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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Please go ahead.
Good morning, everyone. David Atkins here. Thank you for joining us this morning. As you know, we've issued a Q1 update, which highlights the following: we have an attractive and valuable mix of high-quality property with NAV per share up nearly 2%; retailers continued to take space at our centers at attractive prices, delivering positive ERV growth; and our dedicated team is able to deliver consistent returns even against some of the toughest trading conditions.Now as you know, we don't regularly issue a quarterly RNS, but given there's a lot going on in the retail sector, our major acquisition underway and now an opportunistic approach, we felt shareholders would benefit from the extra clarity. So I'm now going to briefly run through the trading update, then we'll open up to Q&A.As you know, we are in an offer period and hence this may constrain some answers, but I'll do my best to be as open and as helpful as I can.So on leasing. Our teams have been working very hard. The first quarter is usually a quiet one due to seasonal effects, but they still achieved GBP 6.8 million of new rent across the group, that's up nearly 60% on Q1 2017.The strongest leasing uplift was in France, where there is a renewed business confidence, and Ireland also had a very good start. Arguably, though, the delivery in the U.K. is most pleasing, where, despite one of the toughest trading periods on record, retailers still want more space in our prime destinations. There's an undeniable flight to quality, and we are capturing this demand.Our occupancy remains high, 97.1% as at 31st of March. Now this is down marginally on December, which always sees a seasonal boost, but it's better than 31st of March last year.In the period, there have been a number of administrations and CVAs. And as we've always said, retailer stores trade well in our centers, so in a number of cases, the rent is unaffected. We currently estimate that the total 2018 impact from all CVAs and administrations would be GBP 3.5 million.Despite the noise around high-profile brands, such as New Look, Toys R Us and Jamie's, the group impact is still less than 1% of our total NRI, and that's before we actively go about reletting space to help mitigate some of that impact.The underlying income resilience of our portfolio underpins the strength of our platform and the robust valuations. We delivered a group capital return of 0.3% in the first 3 months. Underlying this was another strong valuation uplift from Premium Outlets, up just under 1%, benefiting from the extension of [ Bicester ].The progress of our developments in Ireland and France lifted valuations by 1.2% and 0.4%, respectively.Prime U.K. shopping center valuations are stable. We've seen a small outward yield shift at 3 centers, but rental growth and supportive transaction evidence underpins the valuation of our prime U.K. shopping center portfolio. As a result, we have reported EPRA NAV per share up 1.8% to 790p in the quarter.Our estimated net debt figure of GBP 3.4 billion is stable on the year-end. And combined with an increase in our valuations, we're able to report an LTV improvement of 100 basis points, down to 35%.And it's great to be able to update you on our progress at Brent Cross, where today, we're announcing a major new pre-let with John Lewis, who are committing to a new flagship store. In addition to this, we have a new pre-let with cinema operator National Amusements, who are delighted with the Southampton site, that I know many of you will have seen back in our Capital Markets Day in November, and are now committing to a 12-screen Cinema de Lux to anchor the leisure component of the Brent Cross extension.In Paris, construction has now commenced on Les 3 Fontaines at Cergy, and we've seen strong leasing demand on the existing scheme, which confirms the attractiveness of this dominant scheme and our strategy to only focus on and extend leading prime assets.Our strategy of active capital recycling continues, and we have disposed of GBP 92 million already this year at book value. We're currently in active discussions on numerous assets, and we're confident of achieving our GBP 500 million target for disposals this year, and discussions on these deals are encouraging.Finally, with regard to our proposed acquisition of Intu, we continue to believe there's a clear strategic rationale in combining with Intu's portfolio, setting the new benchmark for European retail destinations and to manage their assets better. We have identified attractive synergies, and the transaction will deliver accretion to earnings and shareholder value.Now at the present time, Klépierre's position is unclear, so we will not be finalizing or posting shareholder documents, while we're in the put up or shut up period.And so to wrap up. Our strong results today highlight the skill of our team to deliver in tough conditions. It's also further evidence of greater polarization in a market towards the outperformance of the best retail assets and reinforces my message that not all retail is equal.Now Simon and I will be delighted to take your questions.
[Operator Instructions] We will now take our first question from Ben Richford from Crédit Suisse.
Just the yield shift. Outward yield shift that you mentioned was at 3 centers. Could you just let us know which centers and whether there's a trend there please?
Yes. It was at 3 of our smaller centers: so at Aberdeen, the Oracle and Leeds. Aberdeen, obviously, still suffering a bit from the decline in the oil and gas industry. And Oracle itself, just being impacted by competition opening at Oxford and Brantano.
And then could you confirm whether you're engaging with the Klépierre management?
Well, we've not heard back from them, so nothing really to engage with at the moment. But they certainly know where we are.
Okay. And what do you think is the right way to think of absolute value for your company? You published a new net asset value today. You valued the Intu transaction at triple net. Perhaps you could comment on that please?
Well, I think you have to stand back and look at our business in the round. You're right, we continue to grow NAV, and I think we've shown the diversity and growth across all of our sectors, generally, in our business, which I think provides optimism about growth in the future. I think, also, it's the track record of this business, delivering earnings of around 7% to 8% per annum over the last 6 years, pretty much beating all in the sector. So I think it's a combination of those factors. I think today's results further reinforce that we can deliver even in tough conditions, and I believe that, whichever way you look at it, the current share price completely undervalues our business.
[Operator Instructions] We will now take our next question from Michael Burt from Exane.
I have a question on the impact of CVAs and administrations. You made it very clear that the impact is just under 1% of group like-for-like net rental income in the year. Bearing in mind, perhaps you might be able, say, to mitigate that impact, how do you see that impacting your target of achieving 2% like-for-like rental growth for the group?
Thanks, Mike. It's Simon. Yes, I mean, clearly, we continue with our goal of trying to grow like-for-like NRI by 2% across the group. We have some very positive momentum in other parts of Hammerson, beyond U.K. shopping centers and retail parks. I would comment that the GBP 3.5 million that we've disclosed this morning is before mitigating steps, as David mentioned. So the teams are very focused on backfilling space, whether it's Toys R Us or Jamie's Italian. So we reaffirm our goal of trying to grow like-for-like NRI in line with previous years. It's not going to be easy, but there are 9 months to play for, so we'll continue to work with agility and skill.
And I just have one follow-up question on the subject of CVAs and administrations. How does your watch list look at the moment sort of excluding those names you've already mentioned where we sort of know the process is ongoing. Is it sort of more significant, more significant than it has been in previous years? Could you just give us a feel there please?
Yes. I'd say there's a seasonality this -- to this, as you know. Typically, the first quarter of any calendar year is always the most difficult for retailers, including beverage operators, because consumer spending is subdued, the weather often restricts visits to those sort of venues, and the March quarter day is still 1/4 of the annual rent. So it's always a time when there's the greatest pressure on businesses and capital providers, which is why you frequently see an uptick in restructuring administrations and CVAs in January, February, March. Now as things get a bit better in the second and third quarter, we would expect a decline in the run rate [ failures ]. And looking overall at the watch list, I'd say this year is bigger than the last couple of years. It may not be as bad it was in the global financial crisis or 2012, '13, which, as you remember from our year-end results, was also a very difficult period. So it's manageable, and I think we are through the worst of this calendar year.
So I think it's worth pointing out, here we are at the beginning of April and because we've just gone through the March quarter, we've actually received half of our revenues for the year. That's the beauty of real estate companies with the 3-month quarter days that we remain confident about our revenue stream even at this point early -- relatively early in the year.
We will now take our next question from Sander Bunck from Barclays.
Just one very quick question from my side. You mentioned that the footfall of -- at Hammerson U.K. centers was up 0.5% and in France up 3.5%. However, these numbers are adjusted for center closures and snow days. Can you give us a bit of feeling what the adjustment is that you've made there and what the number would be if you include that impact?
Yes. So without those snow days, remember, across Europe, we've had very significant snow. So excluding those snow days, it would be minus 1.5% across the U.K.; and France, it remains positive, about plus 2%. So yes, we're still happy with that. But clearly, if a center is closed and transport systems are down, then we think it's appropriate to delete those days because they don't actually get to the center.
[Operator Instructions]
No? So it sounds like we've answered your queries in our statement. So if there are no other questions, I'll wrap up.Thank you for taking part in the call this morning. I just like to end by reiterating that, in a challenging environment, it's a mark of the quality of our portfolio and the skill of our team that we're capturing this flight to quality by retailers and consumers as we deliver continued growth.We're around all day if people want to pick up the phone, take any further questions. But for now, thank you very much, and have a good day.
Bye.