GBP 3 billion and reflects our first revaluation gain since HY '17.

The total property return was 4%, and it was pleasing to see our leasing beginning to translate into ERV growth and also driving an income return of 3%. The capital return was 1%.

Our credit metrics remain strong with net debt to EBITDA at 7.8x, reflecting the successful deployment of capital into high-yielding assets. LTV at 30th of June is at 35%.

ON a pro forma basis for the acquisition of Bullring, Grand Central, net debt-to-EBITDA moves only marginally to 7.9x, reflecting the exceptional income-producing nature of Bullring. Pro forma LTV stands at 37%, both commensurate with the strong IG credit rating.

And closing on NTA. NTA at the 30th of June is 3.81p per share.

On to the EPRA earnings walk. Going from left to right, the June '24 EPRA earnings were GBP 50 million.

You can then see the loss of contribution from disposals, GBP 12 million from Value Retail and don't forget the GBP 3 million from Union Square. The acquisition of Westquay and Brent Cross has GBP 9 million and like-for-like NRI, another GBP 3 million.

NRI from the development portfolio was GBP 2 million lower as we pursue vacant possession strategies and a little bit for the sale of lease land. Inflationary cost growth was exactly in line with my guidance at the year-end, which together with the loss of fee income adds around GBP 1 million of net cost.

Finally, better net finance costs principally from higher interest receivable on cash deposits adds GBP 4 million, bringing new home to GBP 48 million of EPRA earnings in the period. Next to the NTA walk, again, going from left to right.

Starting at 370p per share, EPRA earnings added 10p per share, revaluation 5p per share and the profit on the sale of Leeds and the share buyback add 0.01 each. FX and other were a benefit of 2p in this half.

And to close, the outflow of the 2024 final dividend was 8p, resulting in NTA per share of 3.81p at 30th of June. Let's now turn to the valuation movement in more detail.

This chart shows the like-for-like valuation movement on our GBP 3 billion portfolio. Strong leasing and rental growth was again recognized in valuations, while yields were broadly flat.

In the second column, you see the growth in like-for-like values with U.K. like-for-like up 1%, Ireland up 2%.

Both the U.K. and Ireland were driven by ERV growth of 1% and 3%, respectively.

France values were flat with ERV growth of 1%. Overall, the portfolio value was up 11% to GBP 3 billion, also reflecting the acquisition of Brent Cross.

Of course, with today's acquisition of Bullring and Grand Central, this would increase to around GBP 3.3 billion. And by way of reminder, on the far right-hand side of the chart, as has been the case for nearly 5 years, the yield spreads to 5- year swaps continue to be at all-time highs.

Moving now to debt maturity and credit metrics. We have a strong and flexible balance sheet at this point in the cycle.

We remain cash covered for the upcoming 2025 sterling bond. Looking further ahead, I would expect to refinance the 2027 eurobond in the ordinary course around 12 months ahead, something for you to consider for your models in FY '26 and beyond.

On the right-hand side, you can see the pro forma balance sheet position post the acquisition of Bullring, Grand Central, still a strong position in line with an IG credit rating and over GBP 1 billion of liquidity. As Rita-Rose mentioned, we have optionality of capital sourcing either from further recycling of the portfolio or looking to our strategic level starting to come into reach.

On to my last slide. On the left-hand side, you can see the consistent cash dividend per share growth delivered since we emerged from COVID.

The further 5% increase to 7.94p signals the Board's confidence in the strong growth to come. Let me now just provide a bit more color on the upgraded guidance from today.

Full year GRI guidance is now growth of around 17%. We have previously guided that, that would be around 10%.

The 17% comprises full year like-for-like growth of around 3%, so second half of around 2%, which reflects the outperformance in timing from a very strong first half. EPRA earnings guidance is around GBP 102 million, and this comprises an uplift from our previous guidance of GBP 95 million to around GBP 97 million from the stronger like-for-like performance and around GBP 5 million from acquisitions.

Remember, you only get 4.5 months benefit from the acquisition of Bullring and Grand Central with the full year effect to come in 2026. And on CapEx, we continue to be disciplined on both the timing and deployment of capital.

We now expect full year CapEx to be around GBP 60 million, mostly relating to repositioning, and therefore, this is growth capital. Of course, you can pick up the detail on the full year guidance with Josh Warren offline.

With that, now back to Rita-Rose.

Thanks, Himanshu. For those of you who are not familiar with our unique portfolio and platform, all 10 destinations are in the top 20 of retail venues in their geographies.

All are in the top 1% of where retail spend is concentrated. These destinations play into the structural trends driving how brands are evolving their physical estates shown on the top right.

Dense city locations remain at the heart of economic and social activity. Physical space is the essential link in the supply chain in a unified commerce model.

Adversarial online/off-line models are simply redundant. And now the well-established flight to quality trend, fewer, higher-performing spaces in only the best locations.

And on the right-hand side, you'll see the attributes of our destinations, exactly like what we have in Birmingham. Our destinations are simply irreplaceable and with no new supply, while demand is growing.

We have invested significantly in our business model and platform in recent years, including accelerating our investment into first-to-market AI analytics. This allows us to better understand our customer and occupier behavior.

It gives us a differentiated capability in curating the right mix and strengthens our negotiating hand. Overall, we now have a future fit and scalable platform, which will drive operating leverage as we continue to increase AUM and income.

It is such insights that have informed our active asset management and leasing strategies over the last 4 years. What I mean by active asset management, you'll be familiar with the success of our investments to reposition Dundrum and Bullring.

The key message is we continue to reap the benefits. In this half, we've seen further progress on our repositionings at the Oracle and Cabot Circus.

At the Oracle, the repositioning in isolation will deliver an outturn IRR in excess of 20%. TK Maxx and Hollywood Bowl are now open.

Hollywood Bowl has had its most successful opening ever in terms of sales and footfall. The final letting to complete the repurposing of the former House of Fraser unit was exchanged in June with Zara.

These and other new openings, including Cosy Club have delivered a notable step-up in operational performance for the Oracle with footfall up 4% year-on-year and in Q2, 10% up in July as occupancy has improved from 94% to 98%. Importantly, like-for-like net rental income was also up 6% in the first half with further growth to come.

Turning to Cabot Circus, M&S was handed over and will open in Q4, while we will shortly hand over to a new cinema operator with an opening in early 2026. We have since signed 2 further leases with leading global brands together at over 100% ahead of previous passing rent and 70% ahead of ERV on a net effective basis.

The extensive works at Cabot Circus are also flowing through into financials with 24% like-for-like net rental income growth in the first half. Now let's look at some overall highlights in the first half.

Like-for-like leasing volumes were up 13% to 152 deals with leasing value up 3% to GBP 23 million. Principal leases were concluded 45% ahead of previous passing and 13% ahead of ERV.

This boosted like- for-like passing rent by 2.4% to GBP 200 million on the flagship portfolio and provided important evidence to the valuers with like- for-like ERV growth of 1.2%. It was pleasing to see the strong leasing performance in Ireland reflected in ERV growth of 3%.

And by the way, just last week, we signed Normal into the former over-rented River Island unit in ILAC, another first for the Irish portfolio. We expect to see a pickup in like-for-like net rental income in Ireland in the second half.

The increased footfall and sales for our occupiers are now well-established trends over the last 5 years for our portfolio. Let's look at that.

Our footfall is growing and consistently outperforming national indices. Strong sales densities growth, particularly visible with new concepts, which outperformed all by around 40%.

Demand is at an all-time high with like-for-like leasing values continuing to grow and consistently positive leasing trends since full year '21. These trends are also reflected in the financials, and let's look at that.

On the like-for-like portfolio, passing rent has grown 13% over the last 4 years. ERVs are up 6%, more opportunity there and gross rental income has grown 8% per year.

Importantly, all of our strategic and operational focus has been rewarded by the market in returns to shareholders as shown by strong total shareholder returns on the right-hand side. Our growth is, therefore, robust and sustainable.

These trends are not created by accident. They come from the realignment of the portfolio and the platform.

We have been disciplined in our approach to capital allocation to drive growth and enhance returns to shareholders. There are a variety of options to recycle capital, including the monetization of strategic land as we achieve key planning goals, asset rotation, and we remain committed to maintaining a strong and sustainable balance sheet through the cycle.

By way of reminder, on the right-hand side is the medium-term financial framework we announced last July. With today's upgraded guidance, we are on track to deliver that.

Our track record is established. We've achieved GBP 985 million of sales since full year '20 at an average discount to book of 2%.

Value Retail was exited for GBP 595 million at a 24x EBITDA multiple and a 3.4% exit cash yield rapidly recycled into assets at 8.5% yield as shown on the right-hand side. This is driving growth in rental income and earnings.

This will only be enhanced by the further acquisition of Bullring and Grand Central. Let's take a step back to look at the additional broad opportunity set on the entire portfolio before I conclude.

We have a significant opportunity to generate optionality and unlock value. We've covered the left-hand side and our extensive recent progress.

It's worth highlighting that the Ironworks, our resi project in Dundrum will commence lease-up in the second half and become Dundrum's largest occupier in due course. Looking to the medium and longer term on the right-hand side, there is around GBP 5.2 billion of potential GDV from both projects on existing assets and stand-alone opportunities.

We are progressing planning consents and land assembly to create value and continue to analyze potential alternatives for delivery across all projects. This could include developing ourselves as is the case with the Ironworks at Dundrum or potential site sales where it makes sense and have liquidity at attractive terms.

This is, in fact, what's been done in Croydon in '23 and Leeds Eastgate this year. Now putting all this together to summarize, we are executing a strategy that is driving value creation.

We are allocating capital in a disciplined manner. Today, we have a high-quality portfolio of landmark destinations.

There are multiple paths for us to drive further growth through active asset management, targeting leasing, repositioning and asset enhancement. And we have significant opportunities to unlock value and recycle capital either from progressing developments or further asset rotation.

Our data-driven platform is lean and scalable. I have a great team, and we have a strong culture of cost control, which will drive operating gearing.

All of this gives us confidence in our upgraded guidance for 2025 and beyond to grow and grow again. Thank you, and we look forward to joining you for the short Q&A session later.