Ham­mer­son’s deadly duo at last de­cide to shut up shop

The group’s boss and chair­man have presided over a dra­matic fall in its for­tunes but the blame also lies with a board that failed to act

The Daily Telegraph - Business - - Business Comment - Ben Mar­low

First the long good­bye, now the wrong good­bye from the deadly duo at Ham­mer­son. Boss David Atkins and chair­man David Tyler have both an­nounced their ex­its, Atkins not un­til the spring, but the pair seem de­ter­mined to cause as much chaos as pos­si­ble be­fore they head out the door. Not that there was any dan­ger of this dou­ble act be­ing re­mem­bered fondly by share­hold­ers, not af­ter the as­ton­ish­ing col­lapse in value on their watch. But an £800m res­cue fundrais­ing, in­clud­ing a heav­ily di­luted £550m cash call will ce­ment a pretty wretched legacy.

Yes, th­ese are “un­prece­dented con­di­tions”, Sure the pan­demic has caused “ex­tra­or­di­nary dis­rup­tion”. It’s “ex­ac­er­bated struc­tural shifts” too, all of which is in­deed “re­flected” in the com­pany’s half-year re­sults.

Losses of £1.1bn; an 8pc fall in the value of Ham­mer­son’s port­fo­lio to £7.7bn; a jump in the loan to value ra­tio mea­sure­ment from 38pc to 46pc; 72pc of the rent owed for the first half of the year col­lected, and only a third of what is owed in the third quar­ter. To cap it off, a go­ing con­cern warn­ing that debt covenants could be breached without fur­ther cap­i­tal.

This is firmly cri­sis ter­ri­tory but let’s not pre­tend it wasn’t one of the board’s own mak­ing. The pan­demic has merely has­tened the com­pany’s in­evitable ar­rival at the precipice.

Bor­row­ings re­main far too high. Net debt bal­looned from £2bn at the end of 2011 to £3.5bn at the end of 2017 and man­age­ment re­lied too heav­ily on try­ing to sell off in­di­vid­ual as­sets in a de­te­ri­o­rat­ing mar­ket.

At the same time, val­u­a­tions have been go­ing steadily south. A port­fo­lio worth £9.1bn in 2018 had sunk to £8.3bn by the end of 2019. Six months later it crashed an­other £600m, leav­ing it at the mercy of the stock mar­ket and lenders.

The mo­ment for de­ci­sive ac­tion was in 2018 when lever­age had only come down by £100m and the share price was still trad­ing above 300p. If not, then at the full-year re­sults in Fe­bru­ary when all the metrics were clearly go­ing the wrong way, and even April when the £400m sale of seven re­tail parks col­lapsed at the last minute.

But not now with the shares at an all-time low of 48p, af­ter an­other 14pc fall; a mar­ket cap of just £370m; and bor­row­ings still stuck above £3bn. Gear­ing is now 98pc, way above the com­pany’s own 85pc guide­line.

And let’s not for­get the board was pre­sented with the magic so­lu­tion in 2018 when France’s Klépierre made a 635p bid ap­proach, valu­ing Ham­mer­son at £5bn. Atkins and Tyler should have bitten their hands off. In­stead they were sent packing on the ba­sis that it un­der­val­ued the com­pany “very sig­nif­i­cantly”.

The fund rais­ing also in­cludes the £270m dis­posal of Ham­mer­son’s well-re­garded Euro­pean shop­ping out­lets, and as Liberum ar­gues “the sale of bet­ter as­sets just leaves more of the bad”. Not only that but Citi thinks fur­ther cap­i­tal could be needed.

For now though, it is “the only prac­ti­cal step to take in or­der to se­cure the bal­ance sheet”, as the bro­ker Stifel points out. Yet, it wouldn’t have been if the board hadn’t been asleep.

‘An £800m res­cue fundrais­ing, will ce­ment a pretty wretched legacy’

Blanc hits the ground run­ning

Amanda Blanc’s not wast­ing any time at Aviva. Four weeks af­ter her ap­point­ment and the in­surer’s new boss has al­ready gone fur­ther than pre­de­ces­sor Mau­rice Tul­loch man­aged dur­ing an un­cer­tain year at the helm.

Still, you could ar­gue that the straight-talk­ing Welsh rugby fan had lit­tle choice. Tul­loch ul­ti­mately stepped down for fam­ily rea­sons but in­vestors were un­der­whelmed by his “busi­ness as nor­mal” strat­egy so Blanc had to shake things up.

Whether her new strat­egy goes far enough is up for de­bate. Some share­hold­ers, and a num­ber of an­a­lysts too, wanted to see a rad­i­cal break-up of what even Blanc seems to have ac­knowl­edged is a dis­parate em­pire with lit­tle co­he­sion.

As Blanc says, she’s “made it re­ally clear, that’s not on the agenda”. How­ever, she wants Aviva to build on its strong po­si­tions in the UK, Ire­land and Canada and be­come the mar­ket-lead­ing in­surer in those mar­kets.

That seems sen­si­ble enough but it’s not en­tirely clear what that means for the rest of the group. If the fo­cus is on the An­glo-Saxon part of the em­pire that raises im­me­di­ate ques­tions about the fu­ture of busi­nesses in parts of Europe and Asia.

The best Blanc can say for now is that “there may be bet­ter own­ers” but she won’t com­mit to putting them up for sale. How­ever, they will be “man­aged for value”, which sounds like code for say­ing “we will look for buy­ers when the mar­ket is bet­ter”.

That is sen­si­ble too but an­a­lysts at Citi think the di­vi­sions in France, Poland, Italy and Asia could be worth nearly £7bn and of­fload­ing them could add 50pc to the share price. That’s not to be sniffed at, not at a com­pany where the stock has gone nowhere for the last 25 years.

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