Morning briefing: Hammerson lifts guidance after buying half of Manchester Arndale; Oakley Capital Investments says share price fall “unjustified”; Greencoat UK Wind cashes in on high power prices; “robust earnings” drive SAINTS; plus AGVI

Hammerson (HMSO), the £2bn UK real estate investment trust, has launched a £190m share issue to fund the £218m acquisition of a 50% stake in the Manchester Arndale shopping centre. The company is buying from Palma Arndale BidCo, which represents the investor consortium that bought the holding when its previous owner Intu collapsed in 2020. HMSO lifted its earnings guidance by £7m to £132m to reflect the acquisition which it said would be immediately accretive. Announcing half-year results showing a 5% increase in like-for-like net rental income, chief executive Rob Wilkinson said: “What was already proving to be a strong underlying performance this year is now further enhanced by today’s acquisition. We are now guiding FY26 earnings to be 27% greater than FY25, strengthening our path of sustainable growth, and underpinning a new medium-term outlook.”

Richard Williams, senior analyst at QuotedData, said: “Hammerson’s turnaround from launching an emergency rights issue to stay afloat in 2020 to today raising capital to fund its growth has been remarkable. The acquisition of a 50% stake in the iconic Arndale centre in Manchester is strategically consistent with Hammerson’s increasingly focused portfolio of dominant city-centre retail destinations and comes at a tidy topped-up net initial yield of 7.8%. While existing shareholders inevitably face dilution through the non-pre-emptive placing, this is limited to around 1%, and the acquisition enhances earnings from day one without materially increasing financial risk.”

Oakley Capital Investments (OCI) has called its share price fall this year “unjustified” and reiterated the benefits its diversified portfolio of private companies is deriving from artificial intelligence (AI). In a half-year trading update, the private equity fund of funds said it made a 6% investment return in the six months to 30 June with compliance tester Phenna, sail specialist North Sails, semi-conductor analyst TechInsights and cybersecurity software provider Exaforce making the largest contributions. Despite the increase in net asset value (NAV), the shares fell 16% in the period, largely the result of first quarter declines in response to concerns about AI disruption and conflict in the Middle East. “With the advancement of AI, increasing adoption across the portfolio is also supporting productivity improvements and, in selected cases, beginning to create new commercial opportunities,” it said. Earnings growth accounted for 80% of the underlying return, with only 20% attributable to valuation multiple expansion, it said. OCI invested £43m in Oakley Capital funds and bought back £9.4m shares out of a £20m allocation for this year.

Matthew Read said: “OCI’s 6% NAV total return provides a stark contrast with the 16% fall in its share price and suggests that the market’s concerns have run well ahead of the underlying evidence. Portfolio earnings growth remains solid, AI appears to be creating opportunities rather than disruption, and liquidity looks adequate to meet commitments. With the shares trading at a substantial discount, ongoing buybacks should continue to add value while investors wait for sentiment to recover.”

Greencoat UK Wind (UKW) shares have risen 3% after half-year results showed the positive impact of strong power generation and high energy prices. The £2.3bn renewables fund said its wind farms generated 3,003GWh of electricity, up from 2,567 GWh a year ago, and 4.9% above budget. As a result it expected full year net cash generation to be at the top end of its £350m-£410m guidance. Cover for the 10%-yielder’s half-year dividends rose to 1.9 times from 1.4 last year.

Matthew Read said: “These are a welcome set of results from Greencoat UK Wind. Generation was ahead of budget, cash generation was strong and the dividend was covered 1.9 times, while debt was reduced and near-term maturities were refinanced. Against that backdrop, its low 20s discount to NAV – 22% at the time of writing – still looks too wide, particularly given the portfolio’s inflation-linked income, improving balance sheet and expected full-year cash generation towards the top end of guidance.”

Scottish American (SAIN), the £814m Baillie Gifford managed global equity income trust known as “SAINTS”, underperformed in the first half of the year with a 5.6% total investment return trailing the 12.9% return from the FTSE All-World index, although £78.7m of share buybacks lifted the shareholder return to 6.3%. The investment trust’s board was confident it could deliver a 53rd consecutive year of dividend growth after “robust earnings growth” in the half-year period drove a 6.1% increase in its two interim dividends of 3.98p per share, more than double the rate of UK CPI inflation. 

Matthew Read, senior analyst at QuotedData, said: “Given SAINTS’ emphasis on income, it’s not surprising that the trust has underperformed its benchmark which has been driven by a very narrow group of AI-related stocks, which is an area that SAINTS is likely to be underweight. However, underlying earnings growth remains healthy and broad based, supporting dividend growth comfortably ahead of inflation, while the managers have continued to recycle capital where investment cases have weakened. The portfolio may struggle when markets are dominated by a small number of low-yielding technology stocks, but its emphasis on dependable earnings, resilient dividends and diversification should help it benefit when the market’s focus broadens out.”

Aberforth Geared Value & Income (AGVI), the £97m high-yielding UK smaller companies split capital investment trust, made a 3.9% return in the year to 30 June, its second since relaunch in 2024. Annual results showed this underperformed the Deutsche Numis Smaller Companies index which rose 7.1% in a period when large FTSE 100 stocks were in favour.

QuotedData’s Matthew Read said: “AGVI’s headline returns for the year as a whole are underwhelming and reflect the nature of its geared structure – returns are amplified, both positive and negative – but the improvement in the second half and strong income performance are encouraging. With the portfolio trading on depressed valuations and offering a 5.5% underlying yield, the structure could provide meaningful upside if sentiment towards UK smaller companies improves.”

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