February 25, 2020 / 8:12 AM / a month ago

UPDATE 2-Hammerson slashes 2020 dividend as store closures bite

* Hammerson slashes 2020 dividend

* Says CVAs, administrations largest single factor reducing income

* Shares rise as much as 5% (Adds details on dividend, analysts comments)

By Samantha Machado

Feb 25 (Reuters) - British shopping centre operator Hammerson almost halved its 2020 dividend on Tuesday after the collapse into administration of a number of UK retail chains and outlets cut its annual net rental income.

The company has been striving to reduce its net debt, which stood at 2.8 billion pounds at the end of last year, by offloading assets and refocusing on its city shopping centres and premium outlets division.

The owner of London’s Brent Cross shopping centre said it expects to recommend a dividend of 14 pence for 2020, a 46% fall compared to last year.

Its shares rose as much as 5% on the UK midcap index as analysts welcomed the smaller payout, before paring gains to stand little changed by 0935 GMT.

The London-based company said last week it will exit its out-of-town retail locations by selling seven of them to private equity firm Orion for 400 million pounds.

Hammerson said it had “decided to take a prudent and disciplined approach to dividends, over and above that implied by the disposals programme”.

“We welcome the reduction, given the business’ cash requirement at a time of potentially higher capex requirements as the industry becomes more competitive to sustain structurally declining footfall”, Liberum analysts said.

CORONAVIRUS

Net rental income fell 11.2% to 308.5 million pounds ($399.9 million) for the full year ended Dec. 31.

“Tenant restructuring, in the form of company voluntary agreements and administrations, has been the largest single factor reducing income,” Hammerson said.

CVAs allow retailers to avoid insolvency by offloading unwanted stores and securing lower rents on others. Among those directly affecting Hammerson were those undertaken by music retailer HMV, department stores House of Fraser and Debenhams, Philip Green’s Arcadia Group and The Bathstore.

Analysts at Jefferies also flagged a likely short-term impact from the fast-spreading coronavirus on trading in premium outlets, while Hammerson said recent travel bans on Chinese travellers due to the outbreak will have an impact on global luxury sales in the first half of this year.

Hammerson, which reported a net asset value of 6.01 pounds per share, said it sold 542 million pounds worth of assets in 2019, more than its 500 million pound target.

Rival Intu this month said it was in talks with its largest shareholder John Whittaker’s Peel Group and new investors to raise funds to shore up its balance sheet.

$1 = 0.77 pounds Reporting by Samantha Machado in Bengaluru; Editing by Maju Samuel, Sriraj Kalluvila, Kirsten Donovan

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