Hammerson PLC

Hammerson Plc (LON: HMSO) is a General Financial company, managing and developing retail destinations in Europe. The company is presently having operations in 14 countries with 21 flagship destinations, 9 retail parks and 20 premium outlets, with 4,700 tenants.

COVID-19 Update (as on 30^th March 2020)
The UK government advice that all the UK retail portfolio, properties and stores have been shut. On the end of 27 March 2020, the company has received 37 per cent of UK rent billed for Q2. Two flagship destinations are fully closed, Highcross, Leicester and Victoria, Leeds, driven by COVID-19. The whole financial performance will impact by the coronavirus. On 25 March 2020, the company drew an additional 100 million pounds under these facilities to provide surplus cash reserves. As a result, and given the substantial uncertainty about the duration of the COVID-19 pandemic, the management has adopted a prudent approach and decided that it is no longer appropriate to propose the final dividend per share of 14.8 pence for the financial year ended 31 December 2019.

Financial Highlights (for the year ended 31^st December 2019)
For the financial year ending 31st December 2019, driven by a decline in the rental income for the period, the company’s revenue declined to GBP 190.3 millionversus GBP 224.8 million in FY2018. Due to properties revaluation losses, the company reported an operating loss of GBP 499.2 million in FY2019 versus an operating loss of GBP 49 million in FY2018. The company reported an LBT (loss before tax) of GBP 573.8 million in FY2019 versus an LBT (loss before tax) of GBP 173.3 million in FY2018. The company reported a LAT (loss after-tax) of GBP 781.2 million in FY2019 versus a LAT (loss after-tax) of GBP 268.5 million in FY2018. The basic and diluted loss per share stood at 102.1 pence in FY2019 versus a basic and diluted loss per share of 34.1 pence in the financial year 2018.

Share Price Performance

Daily Chart as of April7^th, 2020, after the market closed (Source: Thomson Reuters)

On April 07, 2020, Hammerson PLC shares closed at GBX 77, up by 34.71% against the previous day closing price. Stock's 52 weeks High and Low are GBX 351.90/GBX 53.50.

Key Risks
The market conditions in which the company operates is full of challenges and might impact the operation performance and reduce financial performance as well. Liquidity and interest rate risks could affect the operations of the company. Accidents, anti-social behaviour, pandemic or Coronavirus outbreak, violent crime or system failure leading to reputational loss. Weakness in the macroeconomic and political environment could impact the company’s ability.

Conclusion
The company has shown a decline in the financial year 2019. Both the top-line and the bottom-line have declined, while the company’s profitability remained in the negative zone for the period. The company’s properties portfolio had seen a decline in the valuation due to the uncertain and challenging UK retail landscape. The company operates in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors.

With weak consumer confidence and political uncertainty resulted in pessimistic investor sentiment and declining property values.Other real estate investment trusts are avoiding participating in the recapitalisation of the Hammerson, which shows their lack of confidence in the company’s growth prospects, and they are not confident about the Group’s business.

The coronavirus situation is rapidly evolving, and the group is closely monitoring the impact on the centres. The fundamental changes in the retail sector are impacting retail property market as a result of which many weaker retailers are struggling to survive in the United Kingdom.

Based on the headwinds faced by the group, we have given a "WATCH" recommendation at the closing price of GBX 77 (as on 7^th April 2020), while we look for any upcoming catalysts in the near term.

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