Hammerson Plc (HMSO) Earnings Call Transcript & Summary

Good morning, everybody, and welcome to our results presentation. I must say it's a bit strange to be recording this for you for the first time in these difficult circumstances when we're not able to meet in person. But I do look forward to seeing you when restrictions allow. 2020 was a tough year for Hammerson and its shareholders. COVID has accelerated structural change. The company's capital structure was already too weak and unable to cope with the shock. There was a need to bolster the balance sheet with the rights issue, which we were able to undertake due to the support of our larger shareholders and the sale of VIA Outlets. But I believe that Hammerson has potential with some great assets in strategic places. We also have some great talent within the business. These are all ingredients for good, really safe urban companies capable of adapting to change in this heavily disrupted sector. I'm really clear on what my immediate priorities are, that is to focus on further tactical disposals, to build a balance sheet strength and simplify the portfolio. Our disposals of Brent South and last week of our minority stakes in Espace San Quentin and Nicetoile demonstrates that focus. And it's also about sharpening our operations, maximizing rent collection, reviving the leasing pipeline and refining asset management. This is all about creating a path to safety, while I undertake a thorough organizational and strategic review to transform and rebase the business to deliver a path to growth with a greater focus on the assets. I will update you on that at the half year. Now today's presentation will Form 3 parts, and then we'll end with an opportunity for questions. First, I will give you a quick overview of our 2020 results and the operational context. James will then take you through a detailed breakdown of the financial results for 2020 and then I'll get back to you on my first impressions of the business, the immediate priorities and what to expect from us this year. 2020 was a year like no other. Hammerson has been hit hard. The team has been focused on what we can control and safeguarding the assets. COVID has accelerated the well-documented structural shift in consumer behavior. And extensive lockdowns have caused deep stress in the bricks-and-mortar retail sector. Our income and earnings have been materially impacted by increased tenant failures and significantly lower collection rates. This means that like-for-like, NOI was down 41%. In total, group adjusted earnings were GBP 36.5 million, down 83%. James will walk you through the detail of this in a minute. In addition, capital values have seen further significant declines. Passing rent, my preferred metric, is down 10.5%. It is down 16% over the past 3 years. Valuers' ERVs were down 10.8%, bringing the total decline in rental values over 3 years to 17%. This, combined with an average outward movement in yields of 70 basis points, have seen capital values down 21% over the year. For U.K. shopping centers, that is 36%. The total decline in values over the last 3 years is 32%. Again, for U.K. shopping centers, this is a 54% decline from 2017 peak. EPRA net tangible assets fell 26% to GBP 3.3 billion. I've already mentioned the rights issue and disposals of VIA. These raised gross proceeds of GBP 834 million. As for liquidity, at the end of the year, we had cash and undrawn facilities of GBP 1.7 billion. We remain well within our covenants, although we still have too much debt. There has been significant change to the management and Board, with myself and a new COO, along with the new Chair, and the search for James' successor continues. The pandemic has definitely been brutal for Hammerson, not just from a financial perspective. It has also had an operational impact. Over the next few slides, I will briefly talk about the challenges and the actions taken in response. Since March last year, we have had to shut down and remobilize our destinations many times due to government and polls restrictions. If you look at the footfall chart, you will note that the sharp recovery when shoppers have been able to visit assets. That gives us hope for the future. We do not believe there has been a fundamental paradigm shift in the attractiveness of these urban locations. It's also worth highlighting that collection rate has been hit hard at 76% for 2020 versus 97% for 2019, typical for the past few years. The amount of passing rent today subject to tenant failure has increased to 6% versus 5% at the end of 2019. As for vacancy, it is now at 6% across the group versus 3% at the end of 2019. Despite the disruptive background, we have continued to run our assets hard and explore new uses for our space. I will pick out a few highlights on this slide. First, let's focus on department store repurposing. NEXT has taken former Debenhams space at the Oracle and Central. We are bringing forward a build-to-rent residential scheme in Highcross. And in Ireland, we are on site, converting the old House of Fraser to Brown Thomas, a suffragist brand. In the wider group, the DISTRICT dining concept of 14 new SMB operators opened in Cergy, exceeding sales expectations, and operating successfully as DISTRICT to go during the [outbounds]. Avril Organic is the first retailer to open at the Italik extension. And we have achieved planning permission at Martineau Galleries in Birmingham and the Goodsyard in the City of London. As you would expect, leasing has been tough. The gray bars on the chart show that activity trailed off rapidly with the onset of the pandemic. There was some pickup notably in France towards the end of the year. The majority of the leasing throughout was to existing occupiers. On a cumulative basis, leasing activity was down 35% versus 2019. On this slide, we give you a bit more color on the leasing environment. On the left are examples of COVID-related opportunities, vaccination centers and logistics. Meanwhile, in the middle and the right, you can see established brands are still taking new space across the portfolio. Everlast has signed deals in retail parts, and Foot Locker and NORMAL, [taken] stores in France, all on traditional terms. Therapy, Bensons for Beds... [Audio Gap] ...and Flannels, have all signed lease that include some of the pilot elements we talked about at the half year. The only commonality is that they have all adopted an RPI uplift, but none have requested a performance element. So despite what you may read, successful retailers don't just want short leases and turnover. On the right, you can see some of the more innovative deals where we helped 2 digitally native operators, MATE.Bike and Tea Palace into pop-up stores for a few weeks. Both saw significantly higher conversion rates and engagement in their catchment areas than online only. This shows the synergies of the omnichannel model and the importance of physical retail. Both are looking at longer trials and permanent space. Obviously, testing new leasing models has been slowed by the ongoing disruption. But what we do know is that retailers are keen to engage. No one size fits all, and it is not just about rental levels, but it's also about affordability. It's about sustainability of that cash flow, and it's about the right occupier mix. At the end of the day, it's about a holistic view of the assets. In turn, this should drive better values for those assets for shareholders. Aside from managing the relationship with brands and leasing, we have also had to adapt our operating environment to the COVID backdrop and I would like to thank the remarkable efforts of my colleagues. We have focused on 4 areas this year: customer safety; colleague safety; service charge savings, absolutely critical to our occupiers; and supporting our communities. With that, let me now hand over to James.

Thanks, Rita-Rose. So an extremely tough year. Let me just take you through the headline numbers on this slide before running through the moving parts in more detail. Primarily due to the revaluation deficit, we recorded an IFRS loss of GBP 1.7 billion, significantly weaker than 2019's IFRS loss of GBP 781 million. Net rental income was down 49% or 41% on a like-for-like basis, predominantly driven by lower collections, higher provisions for bad debt and incentives, and lower variable rent such as car park income from when assets have effectively been [shut]. Premium Outlets recorded earnings of GBP 6.9 million. As you will recall, the first half was very tough with a loss of GBP 7.4 million. But there was a recovery in the second half, particularly as value retail was able to operate successfully in the runup to Christmas, drawing in a good domestic audience. Overall, this led to an 83% decline in adjusted profit to GBP 36.5 million, or 1.6p per share on an adjusted basis, based on the 2.3 billion weighted average shares in issue for the year. Turning to valuations. The portfolio was down 24%, reflecting a capital return of negative 21% EPRA. Net tangible assets per share now stands at 82p, reflecting both the impacts of the valuation decline and change in the number of shares in issue from the rights issue and the enhanced scrip dividend. Net debt reduced by GBP 609 million, or 21%, largely due to the proceeds from the rights issue and disposal of VIA Outlets. Coming back to earnings per share. On this slide, you can see the adjustments made to the 2019 earnings per share for the change in shares in issue following the share consolidation and rights issue. The key takeaway here is that it is not a simple weighted average. There is the counterintuitive bonus issue adjustment to account for. And therefore, 765 million shares previously used for 2019 becomes 1.7 billion shares, and 28p declines by 15.2p to 12.8p, is our now reference point, for 2020. Moving then to the non restatement-related moving parts for 2020. There is a further 3.4p that relates to the change in shares during 2020, with a weighted average increasing to 2.3 billion shares, principally relating to the rights issue, but also the enhanced scrip dividends paid in December. Tax and administrative efficiencies are largely netted off by an increased financing cost as we drew on our revolving credit facilities in March, taking a cautious stance to liquidity during the initial uncertainty surrounding COVID. These were repaid during October. The decline in outlets, earnings and the lost income from disposals each contributed a negative 1.7p, with the largest movement of negative 4.5p coming from the decline in like-for-like NRI, which I'll now cover in more detail. Tenant restructuring in the forms of CVA and administrations were particularly acute in the U.K., hitting retail parks hard. I'll come back to provisions for arrears, but they had the greatest impact in Ireland where rent collection has been weakest, although this market has been less disrupted by tenant restructuring. Increasing provisions for tenant incentives has also had a significant negative impact across the board. Variable rents in the form of car parking, commercialization and turnover was negative in all divisions, although retail parks has limited exposure to this income stream. Otherwise, weaker leasing and higher void costs, together with concessions, have had more modest negative impacts in all territories. This slide, you will remember from our rental collection updates, and there was a breakdown by geography in the additional disclosures. We have collected 76% of 2020 rent. Adjusting this for deferments of GBP 3 million, this up from 61% at the half year. Abatements totaled GBP 22.6 million, leaving GBP 39.4 million outstanding, which would equate to a notional maximum collection of 91%, if achieved. You will note, however, that through the year, we needed to increase amounts waived in order to increase overall collection statistics, particularly during periods of high restrictions, such as Q2 and Q4, a trend I would expect to continue into full year '21, and therefore, I would also expect our collections for full year '20 to settle in the mid-80 percents. With rent outstanding and negotiations ongoing, we, of course, have to make provisions, and this slide compares the full year position with the half year. To give you an idea of the COVID impact, the level of trade receivables at year-end is about 3x what it was of full year 2019. On a more positive note, trade receivables have only increased by GBP 3.3 million since the half year. Nonetheless, as time goes on and collections increase, we must take an increasingly prudent view of the likelihood of collecting that outstanding. And we have, therefore, increased the level of provision against the outstanding to 64% of the total, with the most notable increases in the U.K. and Ireland. Meanwhile, France had a relatively higher collection rate in the second half with a reduction of GBP 8 million in arrears. On this slide, similar to EPS, we show the adjustments first from old EPRA NAV to EPRA NTA, principally relating to the different treatment of deferred tax, and we have provided a reconciliation in the additional disclosures. And second, the restatement of 2019 due to the change in shares in issue relating to the rights issue and the share consolidation, which brings our opening NTA to GBP 1.16 per share. Turning then to the principal moving parts over the year. There was a mechanistic reduction of 6p from the issue of shares due to the enhanced scrip dividend, which brought the total shares in issue to just over 4 billion at the year-end. Proceeds from the rights issue added 13p, while adjusted earnings added $0.01. On the negative side of the ledger, the loss on disposal for via outlets cost 3p and property revaluations 39p, largely relating to the managed portfolio, while premium Outlets were more resilient. We closed full year '20, therefore, at 82p per share. This slide, as usual, shows the breakdown of that revaluation deficit of 21%. We also have the usual slide and the additional disclosures showing the relative movement of ERV and yields, although at the group level, the effect was roughly even. U.K. flagship destinations were hit the hardest, down 36%, reflecting the tougher occupational environment. Next, developments were down 24%, principally relating to Cergy and then U.K. retail parks down 23%. France and Ireland flagship destinations were less severely impacted, particularly in the second half, but ended the year down 15% and 18%, respectively. As mentioned earlier, value retail had a stronger second half, and this is also reflected in the valuation deficit of only 0.4% in the second half, and therefore, 6% for the full year. Here, we break out the improvement in the net debt position. Proceeds from the rights issue added GBP 532 million, while disposals, including VIA Outlets, Abbey Retail Park and [SkyWest] in Paris totaled GBP 328 million. There was a net cash outflow of GBP 34 million from operations, which we break out in the table above. Cash from operations of GBP 52 million, down from GBP 264 million last year, reflecting higher arrears, lower contribution from variable rent and disposals. Interest of GBP 91 million was the other major outflow. Capital expenditure totaled GBP 84 million, principally committed capital relating to Cergy and Italik. Meanwhile, adverse exchange movements were the largest swing factor, adding the majority of the remaining GBP 120 million. On this slide, we lay out the key balance sheet metrics with a pro forma adjustment also for the disposal of the minority stakes in Brent South Retail Park, Espace Saint Quentin and Nicetoile, totaling GBP 73 million. On that basis, net debt reduces to just under GBP 2.2 billion and liquidity increases to GBP 1.8 billion. Meanwhile, we remain inside debt covenants, which I will come back to you shortly. As you all know, we have no LTV covenants at the group level, but we intend to stay on the disposal tact to further strengthen these and other metrics, which Rita-Rose will come back to you shortly. Coming back to covenant headroom. The first 2 columns in the table at the top of the slide show the reported position for our key debt covenants, the pro forma position reflecting the sales achieved to date. I would note here that since Nicetoile was an associate, the unencumbered asset ratio benefited disproportionately from these modest disposals. Meanwhile, the right-hand shows the absolute headroom in terms of group valuation decline from the pro forma position for gearing and the unencumbered asset ratio, as well as the decline in NRI for the interest cover ratio. Putting this in context, the second table on this slide shows the valuation decline to date suffered by each asset class in our portfolio from their respective peaks. In particular, I would note that the U.K. is down more than 50%. Here, we show upcoming maturities on the left-hand side. And on the right-hand side, a breakdown on the liquidity position between cash and undrawn facilities. Three key points here. First, existing liquidity comfortably covers immediate financial maturities, specifically, the GBP 115 million private placement, the GBP 50 million secured debt from O'Parinor maturing in 2021, and the EUR 500 million 2022 bond. Second, we are currently assessing our refinancing options for debt maturing in the next few years in conjunction with potential disposals. We'll look to refinance our upcoming maturities of RCF commitments as a priority in the remainder of 2021. Third, we intend to achieve further near-term disposals to generate liquidity to aid this process. Now before I hand back to Rita-Rose, I just want to use 1 slide to try to give you some building blocks and to help you think about modeling 2021. Now as we all know, there remain a lot of COVID uncertainties. Governments have been forced to react to events with extreme rapidity, altering reopening schedules and indeed imposing further restrictions. So please do not take this as hard and fast guidance. First, I would assume that during periods of government restriction, we will continue to see a rent collection pattern similar to that of Q2 and Q4 in 2020, varying depending on the severity of restrictions and the health of the underlying occupational market, which has been borne out by the rent collection rate in the first quarter, and then most likely, a step recovery thereafter. It is impossible to judge, however, the precise pace of that recovery standing here today. Next, taken together, we are targeting administrative and finance costs to be broadly flat for 2021, although this is dependent on the pace of disposals and refinancing. CapEx will be in the region of GBP 115 million, again, largely relating to committed CapEx of Cergy and some land purchases. To give you an idea of cash burn, given the disposals achieved to date, I would assume that to break even on a cash basis, we would need to collect at least 80% of rent. As you will have noted from today's announcement, the final dividend for 2020 of GBP 0.2 per share will also have an intense script option of 2p per share. So remember to bear that in mind a few share counts, assuming it is approved by shareholders and with a similar take-up rate to that of last year of approximately 80%. The Board continues to believe this is the most prudent way to manage our ongoing REIT and seek tax obligations. As per the prospectus, I would also assume the Board will recommend a similar feature to any interim dividend recommended in due course. And with that, back to Rita-Rose.

Thank you, James. I will now talk about my first impressions of the portfolio, capital structure, process and people, and what is ahead for us. So first, the portfolio. Hammerson has some great assets in good strategic locations, including a land bank with significant value-add opportunity. And these provide for good or best-in-class urban real estate company. But the company has not responded rapidly enough to the shifting environment in terms of embracing a wider range of uses. The portfolio must also be refocused to succeed as future destinations. We have spent too much focus on operating the assets in a steady state, perhaps managing them to prove ERVs rather than managing them to create sustainable destinations where the offer is dynamic and relevant. On capital structure, the actions taken by the Board last summer strengthened the balance sheet, bolstering liquidity and restoring covenant headroom. But debt is still too high, and we are having to dispose of assets towards the bottom of the cycle. As James said, we also have some upcoming maturities to manage. Hammerson has also too many different ownership structures, which is difficult from a liquidity, relationship, management, focus and operational perspective. We will focus on simplifying the portfolio. Critical to the future success of Hammerson is the innovative management approach with an investor mindset. Most of the ingredients are there to facilitate this. We have blue chip JV partners, so we should be doing more with them to add strategic value to our working relationships. We have a proven ability to attract the [better] brands to our destinations. And we are thought leaders in sustainability, now essential for the sustained support of our customers, communities, employees, partners and, increasingly, investors. Refocusing is necessary with greater emphasis required on agility and strategic value-add opportunities and proper capital allocation. Turning again to my immediate priorities, I have 3 overarching principles: simplification, streamlining and preparing to seize strategic opportunities. In turn, I am focused right now on 3 areas. First, the balance sheet. We will execute tactical disposals in markets where some liquidity has returned, as demonstrated by the disposals of Brent South Retail Park and Espace Saint Quentin and Nicetoile. We are analyzing options for refinancing. We now have GBP 1.8 billion of liquidity with minimal maturities in 2021 and around GBP 450 million in 2022, so we have time to consider these options in association with proceeds from disposals. But we must anticipate the refinancing of our RCFs, as James mentioned, and the 2023 Eurobond. Second, strategy. As I have said, a comprehensive asset review is underway in order to underpin the future state of Hammerson and a strategic midterm plan. This is likely to see the company rightsized before it is put on a path to growth. In addition, I am carrying out an organizational review to ensure we have the right talent with the right skills in the right place. Third, operational. We need to improve our focus on performance and efficiency. For example, maximizing our income and collection rates, while working with our brands to deliver affordable and sustainable rent levels and creating the destinations of the future. At the same time, this must be done in a safe trading and operating environment. While continuing to deliver cost savings for occupiers and for shareholders, we will concentrate on value creation through repurposing existing space, focusing on sustainable future cash flows rather than historical ERVs. We will improve our data insight and scenario planning capability, and we will continue to assess new leasing structures and new partnerships. I will report back on this progress of all of these points. Here, I just want to give you a little more color on my thought process on disposals. When I joined Hammerson, I conducted a pragmatic initial review of the portfolio based upon liquidity of our different investment markets against the current backdrop. In turn, this has led me to an initial classification of the portfolio being: immediate disposals, those assets either in the most liquid markets and/or those that are not strategic relevant for Hammerson and indeed would be more valuable in the hands of others; medium-term disposals for assets where there are value-add opportunities for us in order to achieve the best pricing or now is simply not the right time to sell; and long-term holds, for the very best assets in the strongest catchment areas with the greatest potential for mixed-use going forward. You wouldn't expect me to go into detail about which assets sit in those buckets, but the disposals executed since January should give you an idea. I will give a more fulsome update on our progress and intentions later this year. So to summarize, 2020 was indeed an awful year for Hammerson due to the impact of COVID on the retail economy, which meant a dramatic fall in revenue and a significant deterioration in values. Also, a limited leasing and investment market. And clearly, shareholders have suffered financially. A new management is in place. We will need time to stabilize the ship and return it to a growth path, which Hammerson has not been for some time. My immediate focus is on navigating the path to safety. We will do this by tactical disposals and intelligently managing the refinancing ahead of us. Right now, sales are difficult, but we have been able to execute, and I expect to be able to deliver further news in this area. At the same time, we must be ready for an operational perspective for reopening and working the assets hard. But for sure, the agenda for the rest of 2021 will include further disposals to reduce debt, implementing changes needed to our operating model and our organizational structure and delivery of the new strategy. Look, putting aside the presentation for a moment, believe me, I recognize and I see the extent of the challenges ahead. Leaving aside the financial impact caused by the pandemic, the sector is going through a structural transformation that I have seen and worked through in many markets across the globe, particularly in Asia. It is evolving to a model where all city center assets have multiple uses. I do believe we have the right assets in the right locations to provide these future destinations. You would not expect me to have all the answers that you might want today. I have arrived mid pandemic, and I am focused on tackling the immediate priorities to safeguard the company, which I have just outlined. So let's now hand over for your questions. You have had the opportunity to type them, and that will remain open. But we will also take questions from the phone lines in a couple of minutes. Thank you.

[Operator Instructions] We have a first question coming from the line of Rob Jones.

Yes. So REIT [indiscernible] -- first of all, thanks for the presentation. A couple of questions from me. A bit of a focus on balance sheet, and there's some others on the rest of the portfolio. You talked multiple times quite rightly about Hammerson having too much debt. How much is the right amount? And how do you measure that? Is it a net debt-to-EBITDA metric? Is it an absolute level of quantum of net debt? Is it an LTV figure? How do you get to the right level of debt in your mind? Secondly, you talked about analyzing refinancing options. What are those options? And could one of those options be further additional equity if we continue to see material capital value declines across the portfolio? And then 2 other brief ones. Is the size of the RCF likely to be cut by the banks at the point of refi? And then just one on tactical disposals. Obviously, you mentioned that a number of times as well. What's on the list in terms of what can be disposed tactically? It'd be interesting to understand where you think there's opportunities for asset exits over and above what's already been announced?

Thank you, Rob, and nice to meet you -- or hope to meet you soon. First question, the balance sheet and the level of the debt. I do think -- although it's not outrageous that the debt that you can see here, I do think it's still too high because we're not -- I'm not calling the bottom of the market here, so I do expect there are headwinds. So I obviously would want to bring that down and also create as much liquidity we can. We look at that in terms of absolute level of debt because we can't control valuation. The right level of debt in this instance, I would say to you that, that's going to be determined in the next -- in the context of the strategic review with regards to the profile of the portfolio. We will have the risk level of the portfolio. And obviously, the market conditions and where risks will stand at that point in time. So I'm leaving that one open. But again, we are still being very cautious in the current environment. Regarding refinancing options, I will just say that we're looking at all options currently, and we are anticipating. I do not want to be left at the last minute with forced options here. So we do have some liquidity to help support us for some time here, but that we are very actively working. And I'll let James potentially give you a bit more color on that. Last point, the tactical disposals, you're wanting to have my list. Unfortunately, I -- that's still secret. I would say that -- I gave you a bit of the methodology here because when I arrived at Hammerson, obviously, I had looked at the financial -- the balance sheet of the company at that point. We weren't yet in the additional lockdowns, but it was obvious to me that we needed to do that, not just for liquidity, but also to refocus the portfolio, simplify it for the reasons I mentioned in the presentation. So that's why the first thing I did was an initial review. It wasn't necessarily a deep dive, but I really wanted to know exactly where we would take -- spend time and where we would find liquidity, either at the asset level or in the market as a whole, and also identify immediately if there were some assets that we needed to turn around or do something with them before the sales. And then I do have a conviction regarding some stronger core assets. So with that list, you saw us do 3 transactions this year alone, so retail parks, South Brent and then the 2 assets in France. It should give you an indication of where we're seeing pockets of liquidity at this time. We are having additional discussions on some -- on other -- of our assets, but I will keep that general at this point and update as things go forward. So that would be my answer to you on that point. And then James, maybe complete my comments on the refinancing?

Yes, sure. Rob, so with regard to financing, the backdrop now of having GBP 1.8 billion of liquidity obviously provides some optionality. Within that, we've got close now to over GBP 500 million of cash. Near term, obviously, we have no material maturities this year. And then when we look forward to the Eurobond, the GBP 500 million Eurobond in '22, obviously, should we wish we can repay that with the existing cash and liquidity we have. As we start to step forward a little bit, then as we think about bond maturities into '23, look, I think in reality, we'll continue to monitor the disposals. And kind of moving to your other question about bank appetite on RCF. I guess more generally, as we think about credit appetite for Hammerson, historically, obviously, the demand's been very high. More recently, the uncertainty in the occupational market in the U.K. has obviously been far more challenging, especially with COVID. Personally, I think it's quite encouraging. As we look to the secondary markets, we really see the appetite to Hammerson's credit tightening back in. So the spreads are in the sort of 200 and 300 range now, which I think is encouraging. And generally, we've seen quite a supportive backdrop among some of our lenders as we've naturally had to work through waiver processes over the last year. So look, I think the headlines are, we said we'd be very committed to improve the balance sheet. We've done a lot of things on that in the last year, but we still want to go further. And I think with that, we do want to get to a sustainable financing structure, which may well, in time, see the RCF reducing below GBP 1.2 billion. But as Rita-Rose says, ultimately, defining the full structure needs to be done -- the financing structure needs to be done in context of the overall business strategy. But I think the headline is we're making good progress on easing some of the real credit concerns that there have been through COVID, and we're going to stay very focused on that this year to get a sustainable financing structure in place for the business.

Great, James, Rota-Rose. And sorry, just 1 quick follow-up. Can you remind me if, Rita-Rose, your remuneration metrics have been disclosed or announced yet?

So naturally, within the annual report and accounts, we've got a full disclosure in the usual way. So there'll be all the disclosure you'd ever expect on that front.

Perfect. And Rita-Rose, I'd love to have a call with you. Now you're out of place, period. So if you have some time at some point in the next few weeks, that would be great.

Absolutely. I'll look forward to that.

We have our next question coming from the line of Matthew Saperia.

I've got 2 questions. The first one probably for James. Somewhat surprised about the 26% NAV decline that you're reporting over the year, given the values fell by more than 20%. You've obviously got leverage and then the dilutive rights [indiscernible] issue. I was just wondering how you come to the adjustment factor that you're using to get to your December '19 NAV of 116p? It's very different from the one that we were anticipating. And then my second question for Rita-Rose, and I guess it follows on from Rob's question, but thinking about the asset side rather than the liabilities. The rightsizing of the business, any initial thoughts on what you think that will be? And particularly around, I guess, the portfolio size, but also geography. And then following on from that, how do you go about simplifying the ownership structure of the portfolio?

Thank you, Matthew. So starting with your first question, which sort of relates to Slide 17. Look, I think this is just simply a matter of fact. It's a matter of the numbers. So we are [indiscernible] the number of slides that we issued on the back of the rights issue. But obviously, we're very supportive for the level of support we got from our shareholders. But I think, ultimately, the facts speak for themselves in terms of the number of dividends that have been issued and the consequential impacts on the reported now, but I think it's just simply a matter of fact. Maybe I'll turn to Rita-Rose on your second question.

Yes, sure. So on the asset side, in terms of rightsizing the portfolio, that precisely, ultimately -- the purpose of the strategic review we're conducting now, that strategic review is -- what we're doing basically is really deep diving in each asset on the underwriting, the basis of the assets, but also reviewing the forecast, especially with the events we -- major events we just live with the pandemic, and understanding the level of potential and the risk return profiles that can be achieved. So I will come back to you exactly with that and also with the sales that we will have been able to achieve. On geographical diversification, again, it's going to be something that is very much -- it is very much the focus of our thinking currently. I have to say that for the time being, during the pandemic period, it has served us because we have 3 geographies that have quite different risk return profiles and different assets and different models. So it's been good. Then we will look at what we have there, the concentration, the cost of that and really the contribution of that, and decide and come back to you at mid-year. On the owner structures, as you -- as I said in the presentation, I mean the portfolio does have a lot of partnership structures. And I like partnerships, it's just that here more than 50%. And so it's large, and it's also the fact that it's different, different levels of control. It just adds an additional complication to the portfolio. So we will be looking at that. And actually, we are -- currently, you just saw a transaction in France. And we'll again report back on you exactly on what will be accomplished and how at midyear. That's what I can tell you today.

We have our next question coming from the line of Max Nimmo.

I think a few of my questions have been answered already there. But maybe you could just comment on some of the recent transactions we've seen in the U.K. or certainly some of the rumored transactions, things like Touchwood and Solihull? It feels like -- I know it's difficult with looking at yields and things at this point. But on a value per square foot basis, that's still around over 10% below where your values are for the year-end. But it does feel like we're starting to get some sort of price discovery there. I'm just quite interested to get your view on what you -- the valuation outlook? And how much further we have to go given that we're now over 50% value decline of where that takes your LTV in the near term?

I'll start with maybe commenting quickly on the other transactions. I mean these are very different assets, basically. So we're not necessarily looking at that or commenting at this point. Again, very different situation than ours. James, do you want to comment -- do you have a comment on that?

Yes. I mean, I'll probably just stay on disposals that we're focusing on what we can control, as Rita-Rose mentioned it a while ago. We've got some benefit here from the diversification in our portfolio. So what we observed last year and again this year is we ride the different waves of lockdowns and reemergence. And as pricing moves, then obviously, liquidity is moving in line with pricing as well. So from our standpoint, we'll continue to monitor transactions in the market. We're talking to various counterparties at the current time. But we think we've got some relatively unique assets, and we'll endeavor to continue to monetize those. But recognizing, to be clear, we're not a for seller at this time. So we'll just see how the year goes.

We have our next question coming from the line of Paul May.

Just 3 questions for me. First, James, you mentioned the 80% rent collection level to be cash breakeven. Is that right to assume that if rents were to decline by 20%, looking at a slightly different way, then you wouldn't be making any money? Just given where you're sort of targeting rent levels in the U.K., for example, sort of 15% below previous levels? I was just trying to get a feel for, is that an exceptional number given the current circumstances? Or is that something that we should be concerned about on a sort of more ongoing run rate basis?

Yes, in a sense, you're right, if the debt values were held where they are today. Obviously, the intent over time will be to continue to delever as well. So that all things being equal, should reduce the level of finance cost in the business. But yes, you're right, the guidance that the current time for this year is broadly 80% to breakeven against the current passing rent basis of about GBP 270 million.

Sorry, just a second question on VIA. Just wanting to understand if there are any restrictions on your ability to sell any stakes or the whole amount for the first rate of refusal with the other partners? Just wondered what the liquidity is like within of the business? I think you mentioned in the past that Premium Outlets had been performing better than other traditional retail sites. Have you seen that in comments from others as well? So just wondered what the liquidity position is with regard to Value Retail?

Yes. Well, I think it's known that there are some preemption rights in the structure, but I won't comment in the detail of the structure of the agreements. As you say, I consider that, and I know that portfolio. I consider it's a very good portfolio, extremely good operating platform. And as I was saying, currently, we're looking at all our assets in terms of disposition strategies and ultimately more midterm strategy. So it includes value retail. So we'll get back to you on our intent on that one midyear.

Okay. And then the last one, just on the Slide 39 and the additional disclosures, just around the rents that have been renegotiated through the year. Obviously, some quite material write-downs on those relative to XXpassingXX and versus ERV. Appreciate that the principal lettings, particularly in France and Ireland, are obviously much closer to ERVs. Just wonder on those principal lettings, how many have been signed post sort of COVID pandemic? Or were most of them constrained to the first quarter of 2020? Just to get a feel for where rent levels are at the moment versus previous passing and ERVs?

I'll maybe just give you a high -- referring to Slide 39. So the principal leases, permanent leases, there are 31 deals. And there are -- I would say that the renewals are closer to ERV than new lettings. Obviously, overall, the letting activity has been down about 35%. So if you look in Page 62 of the deck, early on the year, there was activity. But at the end of the year, obviously, activity trailed down as the year continued. So perhaps we can give a bit more color with Mark that's in the room on the U.K. leasing. Mark?

Yes. So I think if you look at Page 38 of the deck, just to further overlay Rita-Rose's comments there, you can see there was a cumulative build of deals towards the end of the year. And you can also see pre-COVID deals, January, February and March. So in simple terms, you're absolutely right, during COVID, the deal volume was lower.

Sorry, just to follow up, Mark. Is that the principal deals were spread across the year? Just to sort of get a feel for, has there been many principal deals post COVID and the sort of pricing of those? Or is it more on the flexible?

No, there were. And what we certainly noticed towards the end of the year, before we all anticipated there was going to be an extended lockdown into 2021. The occupiers were -- started to get really focused on reoccupation and taking new stores and, frankly, taking the opportunities that were there in the market. So we did see a spike on permanent deals. But with that said, Paul, the volumes are very low. I mean, let's not -- we have posted very low volume. So as Rita-Rose said, there were 31 permanent deals in total during the year in the U.K. Yes, and a good few of those were towards the end of the year.

Sorry, just a final one, if I may, on that. The -- what's been the retention rate on some lease expiries across each of the 3 main countries?

I think best -- well, the good headline KPI looking at the void numbers. So given -- starting at the U.K., we got 93% occupancy. Within those deals, I've just described, you have a proportion, the 31 permanent deal proportion of lease renewals and new lettings. I don't have a specific stat for the retention rate. So I would point to the generally higher levels of occupancy over the overall territories. And really the tactics have been to adjust the rents as required. Hence, the deals you see in -- the flexible deals being more challenged versus ERV and previous passing rent, but the tax has been to maintain occupancy as we work through COVID.

Well, the point I'd probably add is, look, I think it's difficult to draw too many conclusions based on leasing performance in 2020. This is an exceptional environment that we're operating within. I think it's very encouraging for all of us on many levels that there's a road map, particularly in the U.K.. And there's been the benefits of vaccinations. But as we are doing and reflecting, occupiers will be doing the same. So we've enabled the team to -- empower the team to try and maintain the vibrancy within the centers. But it's why you unsurprisingly see some of the shorter-term lettings being at such a large shortfall to ERV. And really, strategically, what we're focused on is re-underwriting the mix of uses and the value and the cash flows attached to that to the mid to the long term. So I think it's worth noting these statistics, but I don't think we necessarily draw too many statistics from them given where we are and where we've been over the last year.

We have a next question from Alison San.

I have 2 questions. So first question is about the strategy and disposals. So for the 2 franchise that you disposed, can you maybe just tell us what the yield reflected in the transactions? For example, XXXXXXXXXXXXXXX is it a 6 or 7 handle? A range would be fine. And also, are you still looking to exit from your retail parks portfolio? I appreciate that you mentioned on Page 17 of your results that retail park is no longer in the held-for-sale category, but is it just because of the accounting rule or you actually still intend to continue to operate in this asset? That's my first question. It will be great if you could answer that one first.

On the disposals, we won't give too much information. Obviously, it's quite commercially sensitive, but you do have information in Page 51 of the slide deck. And the -- for the retail parks, as I was saying previously, everything is on the table in terms of reviewing the portfolio, and there are obviously some pockets of liquidity, and you have seen us sell 1 retail park early this year. So we are completing our evaluation there, and we'll report back on that once that's done.

My second question is about the G&A. I appreciate that you said your main expenses and the financing costs will be largely flat in 2021. But given that you said you're going to sharpen your operating -- operations, do you have a target to reduce your total G&A expenses from, let's say, 2022 or year going forward?

Well, listen, that's in line with the strategic review we're doing. So I don't, at the current time, have a target specifically. We're really working that out. But I do think that there are cost efficiencies from what I can see initially. And again, we'll get back to you with specifics on that as we complete our review.

We have a next question from Christopher Fremantle.

Chris Fremantle from Morgan Stanley. I just wanted to ask a couple of accounting and reporting questions, so apologies if these are very detailed. But can you just talk about the valuation metrics of the value retail, the outlets that you continue to own and/or the assumptions that are underpinning that valuation? I appreciate you don't have control over that, but I'd be interested to just get some idea of those metrics, which I don't think you disclosed relationship to income or cash flow, just to understand that GBP 1.9 billion, which is clearly a big number in the context of your NAV. That's the first question. The second question is just about your provisions. You mentioned that in the second half, I think, your provisions had increased GBP 35 million, on Page 16 of your presentation. I think I've understood that correctly. Can you just explain how much of that is in the adjusted earnings figure that you report for 2020? It looks as though there's a -- if I look at your financial statements, it looks as though there's a GBP 12 million item relating to amounts not yet recognized in the income statement. There's a line in your income statement that separates a GBP 12 million figure out. So where is that -- if you can just help us understand where the provisions are within your adjusted earnings? And then also in your adjusted earnings figure, it looks -- again, looking at Page 48 of your press release, it looks as though there's an GBP 8 million positive item relating to the impairment of VIA Outlets. If you could just explain what that item is, please? I'll leave it there.

That's great. Thanks, Chris. Good to see somebody is going to all the detail as well. I like that. So first question, DCF. So we -- in terms of how we value retail, it is a discounted cash flow. So we've run, therefore, on looking at income-based projections over the course of the 5 years, applying an exit rate and then a discount rate associated with that. We don't disclose with intent all of those assumptions at each valuation date. But what I would say is when you look at the shape of the capital loss that we've reported, so the 6% for this year, what's really driving that is readjusting the income rates over the course of the next few years. We have to remember this is a portfolio, different assets have differing levels of maturity, differing levels of international tourism. So inevitably, with what's happened with COVID, has been a downside adjustment for some of those factors, in particular, international tourism. But actually, the team has been doing a very good job looking to repivot the strategy increasingly towards sort of higher net worth domestic audiences and using new sort of online visualized sales tools as well. So we've got income adjustments and some yield adjustments associated with those judgments. But remember, the extent of those risks or opportunities differs between the centers. So you only see an average in the 6%. But generally, what we observed last year was a pretty strong bounce back around footfall and increasingly basket sizes increasing as well. So it's why increasing the of the view relative to the other assets we've seen a more resilient performance. Moving then to the second question on provisions. Essentially, the adjusted earnings, have all of that in with the exception of GBP 12 million. The GBP 12 million is essentially the provision for income in advance relating to Q1, where we don't intentionally reflect the income in our earnings and therefore, neither the associated sort of ECL provision associated with that. And then third and final, yes, there was another GBP 8 million. That essentially accrued, though in respect to the VIA. So the profits between the point of exchange when we did the deal and we announced at the half year, and then a point when the transaction actually completed as well. So it's essentially the operational earnings over that period.

Okay. And just very briefly to come back on the value retail. I appreciate you don't want to give too much detail about the assumptions. But can you just indicate to us when you are assuming? And if you are assuming that income goes back to pre-COVID levels within that DCF projection, please?

As I say, it's probably difficult to answer in totality, given in truth, you've got different assets within the structure. And as I say, they've got differing levels of consumer demographics associated with them as well. But I think the headline takeaway would be, as we think about the reality of occupational markets ahead of us, it's an asset that's performed extremely well historically. It's performed well following earlier pandemics, such as SARS and Avian flu. Clearly, this one is far more wider and far deeper. But again, to my earlier point, we think it's the one that's got the most resilient set of income flows associated with it at this time. Apologies, I can't give you detailed disclosures on an asset-by-asset basis, but it's just commercial we are seeing right now.

We have a next question coming from the line of Colm Lauder.

Thank you for the presentation this morning. A lot of my questions on the balance sheet have been broadly answered, but I have a couple of detailed questions on the operational side, which you might be able to help with. I'm particularly thinking around expectations around lease events. So looking at expiries and reviews and potential renewals. And what I was curious, just to get your confirmation on, is looking at the expected outcomes of some of these lease events. So for example, I know perhaps is getting a bit detailed, but on Page 75 of the results, where we're looking at rent reviews in terms of rent passing versus the ERV of these leases that are subject to rent review. And what that shows is that there's still an assumption that the leases to be reviewed in the near-term are presenting reversionary potential. Is that correct? And what are your assumptions around that, obviously, given that ERVs in the portfolio fell over 10% last year?

Yes. Well, as I made the comment, I think that the renewals are closer to ERV than new lettings. And secondly, for 2020, it's really a year where we can't really conclude on anything. I don't know, Mark, if you want to give a bit of color on that? It's an odd year for numbers, I would say.

Yes. Yes, Colm, just to reiterate Rita-Rose's comment, the renewals that we are doing are generally firmer. And at the same point, I made on the earlier question. They're generally firmer. They're generally near ERV, which certainly gives us the -- it's reassuring in the context of those retailers who have sustainable rents want to retain with us. When we look into the future, yes, that -- we think that pattern's broadly there.

A lot of cases either for a year where if -- activity has been low.

Indeed.

Okay. And of the leases that were concluded over the course of the last year in terms of the various degrees of lease events and looking at the 10% or so decline versus previous ERVs and Rita-Rose, you mentioned in terms of a number of these were within the sort of the new pilot structure of more shorter-term turnover linked structures versus traditional leases. Could you perhaps provide a bit of color in terms of the driving force behind that 10% decline for the new lease events? Is that coming more so from the pilot star leasing structures or from the traditional leasing terms?

I think there's -- well, first of all, there's not been a lot of leasing. And secondly, there's not -- the pilot that the -- leasing that you're talking about in very few cases. And I think I said in my presentation that most have -- the leases are based on a longer-term and RPI adjustment. So I think it's really based on the ERVs and the market more than the type of structures that were put in place. Again, I mean this is a really odd year. And I think -- I don't think it's reflective of anything at this point.

Okay. And just one final question from my side, just on the capital valuations. I noted that the material uncertainty clause remains for asset site, Dundrum, et cetera, within the Irish portfolio from your value risk Cushman & Wakefield. And just thinking in terms of what happened in the U.K., when the material certainly closes rolled off, there was a slightly sharper correction in values in the second half. Do you consider that an element of the lesser declines that have come through in the Irish portfolio or as a consequence of the material uncertainty clause remaining? And obviously, with the potential for that to be removed over the next -- in the next round of valuations, is there a potential for a sharper correction in the Irish element to perhaps catch up with a degree of the U.K.?

I'm not sure that's the overarching driver. I mean as you rightly note, we've seen the material uncertainty clause removed in U.K. and France, remains in Ireland. Simply, it's a function of being a much smaller market, obviously, with even fewer transactions that have been conducted. So naturally, the values are just highlighting the increasing judgment. I think, look, as with all of these valuations, we've all been recognizing the challenges that we've been working so over the course of the recent years. And we're now seeing U.K. flagship valuations cumulatively down 54%, retail park, similarly. And in Ireland, specific to your question, 24%, with 18% of that driven last year. Really, what I think this really speaks to is everybody is trying to read through society reopening and what is the outlook for the occupational market? Now from our standpoint, we continue to have good confidence in the assets that we hold there. But it's -- I can't really explicitly guide on what we think the valuations may do over the course of the coming years. All I will say is we remain very focused on protecting this balance sheet during uncertain times. But we've got flexibility in the way I described earlier.

Yes. I would just add that the dynamics of these markets is very different in terms of supply/demand, product growth or pattern. So I wouldn't necessarily think that all these markets move exactly the same.

We have our next question from Marcus Phayre-Mudge.

Again, most of my questions have been answered. But just one particular one relating to, you commented on the liquidity of ownership structures. And my question is really just, are you confident, particularly in your U.K. flagships where you own 50% interest and where the other owners may or may not have option rights first refusal, et cetera. Are you thoroughly confident that your valuers have taken that into account because it's really quite tricky. You can't really value the whole center and then just take your 50%. That really in this day and age, I'm afraid there has to be quite a significant discount to reflect the fact that, in a way, other parties may not come forward if they know that there is an option to your existing partner. I wonder if you would comment on that? That was my first question. I've got a couple more in a minute.

My answer to that would be that we do an asset valuation, so it doesn't necessarily take into consideration structures. I don't know if James, if you want to add to that?

No, indeed. So I think, like, when you follow the red books approach, we manage the assets and obviously full disclosure to them in all regards as well. But ultimately, there's no sort of explicit adjustment in respect of the particular structures that we have in place on an asset-by-asset basis. But that said, as we know, the value is ultimately, as we're all doing, reading through to yields, which are an increasingly subjective matter, and that can have regard to many things. But it is subjective at the end of the day.

My next question is just relating to the old one, the old sort of thorny one of leasing versus ERV. And I know we're dealing with a relatively small data set. This issue has persisted for some time because the market continues to be weak for physical retail. This constant delivery of leasing data add discounts to ERV. At what point do you actually say to the valuers, guys and girls, you need to be properly realistic on this, and these are the transactions that we're doing in the market. And therefore, that is the ERV, not some airy-fairy number that you choose to make up. But that's more of a comment than anything else, and I'll leave it -- leave that there. I don't think you've necessarily got a particular comment on that.

Just to say that valuers are independent, and they do these ERV values in our sector, in the retail sector. I do think that there is a point where it's not going to -- probably going to -- as I said in my presentation, my favorite matrix is passing rent that -- because these products will evolve in time, and that's going to be the real KPI. I think that we're going to want to be following. The products are not necessarily be -- going to be that comparable, if I can say.

Okay, Rita-Rose. And the final one from me relating to Slide 76. Just going back to your -- to value retail. Just to be clear, this slide, and you're kind enough to put in the title that this actually includes Acquisitions and Extensions. So we can't actually draw -- there's no like-for-like data in this slide. This is just a nice graph that shows if you buy more things, then your sales growth will go up because you have bought assets that have sales. I shouldn't be drawing -- I'm sorry to be so stupid about this, but there isn't anything more that I should be taking from this particular slide, is there? I don't want to miss something.

Great. So to your point, yes, you're correct, it is a sort of absolute view. But that said, we've only, I think, had any acquisitions in the past 2 years.

Okay. So more useful going back to Slide 5...

Sorry. My apologies. Sorry, Marcus. Slight correction, if I may. This is portraying only assets that we've now owned for 2 years, my apologies. So it's sort of a middle position between what you're describing in terms of a like-for-like and absolute.

Okay. In that case, that leads me to my final question. On the previous slide, 75, I think, just if I could ask, the key focus, this comes back to Chris Fremantle's question about the valuation of the asset in the DCF. That EBIT margin is going to be absolutely crucial going forward in terms of what the valuers are utilizing, both looking backwards at your evidence from the past and the future because we are -- you don't have control over the marketing expense or the admin cost. You are a minority shareholder. And therefore, there could be a situation where your partners wish to ramp up expenditure in an effort to try and recapture lost sales, et cetera. Just to be clear, this is -- you are ultimately a receiver of the net margin rather than having any control over the operation of the business. Just want to check that. Is that correct?

Well, we do, of course, have influence here by virtue, in particular, Rita-Rose, obviously knowing the team and sitting on the Board there as well. But you're right, ultimately, in terms of the valuation, we're trying to read through to what an appropriate the EBITDA margin is for the mid to long term given that sort of 5 year DCF that I mentioned.

We have next question from the line of Marc Mozzi.

I have 3 questions from my side. The number one is back to your capital allocation strategy. So if I understand correctly, you would like to reduce minorities, you would like to simplify the structure what we have for relocation, free type of Xasset classesX And the third element is you have nearly GBP 1 billion of refinancing obligation over the next 3 years. And if I look at your chart spreading your total assets by region or by asset class, you only have 3 blocks, Value Retail, France or U.K., above GBP 1 billion value. So I'd like to understand, if you would like to break this allocation into a smaller business? Or if you really want to have a simplified, more aggregated pie chart or donut chart here, and you're completely agnostic about selling potentially everything? So pretty differently. Which assets do you think you won't want to sell or you don't want to sell?

I think, again, that's exactly the object of the strategic review we are doing at the moment. So capital allocation is key. And there might be some breaking up. And we're also going to be doing a bit more work, as I was saying, on capital allocation and the -- we're trying -- obviously, we are trying to simplify and streamline the business and being way more agile and focused on a specific strategy. So that may give you a bit of an indication on what we're seeing in the portfolio as being potentially not really in our focus. But capital allocation is really, ultimately, as I was saying earlier, is a key and what will come out of our strategic review in order to make sure we're maximizing efficiency and return to the company, and also having a good risk return profile at the end of the day.

Okay. Well, just a final question on that point from me. Is Value Retail on your potential disposal list?

We won't go there. Listen, again, it's in the -- everything is on the table at this point. Everything is being reviewed in detail. So of course, that is part of our portfolio. I will again reiterate the fact that it is a good operating portfolio, but we're going to be reviewing that and coming back to you at midyear with a more refined answer to that one.

Okay. My second question is about your land bank. What amount of CapEx would be required for that land bank to be fully developed? And how long do you think it may take?

To the first part of your question, the CapEx currently, broadly estimated, is around GBP 2 billion for this land bank. What was the second part of your question, sorry?

How long do you think it will take to revise that CapEx?

Okay. Well, that's a -- it's long dated. It's several years ahead. So -- and it's phased. We're currently -- we're just doing all the pre-work to get those assets as far as we can. But they're all -- it's all phased, and it's several years in the making. And I do personally -- when I look at Hammerson, having a land bank like that is certainly something that's very attractive on the real estate point of view, and that has eventual value. So I am taking the time to look at that and how we would manage to do eventual opportunities or build eventual projects. But it is a bit more long dated. So again, it's part of the strategic review, but potentially not the short-term priority.

And my third question is about your distribution obligation over the coming years, especially coming from your previous disposals. Can you remind us how much you need to distribute related to those disposals over the next 2 to 3 years? If you're planning to eventually postpone those distribution as long as you can or if you're going to address that, thanks to this quick option.

Yes, sure. By all means. So as we announced at the half year, concurrent with the recapitalization strategy will be where we're paying for scrip dividends. The reason why we're doing that is to meet ongoing distribution obligations respecting both the tax regimes in the U.K. with the REITs and the French SIIC equivalent as well. To give you a feel for the numbers, broadly as we came into 2020, the distribution obligation broadly was about GBP 300 million. That was a function of what I'll call operational profits in both U.K. and France. Together with, as we've previously disclosed, the distributable proportion of the capital gain when we sold our 75% interest inXXXXXXXXXXXXXX ] that was EUR 270 million. Now during the course of 2020, we obviously paid away with the shareholders' approval of a scrip dividend, so that was just over GBP 71 million. And there's been, as you can see, a very thin level of profitability in the year. So at the current time, our obligation is broadly around GBP 250 million to pay away by the end of 2022. You'll see, concurrent with this morning's numbers, we've announced a dividend in the form of a cash of GBP 0.2, but with an enhanced scrip of 2p. So if we were to assume the same take up rate, broadly 80%, then it probably means the distribution obligation falls to something broadly in the region of about GBP 170-or-so million. Now that amount, we need to clear by the end of 2022. So the Board's current view sort of consistent with the strategy that we've been talking to this morning continues to be to protect the balance sheet. So we continue to, I think, be focused on maintaining the scrip option to protect the tax status of the group. I think the midterm intent will be to revert to a cash-based dividend, but really that will be a function of -- once the board feels we've got all the strength and resilience we'd like in the balance sheet, only at that point will we make the change. But I think that will be the continued midterm intent. But certainly likely through this year and potentially longer will be on the script.

Yes. And as I have you on the call. Just on this question around your 2019 rebase or recalculated net asset value. So my understanding, I think your 116 is weird because you had 765 million shares last year, and you had the bonus last year of 219. This is all on your slide deck. Divided by -- and if you divide your 4.5 billion of asset value -- net asset value at that time, you will end up at 260p -- 268p as a restated net asset value for in 2029, I would be delighted to go through that because I think there is a bit of confusion here where you are creating more shares, you have a 20% capital value decline, you have the benefit of the leverage. It's where that it can only lead to that small decline in net asset value per share. But that's purely technical on. That's more remarks than a question. Thank you very much for your presentation.

Sounds great. As to say, we're more than happy to take that 1 off-line, and we'll walk you through the math.

I will now hand over to Julia to take questions from the web.

Thank you for all the questions submitted on the webcast. We will not have time to go through all of them, and most of them have been covered. But I will read a selected few. So a first question is from Robbie Duncan at Numis. Robbie asks, your gearing ratio of 70% and excludes the GBP 689 million of net debt within value retail. Including it, gearing rises to more than 90%. 2 questions. First is why is the VIA debt excluded from your gearing calculation? Second is, what is the maturity profile of the debt within VIA? You clearly have a spike in group maturities in 2022 and '23 at GBP 447 million in each year. But is there more refi risk in VIA?

So firstly, in terms of the reasons why we disclosed the credit metrics in the way we do, we're seeking to be extremely transparent. So the ratios we've disclosed here are simply in line with the various covenants that we have across our credit instruments. And therefore, it gives you and the rest of the market transparency on where we are. And therefore, from a sensitivity perspective, what further capital value erosion we can withstand. Secondly, in terms of Value Retail and its secured debt profile, the majority of that debt is over 1 year. The general term associated with that mean it's typically broadly, I think, 5 years across the portfolio. So hopefully, that helps answer those questions.

It's also nonrecourse debt.

Okay. Great. Next question also for James mainly, is from Andrew Gill at Jefferies. And the question is, how much is the remaining distribution required by the SIIC rules for XXXXXXXXXXXXXX ] and will the 2 French asset disposals increase the distribution requirement? What is your estimated NAV dilution to satisfy this on the current 80% scrip take up?

So the headline, as Andrew to my earlier comments, which will probably be quite helpful. And these 2 assets are not really generating additional -- if the disposals announced this morning, the French disposals are not really generating additional material capital gains given the values involved. So I think it's -- no material difference would be the headline. I think for the first of the script, I'd probably just refer you back to Slide 18 with the impact there with the 6p. And beyond that, is there anything else you'd like to follow-up off-line, would we like to do so.

Okay. Great. And finally, we had a couple of questions about that, namely from Steve Bramley-Jackson at HSBC and XXJan WillemXX at XXXXXXXXXXXXXXX and it's probably for Rita-Rose. So I'll read out the questions. What do you consider to be core for Hammerson's in the future, shopping centers or mix use development? And there's a similar question on that saying, can you comment on strategy for your French assets? You don't have critical mass there. Do you want to sell?

Well, again, I -- we are in the midst of a strategic review, looking at the composition and the construction of the portfolio for the years to come. So if you ask me, will it be development or shopping centers? It may ultimately be a mix. But again, it all has to work in terms of ultimate risk return profile. So that's exactly what we are currently looking at. So I don't want to give -- of course, I have some impressions, but I don't want to give any conclusion out until we -- I'm not necessarily a storyteller here. I really want to make sure that we have everything in hand to support specific execution. So that's one thing. For the French assets, it's the same thing. Ultimately, we are looking at our exposure there. And as you know, having sold these 2 assets, we now have 4 assets. One, which mainly composed of 2 larger in Terrasses du Port and Cergy. So we're looking at concluding on the overall exposure to that portfolio and our plans for the future.

I'm afraid that's all we have time for. We've been running up to 1.5 hours now. So we have all your questions. We'll try to get back to you as soon as we can, and you can always reach Josh or myself if you have any follow-up. So thank you again.