Hammerson PLC

LSE:HMSO

Earnings Call Transcript 2022-Q1

[Operator]

Good morning, everyone. And thanks for joining us for our Half Year Presentation today. This is our third set of results under new leadership and another half year focused on execution which has delivered tangible results.

I will give you a quick overview and then pass on Himanshu to take you through the numbers. This slide shows, on the left, our key priorities and what we said we would deliver. We said we'd optimize cash flow and drive further value from our assets through operational improvement. We said we'd reduce cost and drive organizational speed to value through digitalization and automation. We also said we'd generate capital to reduce debt and reinvest. And we said we'd create value and optionality by hitting key milestones on our pre-development schemes.

On the right, you can now see what we did and how we delivered on all of our commitments and key metrics. Like-for-like GRI grew by 16% and NRI by 48%. Footfall, sales, occupancy and collections are recovering, and now close to or above 2019 levels. This momentum continues into July.

We saw a good leasing performance, 31% over previous passing, and now in line with ERV. We have strengthened our tenant profile and mix and now have more than half of our deals to non-fashion and 68% since half year 21. Flagship occupancy in our managed portfolio is now up 2% to 95% year-on-year.

We have also made significant progress on reducing gross admin costs, delivering a 20% reduction year-on-year, achieving our 2023 target 18 months early.

Net finance costs were also down 25%. We have delivered £194 million of disposals and have a solid balance sheet, with more than £1 billion of liquidity following further refinancing activity in the half. We have no group unsecured debt maturities not covered by cash until 2025.

We have also continued to make strategic progress on our land promotion and pre developments with key milestones met that will deliver options for further value creation.

Overall, adjusted earnings were up 154% year-on-year to £51 million. And by the way, this is the first time our adjusted earnings have been in line with IFRS profit since 2017.

So, you can see, we have a strong operational grip on the business and we are more resilient and financially secure as a result of the actions taken since the start of 2021.

We showed you this following slide at full year, which demonstrates our focus and disciplined financial and operational management that are the drivers of a better, more resilient business.

Our focus for the half was, and will continue to, be as follows First of all, further realigning our portfolio to best-in-class city center locations with resilient catchments. Two, on leasing, we have a stronger, more diversified occupier mix and higher quality brand portfolio. Three, footfall and sales are recovering. And despite the economic backdrop, Q2 2022 was stronger than Q1 and we are seeing that trend continue into July.

Four, we have delivered a strong improvement on cash collections which are normalizing. We have already collected 90% of rent due to date versus 69% at this time last year.

Five, the actions taken in the last 12 months on costs, you can already see in earnings this year. We are not done and we are also exploring further opportunities within our control.

Six, our capital allocation remains disciplined and tight, with disciplined expenditure on core assets and land promotion in 2022 and 2023. Seven, headline LTV is now down at 37%, reflecting disposals completed and we will further strengthen the balance sheet.

Last, but not least, the increased strength of our balance sheet was reflected in our IG outlook being upgraded from negative to stable.

With that summary, I will hand over now to Himanshu for details on the strong half year numbers and then I will come back to you to talk about our strategic and operational progress.

[Himanshu Raja, Chief Financial Officer]

Thanks, Rita-Rose. And good morning everyone. Okay, let's jump right in. These are good numbers, which, as Rita-Rose said, show the tangible progress we're making at each reporting period.

Our adjusted NRI was £87 million, down 1%, largely reflecting the impact of disposals. Encouragingly, our like-for-like NRI increased by 48%. Rent collection continues to strengthen and normalize with H1 at 92%, which compares with 71% when we reported this time last year.

And this momentum has continued into Q3, where we were already at 84%. And we have more to do here, and I expect collection rates to continue to improve, notwithstanding the uncertain economic backdrop. The resulting adjusted earnings were £51 million, up 154%. Gross administration costs were down 20% year-on-year. Finance costs were down 25% and we also had a strong contribution from value retail.

Turning to valuations, our managed portfolio is valued at £3.3 billion. Yields have been stable since the first half of 2021, and the effective ERVs on valuations continues to diminish.

Capital returns were a negative 1.5%, but with total returns up 2.1%. This being the first reporting period in four years that the group has posted positive total returns.

Our net debt stands at £1.7 billion, down 6%, benefiting from the sale of Silverburn and Leeds, which generated £194 million in disposal proceeds.

And finally, as I signaled in March, headline LTV is 37% and LTV on a fully proportional basis is 45%.

Turning now to the adjusted earnings walk in more detail. Starting with the £20.1 million we reported this time last year, the underlying NRI before the effect of disposals was £14.1 million, driven by improved collections and the flow through of the overall strong leasing performance over the last 12 months.

The reduction in net debt and on refinancing saves £9.9 million, whilst gross admin costs was £7.2 million down, of which two-thirds related to lower headcount. As Rita-Rose said, we delivered our commitment of 15% to 20% savings against the 2019 base 18 months early. There's more opportunity here, which Rita-Rose will pick up on in her section.

I'll run through value retail earnings momentarily. The effect of disposals of £14.8 million and the related loss of income brings home the earnings walk to £51.1 million.

To value retail, a continued strong performance from value retail with earnings of £13.7 million compared with a loss of £2 million pounds in H1 2021 when the villages suffered COVID-related closures at the beginning of that year.

The strong GRI performance of £32.4 million at our share reflects strong footfall with overall spend per visit exceeding 2019 levels by 7% year-on-year, and there are three main drivers. One, targeting high net worth domestic customers; two, an increase in European tourism; and three, the return of some tax free shoppers, particularly at La Vallée and Las Rosas.

Occupier demand for space remains high, with 178 leases signed in the half, occupancy at 94% and collections rate at an impressive 100%.

Income was further underpinned by inflation in clauses in the base rent for the majority of the villages. And strong operational and financial cost control saw the benefits in GRI drop to the bottom line.

And now to VR refinancing. La Vallée completed its refinancing in the ordinary course during the first half, reflecting the confidence in the bank market for quality assets. The Bicester expires at the end of 2022. And the refinance of this facility is in the advanced stages, with draft documentation under review. Lenders have either credit approval or are going through their credit approvals presently, and closing is anticipated to occur in the second half again in the ordinary course.

The next slide, turning to valuations. Valuation declines have continued to slow in all three territories, with yields stable since this time last year. And in the half, we saw the ERV effect diminishing, reflecting the improved leasing performance.

Taking a step back, the boxes at the bottom shows the declines from peak, 60% for the UK, 27% for France, and 30% for Ireland, together with the breakdowns of those movements.

Overall, it feels like we're roughly at the bottom today, notwithstanding some near term volatility in the macro environment. The yields for each market and the range as at June 22 also show quite a bit of headroom to prevailing and forecast interest rates.

We have a strengthened balance sheet. As a result of the bottoming out of valuations and the significant disposals, £627 million since the beginning of 2021, the group is financially secure today. We have no group debt maturities not covered by current cash holdings until 2025. Consequently, £1.7 billion of net debt is 6% lower than the year-end. We will look to continue to drive that down further, with £300 million of disposals to come by the end of 2023.

And with ample liquidity and improved metrics, both Moody's and Fitch recently changed their outlook in February and May respectively from negative to stable, and we have in the half maintained our IG credit rating.

It's worth dwelling for a moment on the debt stack. The left hand side of this chart shows the unsecured debt and maturity profile, and the middle shows the secured debt facilities. In the first half, we refinanced £820 million RCF to a new £463 million 3+1+1 facility, supported by a core group of tier one banks. Total liquidity now stands at £1.2 billion, including undrawn existing or new facilities and £500 million of cash. And you can see on the left, the £313 million 2023 and 2024 maturities are more than covered by the available cash.

On the secure debt, that is held either against non-core assets, which I would anticipate being disposed of in the near to mid-term, or Dundrum, which we'd expect to refinance in the ordinary course. In other words, we're in no rush to issue. Indeed, we're looking to drive down debt further through the £300 million or so disposals in our guidance.

To summarize, it's been a strong half year delivering tangible results, with adjusted earnings up 154% to £51 million. And as a CFO, from a quality of earnings perspective, it's good to see that adjusted earnings were in line with IFRS profit, as valuations have stabilized.

Combined with the reduction in debt, NTA has increased, and that is also for the first time since 2017. We've achieved our cost targets 18 months early. The balance sheet is stronger, we've lowered finance costs, and we've no need to refinance in the near term.

The usual line-by-line modeling guidance is in the back, which Josh can walk you through. And you'll see from this and from our outlook statement that, notwithstanding the wide economic volatility, we look forward into H2 with real confidence. This is a better business today with strong strategic and operational momentum, which Rita-Rose will expand upon.

Rita-Rose, over to you.

[Rita-Rose Gagné, Chief Executive]

Thanks, Himanshu. Now, let me update you on the execution of our strategy and priorities for the second half of the year. Let me first set the scene and talk about what we are seeing on the ground. Facts, not speculation.

There is no debate today on online versus offline. Omnichannel is the future. Growth of online is slowing, particularly in the UK, as you can see on the left. Cost and profitability in terms of customer acquisition and fulfillment favors a hybrid omnichannel model. This was true pre-pandemic and fulfillment costs have only increased since then.

Brick and mortar is crucial to drive online and to enable brand interaction, customer engagement, fulfillment and the overall human experience, which cannot be replicated online alone.

This is illustrated by the opinions of brands shown on the top right, with 60% to 80% saying that bricks and mortar is more effective for cross selling, boosting online sales and customer engagement.

Best-in-class operators, such as Apple, Nike, and Inditex, for example, already have this model in place today and are growing strategically, with stores in the right locations, and we have those.

Those who have been exclusively online or physical, such as Primark, are taking steps into the omnichannel world, often driving that last mile fulfillment to the store.

We have more than 250 million visitors passing through our portfolio of unique city center locations each year. Overall, we have strong catchments and a relatively young and affluent customer base, benefiting from 1,250 diverse and quality brands offering a mix of experiences. Therefore, we are well positioned and are already benefiting from this ever-evolving landscape.

This strength is reflected in the sustained recovery in footfall compared with 2019 levels we have seen from 80% in January to around 90% today. At group level, July footfall is in line with June.

In some core destinations, we are seeing footfall at or above 2019 levels and well above national indices. In the first half, sales in UK and Ireland exceeded 2019 levels. We are only slightly behind in France, but we saw a strong performance from France in June 2022.

Occupancy costs have become affordable, particularly given sales figures do not take into consideration the benefit that stores provide for last mile fulfillment, brand interaction and customer service. Overall, flagship occupancy is up 2% year-on-year and stable versus the year-end.

On to leasing now. This slide shows again the appeal of our destinations. It emphasizes a strong leasing performance, the continuation of a theme started in the second half of last year.

Let me walk you through a few data points. We signed 143 leases, securing a further £10.5 million of income and a total of £25 million since the middle of last year. Headline rent is 31% ahead of previous passing and 1% ahead of ERV. July continues to show robust activity with 22 deals already signed, securing a further 2.3% of rent, in line with ERV and, again, well ahead of previous passing.

Our leasing activity has been geared towards non-fashion, which made up 68% of the total over the last 12 months. Nonetheless, we continue to enjoy the support of innovative and best-in-class fashion brands, with strong evidence in renewals.

Occupiers are signing to longer term deals, and this is also reflected in the duration statistics at the bottom right, the WALT of 7.6 years and a WALT of around 10 years.

So those were the numbers, but it's the brands that really bring the story to life. There is too much to go through on this slide, so I will just pull out a few examples. The Commonwealth Games begin today in Birmingham. As well as being a sponsor, the Bullring is hosting the official store and we have installed new EV charging points for use by the game's fleet in the immediate term and important for sustainability in the longer term.

Just this week, we expanded our partnership with CPP Investments in Bullring. The same day, we signed a new lease with JD Sports, who are more than doubling their presence in Bullring with a new flagship store of 24,000 square feet. This prioritizes their city center presence in Bullring and is a fixed rent lease in line with ERV.

Commercialization continues to play a crucial role. It not only brings vibrancy to the assets with new experiences and brands, but delivers a meaningful contribution to income, up 70% year-on-year and adding £12 million of income since half year 2021.

Let me call out a few projects. There's Sky, who we've collaborated with to showcase its new glass TV in a pop up house in Bullring and Cabot Circus following its success in Brent Cross.

The summer sports, with free-to-view giant screens at the Oracle, Westquay and Bullring, offering sports bars and casual dining. There's Big Sara, the 150 million year old dinosaur at Westquay who is attracting the local community and visitors from far and wide, and our events an immersive experiences ranging from pride, hip hop and music festivals to family days and world yoga events.

The repurposing in Dundrum is seeing Penneys upsize into the remaining former House of Fraser space. This reinvigoration has seen new occupiers, such as watches of Switzerland choose Dundrum for their first Irish store and the return of brands such as Aldo.

Continuing with the momentum and the teams from the full year, we have seen further long term renewals from Levi's and Ernest Jones in Westquay. Diesel in Pavilions, All Bar One at Oracle, Kiehls and Smiles who are a dental clinic in Dundrum, and many more.

A key new entrant to the portfolio for us and expanding the F&B selection at Brent Cross was Marugame Udon. This is a well-known brand in Japan, expanding outside the West End for the first time and now also opening at the Oracle.

In terms of new uses, we are also excited about the LOST concept coming to Croydon from the team behind Secret Cinema. This will repurpose the previous Alder space, formerly the UK's largest department store and will no doubt enliven Croydon.

Finally, we have also opened two units with Sook who rent state-of-the-art retail pop up space by the day. Sook will help drive vibrancy and footfall.

Turning now to cost actions, a key lever for us facing a volatile macroenvironment and building sustainable earnings. The actions taken in the last 12 months are yielding results with gross admin costs down 20% year-on-year and that is 18 months ahead of our 2023 target.

But as I said earlier, we are not done. We are already exploring further opportunities for cost reduction, improved agility and speed to value, creating more responsive, efficient and data-driven business. We are also creating more integrated, connected, automated system that will drive overall efficiency.

In terms of net finance costs, these are down 25%. With no group unsecured refinancings in the immediate future, and as we complete further sales and put some capital to play, there may be opportunities to improve this further.

You will be familiar with this slide and our approach to capital allocation. With the disposal of Silverburn, Leeds and other non-core land, our cumulative disposals are now at £627 million since the start of 2021 and we anticipate completing the remaining £300 million by the end of 2023, further strengthening the balance sheet. Conversations with a broad range of buyers are ongoing and we remember we are not forced sellers.

Over the medium term, there will be further opportunity for potential sources of liquidity as we continue to evolve the portfolio and to, therefore, recycle capital to both core and long term opportunities.

Let me turn to accelerating development. In the half, we met our key land promotion and pre development milestones. As guided at full year, our capital requirement is modest. We are looking at a potential spend of approximately £70 million by the end of next year to generate an absolute uplift in value of about £110 million by 2023.

We are taking these and other projects, like the remaining East Gate land in Leeds, to create value uplift and optionality – optionality on how and when to proceed further and how much of our own capital to source and invest. Therefore, there is a long-term opportunity with a potential GDV of more than £2.5 billion at our share.

We will assess and select the best returns for shareholders, mindful of our own cost of capital and assess all options for capital allocation, including further debt retirement and distributions for shareholders.

Let me now bring to life the progress we have made on pre development and land promotion. In Ireland, we are delighted to have achieved three of six planning permissions for Dublin Central and are progressing a further two in the second half.

Staying in Dublin, we expect to start the podium at Dundrum in the second half of the year, a modest and low risk residential scheme on the Dundrum estate, diversifying our mix and activity and a proof of concept for the wider residential opportunity in the Dundrum Village.

Back in March, we opened the new extension at Cergy Trois Fontaines in France and it was really great to be part of the opening event. I'm pleased to say that this is 86% let or in the hands of solicitors.

In the UK, in the second half of the year, we are master planning a resi-led scheme for our 10 acres of remaining 100% owned land in Leeds, part of which we will identify potential partners.

Close consultation with local authorities continues in Birmingham to secure infrastructure funding for Martineau Galleries. We are also progressing designs and feasibility with our partner, CPP Investment, for a major repositioning of Grand Central located above New Street Station which will create an amenity-rich, workspace led offering.

Lastly, in March, we signed the Section 106 agreement for The Goodsyard in London. We anticipate completing the drawdown of this land in the second half.

So, in summary, it has been another half year of strong, strategic and operational, financial progress. We have strong strategic assets, a robust strategy and a leadership team that has consistently delivered key milestones since the start of 2021.

My immediate priority is more of the same, relentless execution to continue to build a better business by further strengthening of our balance sheet, by going again and again on cost to deliver a more agile organization, reducing vacancy and void costs, repurposing space, delivering a vibrant occupier mix expected by our customers and brands and unlocking the pre development value uplift that continues to create optionality for the future.

Now to my closing remarks. Physical retail is a critical part of the omnichannel fulfillment and brand experience for our occupiers and to the customer. Our strategy is focused on best-in-class city destinations which play a central role for our occupiers and the communities in which we operate and which we can continue to grow and thrive. We have a strong operational grip on the business. As a result of the actions we have taken since the start of 2021, Hammerson today is a better, more resilient and financially secure business.

While mindful of the wider economic volatility, we have a good pipeline of opportunities ahead and look forward with more confidence. Thank you very much for your attention.

[Operator]

[Operator Instructions]. And our first question comes in from the line of Colm Lauder calling from Goodbody.

[Colm Lauder, Goodbody]

I thought I'd sort of kick off firstly with trying to get your views on the consumer market. So, you have the benefit of access to live sales data, live footfall data, et cetera, across your flagships and indeed the outlets. And I was wondering that data is showing us in terms of how you are seeing consumer trends evolving or changing within your centers.

[Rita-Rose Gagné, Chief Executive]

I think there's sort of two angles to your question, first of all, the data per se, and I'll give you a bit of color on how that has evolved and into July and how we see the next few months. But also, as you point out, some consumer trends that are changing and, ultimately, to a certain extent adapting to the current environment.

So, as you remember in our year-end result, the trends were recovering strongly, I would say, since the second half year last year. So, if you look at the first half this year, definitely on statistics around footfall and sales, it's been stronger in Q2 than in Q1, notwithstanding the fact that I remember standing or sitting with you, while I was doing the end of year results, and the week before we have had the news of Ukraine. So since then, there has continued to be some growth and some robust activity up to this date, actually.

So, if we look briefly at footfall, we're saying – and it's broadly in the portfolio at the moment. You saw in our statistics at minus 10% pre pandemic, but we have several properties that are way above that, way above pre pandemic levels still today.

If I continue on footfall and I talk about July, June and July, actually, if you look more particularly at statistics for the UK, June was at about minus 10%, as I just said, and now July is at minus 8% up to this date. For France, it's pretty stable. And Ireland also.

In terms of the sales, we don't have yet the sales for the month of July, but for June, and maybe if we look at May and June, May has been a strong month. June has seen a decrease in sales, but we're still over and above pre pandemic levels. In the outlet sector, it's really considerably higher. So, again, robust performance that continues to flow through in July. And it's difficult to talk about that without talking about the leasing activity that we're seeing in July because we've had a strong half year. We've signed 143 deals. And now in July, we've already signed 22 deals. We have a strong pipeline. There's a lot of new deals in there. We're signing them above ERV, considerably above passing rent. Just this week, actually, there's been a lot of news for Birmingham, but we signed JD Sports yesterday. 24,000 square feet, expanding location into the Bullring. So, the activity continues to be strong on that front.

And I would just add two things, actually, to complete your question. There's the consumer trend and then there's the retailers because you can ask yourself why are these trends there and why are they strong? Well, first of all, there's definitely – and I'm spending more time myself at the assets and with the retailers and because consumers – we're doing a lot of service surveys at this point and we're increasing our capability to track data more quickly and interpret that data.

But at the end of the day, there's really a polarization, a flight quality for retailers at this moment, particularly in this environment, I would say. So, really, they are searching for the best quality assets. And Hammerson has that in some key flagship assets, and it's about the quality of the brands in the assets. And that's not just a general concept. It's really we're going way more deeper in the analysis of each catchment area to make sure that we're adapting. The mix is not just the tenants, but also the activities and everything that goes on in the assets to cater to the consumer.

The retailers are adapting their business models to the current environment. Let alone the macroeconomic side, just the digitalization that's going on in general on the retail side, so there's a transformation going on, omnichannel. So the concepts are changing in the physical stores formats that are way more catered to the contact with the consumer, education, the last mile fulfillment. So, there's going to be a lot more uses in our properties in the future.

On the consumer side, you're seeing a change post-COVID. There's some trends that have been picking up around leisure, health, togetherness, wellness, etc. So what is discretionary and non-discretionary is changing also. So we're in a period of transformation and adjustments. I would say the same for the overall economy, but we're seeing that flow through strongly. So it's really for us also a flight to that quality, quality of the operators that can adapt to them. Also good, I would say, brands, independent brands or a mix to cater to the specific communities we serve.

So, I would stop here, Colm. I could go on longer, obviously. And I hope that this answers to your question.

[Colm Lauder, Goodbody]

Maybe just as a follow-up to that, and thinking about your leasing pipeline, and you've mentioned that there's a good bit of deal flow so far in July, are you seeing any sort of changes in the mix within that leasing activity for July in terms of sort of the areas or pockets of changing occupier demand? Are you seeing more food and bev or less or more leisure? What are the sort of the occupier segments at the moment that are particularly active?

[Rita-Rose Gagné, Chief Executive]

For one, we ourselves are targeting to realign our own mix. So we've increased our reach to some types of uses. And we're saying in the documentation, the results that we have more non-fashion in the leasing pipeline at the moment. And I would say to you that – the mix is – what we're seeing flows through in terms of the demand – and again, it varies from catchment area. It really varies because in some of our properties, in our surveys, what comes out is that customers want the fashion brands, they want the Primarks, the Nikes, the Adidas, Inditex, etc. And these brands are really premium and they have a lot of concepts that are adapting to the demand. So, you saw Bershka and Pull&Bear get into the Bullring, Tessuti in former Arcadia in Bull Ring. We saw that in Brent Cross also. There is still that demand, but we're seeing a lot of F&B, we're seeing a lot of leisure, wellbeing is something that – as I said previously, discretionary and non-discretionary is sort of changing post COVID. So, I would say that we're seeing a lot of that flow through. And again, I was talking about fashion. Cergy, we just signed a large deal with H&M and it's doing extremely well.

So, it really depends, but the pipeline, I would say, we're seeing increased demand around leisure, social, games, again, sciences, health, I would say. Yeah. Jewelry sector is still strong also. Outdoor sports strong.

It's also a function of the fact that – I'll just finish on this that some retailers are adapting at the moment to the outlook and adapting to supply to the customers a different adapted service or type of product. We saw some retailers that are starting to offer renting of product, outdoor sports, et cetera. So, you're really seeing different uses and different habits flow through in the pipeline. But, overall, I would say that what we have in the pipeline, 68% about is non-fashion.

[Operator]

The next question comes in from the line of Paul May calling from Barclays.

[Paul May, Barclays]

Just quick on the leasing side of things, just looking at sort of leasing volumes, seem to be quite a bit slower in France in the first half. Is there anything behind that at all? Or is it just a circumstance, the situation? Obviously, rents are up strongly versus previous passing, but – so releasing volume is quite low.

[Rita-Rose Gagné, Chief Executive]

Yeah, you're right. But it's just a question of timing. And if you look at the month of July, then France goes back up. It's just a question of timing.

[Paul May, Barclays]

Just another one on the development pipeline or the sort of opportunities moving forwards. Does the changing finance situation affects your decisions there at all in terms of the cost of financing? I think before – returns on those were difficult to determine. I think it was…

[Rita-Rose Gagné, Chief Executive]

You talking about the development pipeline, Paul? Sorry, we can't hear you 100%. But I'll repeat your question, on the development pipeline, are we concerned about the financing costs?

[Paul May, Barclays]

Yeah, that's right. The impact of higher financing cost on that development pipeline.

[Rita-Rose Gagné, Chief Executive]

Listen, again – and it's the same, ultimately exactly the same presentation we did at year end. We're not yet in a development pipeline, for one. What we're saying here is that our land, there's so much great land in there that we really want to capture an uplift in value and bring us to a shovel ready point, which will be probably by the end of 2023. So, at the moment, it's not something that is of a concern. And it is like CapEx at this moment. It's about drawdown of land, it's about planning consents, it's about design. So, that concern is not there yet. And when we will come at the point of decision, ultimately, then we will underwrite cautiously and carefully at that time, and we will also have many options to consider because we already have a lot of options coming at us and partners wanting to help us capitalize on the opportunity. So we shall see at that point.

[Operator]

The next question comes in from the line of Matthew Saperia calling from Peel Hunt.

[Matthew Saperia, Peel Hunt]

Just one quick question from me. I was hoping, probably for Himanshu, whether you could talk about your sensitivity to rising interest rates, and specifically what we might expect the – whether there's going to be a change in the interest rate on the refinancing at Bicester that you're expecting to conclude in the second half.

[Himanshu Raja, Chief Financial Officer]

Two questions in there. One general sensitivity; and two, Bicester. So, let me just cover off Bicester. As the release this morning says, Bicester in the advanced stages of refinancing with documentation largely agreed and banks either credit approved or going through their credit approval processes. Naturally, I'm not going to reveal what the spreads are on that. But suffice to say, actually, that there remains a good support for high quality assets, such as Bicester. And the same was true for value retail's La Vallée financing, and I'd say the management team is pleased with the pricing that they have seen on Bicester.

More broadly to your question, clearly, spreads have widened. But as we pointed out in our presentation, we don't need to be accessing the capital markets till at least 2025 and we'll keep a weather eye on how bond markets move over that time period. It's well documented that those markets are quite volatile today. Real estate has underperformed other sectors, and retail kind of all the more so. But we don't have to access those markets till late 2024, early 2025.

[Operator]

Thank you. That was the final question via the audio line. So I shall hand the call back to yourselves in the room for any online questions.

[Rita-Rose Gagné, Chief Executive]

Thank you very much to everybody for your attention this morning.

[Josh Warren, Director of Strategy and Investor Relations]

Just got a couple of questions coming in from the written in ones. From Nicolas Lyle at STANLIB, just asking at what price or coupon would you be able to issue a five-year Sterling bond today?

[Himanshu Raja, Chief Financial Officer]

Again, if you look at your spreads, then they've widened considerably. And if we had to access the markets today, which, again, we don't, theoretically, the bond pricing will be up 8%, 9% sort of level. But they move quite considerably kind of week on week. So I'm not sure that's a representative indicator of what the price will be when we come to refinance in 2024, 2025.

[Josh Warren, Director of Strategy and Investor Relations]

Next question comes from Jaap Kuin at Kempen. So, could you please comment on the split of the £22.5 million increase in our own flagships and give some indication of the shares coming from rent collection, provision releases and other relevant items.

[Rita-Rose Gagné, Chief Executive]

The split in the NRI, if I understand well, so we have a chart on that, I think, Himanshu, that we can give a bit more detail, if you wanted to make.

[Himanshu Raja, Chief Financial Officer]

The way I'd guide is approximately 50/50 between hiring from turnover rent and from car parks and commercialization income and lower costs relating to the year-on-year change in the bad debt charge. You'll see in the release the lower bad debt charge is from improved collections right across the board.

[Josh Warren, Director of Strategy and Investor Relations]

And we've covered, in one way or another, all the other questions coming through online.

[Rita-Rose Gagné, Chief Executive]

Great. Thank you very much again, everybody. Have a good day.

[Himanshu Raja, Chief Financial Officer]

Thank you.