Dividend hike as rent lifts Hammerson

Hammerson reported a rise in annual profits on Monday, driven by strong rental income, and took the opportunity to hike its dividend.

The shopping centre and retail park specialist reported pre-tax profit for the year ended 31 December of £341.2 million, up from £142.2 million the previous year, as like-for-like net rental income improved by 2.1% to £282.8 million.

The figures were boosted by revaluation gains of £90.3 million while in the previous year, the company took revaluation losses of £49.9 million.

The company reported a drop in the gain on sale of investment properties to £11.7 million but this was due to the disposal of the majority of its office portfolio in 2012 which netted it £42.6 million.

During the year the group secured £24 million of new rents, compared with £19 million in 2012, achieving an occupancy rate of 97.7%.

Chief executive David Atkins remarked that while the UK is beginning to see an economic and consumer recovery, the economic picture in France is less clear cut. However, personal debt levels remain low, which provides the opportunity for a rebound in consumer spending when growth returns.

Hammerson's French portfolio includes the new Les Terrasses du Port development in Marseille, which opens in early May and is now 93% let; and Bercy 2 near Paris, which houses Next and Japanese food chain Yo! Sushi; while construction has started at Le Jeu de Paume, Beauvais.

Retail park rental income

The company's UK retail park business contributed the lion's share of the rise in rental income, which soared to £86.6 million, from £70.9 million in 2012, while gross rental income for the French retail arm tipped up slightly to £71.6 million, from £69.1 million.

In the UK, the company has planning permission for major retail developments in the £1 billion redevelopment of Croydon's Whitgift Centre in partnership with Australian retail major Westfield Group. It has also started extending its Silverburn shopping centre in Glasgow, and has planning permission for another major development in Brent Cross.

The statement also said that investments in Birmingham's Bullring, Saint Sébastien and Value Retail will improve quality of portfolio and provide opportunities to create value.

Atkins said the firm has clear visibility on a number of major development projects "which will create the destination venues of the future, and drive returns to our shareholders".

The final dividend is upped 8% to 10.8p per share, taking total dividends for the year to 19.1p compared with 17.7p a year earlier.

Overall, the property firm said its net asset value (NAV) per share rose 5.7% to 573p from 542p in the corresponding period. Broker Jefferies predicts the year-end NAV will be 572p per share.

The company looks on course to deliver strong growth in earnings and dividends in the medium term. Many investors who switched from the offices sector to retail could feel vindicated by these results.

Interactive Investor discussion board user 'knob the bolt' said: "These shares have rather stagnated in the last two years but I reckon they are ready for a nice move up."

The shares rose 2.4% to 556.5p in early trading.