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25 Feb, 2008

Published: 09:28 Monday 25 February 2008
By: Matthew Goodburn, Investment Correspondent

Hammerson surged to the top of the FTSE leader board after the property firm reported a 3% increase in net asset value (NAV) in the year to 31 December 2007.

At 10:45am the blue chip had risen 65p or 6.14% to £11.24 just off its earlier £11.29 after it stated an adjusted pre-tax profit jump of 24.1% to £117.3 million.

Pressures on out-of-town retail developments will provide the company with a long-term structural advantage, said Bradley Mitchell, manager of the RLAM UK Growth fund, despite a currently negative outlook.

UK shopping centres and retail parks make up 49% of the Hammerson portfolio compared to 22% in UK offices and the rest held in France and Germany.

'There are so many things that are now militating against these big out of town retail developments, such as planning changes and environmental concerns,' said Mitchell.

'The planning regime is becoming a lot less favourable for developers and being able to get local authorities on board is going to be crucial to getting anything approved.

'We have the White City shopping development [in west London] in the pipeline but that's going to be it for some time. Going forward, this space will be trading at a premium.'

The company(53OA) produced a 25.9% rise in its dividend to 27.3p and announced net rental income of £275.7 million, up 16.1% on the previous year with the firm's French holdings outperforming the UK portfolio.

Property holdings in France helped to drive NAV increases, delivering a 16.5% capital return for the year, up from 11.2% in the first half of 2007 although the group noted that the performance from UK shopping centres had been robust.

While recognising that the state of the market over the next year remained uncertain, Hammerson chairman John Nelson said that there were reasons to remain positive.

'With regard to occupational markets, retailers in the UK are continuing to face challenging conditions,' said Nelson.

'Weakening consumer confidence, a reflection of softening house prices and high personal debt levels has recently resulted in slower growth in consumer spending.

'In the City of London office market, the buoyant demand seen for much of 2007
slowed during the last few months of the year.

'In view of the level of development completions over the next two years and reflecting the reduced levels of activity in the financial services sector, the City occupational market may soften.'

Citigroup reiterated its hold stance on the stock despite its high risk take on the sector, and analyst Harry Stokes said: 'Even without factoring in long-term developments, value is opening up. We are encouraged by Hammerson's performance and see more to come.'

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