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
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.