Lex: Hammerson/UK retail: Intu the void
Hammerson’s new strategy should be known as the anti-Intu plan. The retail landlord’s ill-fated proposal to take over its smaller rival would have increased both gearing and exposure to indifferent UK shoppers. Shareholders hated the idea. Now that Hammerson has called off the pursuit, it is throwing this approach into reverse.
Buying in ideas from McKinsey, the world’s largest consulting firm, has resulted in a decision to halve the number of executive directors, ditch retail parks, sell off £1.1bn of assets (12 per cent of the portfolio) and hand shareholders £300m. The loan-to-value ratio will fall and the UK will make up a smaller part of the London-listed group.
For all this effort, shares rose 1 per cent on Tuesday. Has McKinsey simply told Hammerson the time with its own watch? It is difficult to spot anything wildly innovative here. Renewed focus on Europe is a good idea when footfall is down over 1 per cent in the UK and up 2 per cent in France, but is a retread of former schemes. Similarly it is little surprise that Hammerson is talking up its nicest UK locations. Differentiation is fast becoming a retail cliché.
Annual cost savings of at least £7m are welcome. Handing back £300m might appease some shareholders — but reconsidering capital expenditure is at odds with the idea of focusing on fancy shopping centres. Nothing here will diminish the drumbeat of Amazon.
Shareholders still find it hard to forgive the company for dismissing an approach from Klépierre out of hand. The 635p per share offer valued Hammerson shares at a level they have not traded at since autumn 2015.
Klépierre can make another bid in October. Until then, Hammerson’s best bet is that disposals will prove the 30 per cent gap between market value and the value of assets wrong. Recent sales have been made at a 10 per cent discount to net asset value. The strategy may not be groundbreaking. But a modest re-rating in the share price is still warranted.