In 2017 Hammerson (LSE:HMSO) made a profit. Then it went through four horrible years when positive income from rent was swamped by massive revaluation losses. But the first six months of 2022 showed only £10m of valuation losses after allowing for the £33m uplift at Value Retail (Hammerson’s share), and so the Group was able to report a small profit....
...For the first time since 2017 net assets increased in early 2022 to £2.87bn.
Debt, or potential debt, now consists of:
A €700m eurobond illustrates Hammerson’s low interest rates. If the company meets green targets it pays a 1.75% coupon until maturity in 2027. But that coupon is linked to the achievement of two Sustainability Performance Targets: 60% reduction in Scope 1 and 2 and selected Scope 3 Greenhouse gas emissions under the Group’s direct control and 50% reduction in Scope 3 emissions (which relate to space operated by brands within its destinations) both against the Group’s 2019 baseline. If these targets are not met, an additional margin will be payable of 0.375% per annum for the last year of the bond from June 2026 to the June 2027 maturity date for each of the two targets, 0.75% in total. Thus, even if it fails to meet targets it only pays only 2.5%.
The weighted average interest rate for all its debt was 2.7% at 30 June 2022 and the stated debt strategy is to borrow predominantly at fixed rate (87% is currently fixed) but to do so without giving specific security, thus permitting flexibility regarding its property assets, it can rent or sell them with few restrictions.
Interest cover was 2.92 times for the six months to 30 June 2022. The debt covenant rule is that cover must be above 1.25 so Hammerson are doing well on that score (The definition of interest cover is gross rental income less rents payable and property outgoings, divided by net cost of finance before exceptional finance costs, capitalised interest and change in fair value of derivatives)
Moody’s and Fitch’s senior unsecured investment grade credit ratings were re-affirmed as Baa3 and BBB+, respectively. Importantly, it is rated as “Investment grade” rather than high yield.
The trends are encouraging: net finance costs were down 25% in the half year to 30 June 2022 compared with the same period a year before. This was due to the early repayment of debt with the proceeds from disposals and refinancing and higher interest received from cash deposits
True loan to value ratio
Value Retail, in whic
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