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HYP - Hyprop Investments Limited - Audited results for the year ended
31 December 2010
Hyprop Investments Limited
(Incorporated in the Republic of South Africa)
(Registration No. 1987/005284/06)
Share Code: HYP ISIN Code: ZAE000003430
("Hyprop" or "the company")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2010
Total distribution 357 cents per combined unit up 8,8%
Total return 32,1%
Gearing 12,6%
Total assets R11,5 billion up 6%
NAV excluding deferred taxation R57,01 per combined unit up 7%
Market capitalisation R9,5 billion up 24%
Statement of comprehensive income
Audited Audited
31 Dec 31 Dec
2010 2009
R`000 R`000
Revenue 1 119 048 923 655
Investment property income 984 910 790 568
Straight-line rental income accrual 14 148 13 318
Listed property securities income 119 990 119 769
Property expenses (371 932) (259 380)
Net property income 747 116 664 275
Other operating expenses (36 044) (47 840)
Operating income 711 072 616 435
Net interest (121 554) (70 829)
Received 7 006 26 931
Paid (128 560) (97 760)
Net operating income 589 518 545 606
Non-core income 905 905
Change in fair value 586 121 583 733
Investment property 517 262 580 121
Straight-line rental income accrual (14 148) (13 318)
Listed property securities 75 430 32 391
Derivative instruments 7 577 (15 461)
Amortisation of debenture premium 110 810 97 696
Amortisation of financial guarantee for associate 953 715
Income before debenture interest 1 288 307 1 228 655
Debenture interest (593 024) (544 851)
Net income before share of income from associate 695 283 683 804
Share of income from associate 55 201 20 305
Investment property income 15 518 11 566
Straight-line rental income accrual 320 386
Change in fair value of investment 39 363 8 353
property
Profit before taxation 750 484 704 109
Taxation (147 496) (152 084)
Total comprehensive income for the year 602 988 552 025
Abridged reconciliation - headline earnings and
distributable earnings
Net income after taxation 602 988 552 025
Debenture interest 593 024 544 851
Earnings 1 196 012 1 096 876
Headline earnings adjustments (489 099) (531 749)
Change in fair value of investment (378 289) (434 053)
property (net of deferred taxation)
Amortisation of debenture premium (110 810) (97 696)
Headline earnings 706 913 565 127
Distributable earnings adjustments (114 137) (20 368)
Change in fair value of listed (64 870) (27 856)
property securities (net of deferred
taxation)
Change in the fair value of (7 577) 15 461
derivative instruments
Amortisation of financial guarantee (953) (715)
for associate
Share of income from associate (39 683) (8 739)
Deferred taxation (2 037) 1 481
Attfund transaction costs 983
Distributable earnings 592 776 544 759
Total combined units in issue 166 113 169 166 113 169
Weighted average combined units in issue 166 113 169 166 113 169
Earnings per combined unit 720,0 660,3
Headline earnings per combined unit 425,6 340,2
Distributable earnings per combined unit 356,9 327,9
Distribution details
Total distribution for the year 357,00 328,00
Six months ended 31 December 183,00 167,00
Six months ended 30 June 174,00 161,00
Statement of financial position
Audited Audited
31 Dec 31 Dec
2010 2009
R`000 R`000
Assets
Non-current assets 11 303 054 10 550 405
Investment property 9 481 454 8 858 711
Building appurtenances and tenant 21 237 20 993
installations
Investment in associate 210 055 169 499
Derivative instruments 13 227
Loan receivable 47 813 47 364
Listed property securities 1 529 268 1 453 838
Current assets 154 331 258 153
Receivables 86 584 80 591
Cash and cash equivalents 67 747 177 562
Total assets 11 457 385 10 808 558
Equity and liabilities
Share capital and reserves 5 402 195 4 799 207
Liabilities
Non-current liabilities 5 578 633 5 594 236
Debentures and debenture premium 2 447 895 2 558 705
Long-term loans 1 490 000 1 550 000
Derivative instruments 21 111 12 447
Financial guarantee for associate 953
Deferred taxation 1 619 627 1 472 131
Current liabilities 476 557 415 115
Payables 172 570 134 691
Derivative instruments 3 015
Combined unitholders for 303 987 277 409
distribution
Total liabilities 6 055 190 6 009 351
Total equity and liabilities 11 457 385 10 808 558
Net asset value per combined unit (R) 47,26 44,29
Net asset value per combined unit - excluding 57,01 53,16
deferred taxation liability (R)
Abridged statement of changes in equity
Audited Audited
31 Dec 31 Dec
2010 2009
R`000 R`000
Balance at beginning of the year 4 799 207 4 247 182
Total comprehensive income for the period 602 988 552 025
Balance at end of the year 5 402 195 4 799 207
Abridged statement of cash flows
Audited Audited
31 Dec 31 Dec
2010 2009
R`000 R`000
Cash flows from operating activities 62 608 53 089
Cash generated from operations 735 963 624 030
Interest received 7 006 26 931
Interest paid (128 560) (97 760)
Distribution to combined unitholders (566 446) (529 901)
Income from associate 14 645 29 789
Cash flows from investing activities (112 423) (591 617)
Cash flows from financing activities (60 000) 650 000
Net increase/(decrease) in cash and cash (109 815) 111 472
equivalents
Cash and cash equivalents at the beginning of the 177 562 66 090
year
Cash and cash equivalents at the end of the year 67 747 177 562
Financial results
Hyprop has declared a total distribution for the year of 357 cents per combined
unit, an increase of 8,8% on the previous year. The final distribution of 183
cents reflects growth of 9,6% compared to the corresponding period in 2009.
Total return for the year was 32,1%, comprising income return of 7,8% and
capital return of 24,3%.
Segmental overview
31 Dec 2010 31 Dec 2009
Revenue Distributable Revenue Distributable
earnings earnings
Business segment (R`000) (R`000) (R`000) (R`000)
Canal Walk 387 810 276 462 339 144 244 496
The Glen 163 328 103 096 113 530 75 429
Hyde Park 140 613 88 080 121 084 79 536
The Mall of Rosebank 107 414 64 995 94 093 66 047
Stoneridge 49 523 27 552 47 767 23 174
Southcoast Mall 21 600 13 372 20 520 13 624
Shopping centres 870 288 573 557 736 138 502 306
Offices 49 858 28 014 36 101 23 668
Hotels 64 764 11 407 18 329 5 214
Investment property 984 910 612 978 790 568 531 188
Listed property 119 990 119 990 119 769 119 769
securities
Straight-line rental 14 148 14 148 13 318 13 318
income accrual
1 119 048 747 116 923 655 664 275
Fund management expenses (35 061) (47 840)
Net interest (121 554) (70 829)
(paid)/received
Net operating income 590 501 545 606
Non-core income 905 905
Share of income from 15 518 11 566
associate
Straight-line rental (14 148) (13 318)
income accrual
Total 1 119 048 592 776 923 655 544 759
Revenue and distributable earnings from shopping centres increased by 18% and
14%, respectively, largely as a result of increased GLA following the completion
of extensions at The Glen and Canal Walk. On a like-for-like basis, revenue from
shopping centres increased by 13,3%, while distributable earnings grew 8,8%.
Overall, property expenses in Hyprop`s shopping centres increased by 27%, driven
primarily by increases in assessment rates and electricity costs.
Excluding municipal expenses, total property expenses in the shopping centre
portfolio increased by 5,4%.
Income from hotels underperformed due to pressure on the leisure market
generally.
Fund management expenses reduced due to the replacement of asset management fees
with consulting fees payable to Redefine Properties Limited ("Redefine"). The
consulting agreement with Redefine was terminated on 31 August 2010.
Total arrears in the portfolio at 31 December 2010 were R41 million (2009: R36,8
million). Arrears at year-end include back dated assessment rates of R6,1
million, as a result of council increases in municipal values. Total provision
for doubtful debts at year-end amounted to R15,7 million (2009: R13,9 million).
Property portfolio
Value attributable to Value
Hyprop per
rentable
area
Rentable Dec 2010 Dec 2009 Dec 2010
area
Business segment (mSquared (R`000) (R`000) (R/mSqua
) red)
Canal Walk 150 394 4 556 000 4 040 000 37 867
The Glen 74 583 1 535 433 1 439 234 27 392
Hyde Park 36 894 1 277 000 1 250 000 34 613
The Mall of Rosebank 37 009 918 000 905 000 24 805
Stoneridge 50 241 407 700 425 700 9 016
Southcoast Mall 29 361 129 500 140 500 8 821
Shopping centres 378 482 8 823 633 8 200 434 28 125
Offices 22 221 331 000 300 500 14 896
400 703 9 154 633 8 500 934 27 392
Hotels 271 000 288 000
Investment property 400 703 9 425 633 8 788 934 28 068
Development property 73 674* 87 743*
Listed property securities 1 529 268 1 453 838
Investment in associate 210 055 169 499
400 703 11 238 630 10 500 014
*Rosebank Gardens
Investment property
Investment property was independently valued by Old Mutual Investment Group:
Property Investments (Pty) Limited using the discounted cash flow method.
Investment property increased in value by R517 million, a 5,8% increase, to R9,5
billion.
Vacancies reduced to 3,9% at 31 December 2010 (2009: 4,5%). Excluding
Stoneridge, which opened in September 2008, total vacancies at year-end were
1,6% (2009: 1,9%).
Developments
The R37 million refurbishment of Hyde Park was successfully completed in time
for December trading. The construction of a new access road to Southern Sun Hyde
Park and the northern parkade remains outstanding pending the relocation of
electrical cables by City Power.
Planning for the refurbishment and extension to The Mall of Rosebank,
incorporating Rosebank Gardens, is still in progress. Due to complex town
planning issues and the management of various interest groups in the Rosebank
node, the scheme is currently undergoing a detailed design development process,
with a view to extracting maximum value.
Listed property securities
Hyprop`s investment in Sycom was valued at R1,5 billion at 31 December 2010
based on the closing price on that date of R20,72 per unit.
Sycom underperformed in the year, resulting in no income growth from this
investment.
Net Asset Value
The net asset value per combined unit ("NAV") at year-end was R47,26,
representing a 6,7% increase on the NAV of R44,29 at 31 December 2009.
Excluding deferred taxation, the NAV at year-end was R57,01, equating to
Hyprop`s combined unit price at 31 December 2010 of R57,00.
Borrowings
Net borrowings at 31 December 2010 of R1,4 billion equate to a gearing ratio of
12,6%.
The average interest rate on long-term loans was 9,37% (2009: 9,48%).
R450 million of borrowings was refinanced at year-end, resulting in an increase
in the average interest rate on long-term loans to 9,44% from January 2011.
Attfund Retail
As announced on 6 December 2010, Hyprop has reached agreement with the board of
Femtoworx Limited (in the process of being renamed Attfund Retail Limited)
("Attfund Retail") to acquire 100% of the shares in Attfund Retail, for the
purpose of acquiring Attfund Retail`s portfolio of property assets and listed
property securities. Formal agreements were concluded in December 2010.
In terms of the proposed acquisition, Hyprop will acquire a large, well-managed,
retail-focused portfolio which complements its existing portfolio. Following the
transaction Hyprop`s portfolio is set to increase to 22 properties with a gross
value of approximately R18 billion, almost doubling in size but retaining its
retail focus.
The acquisition will strengthen Hyprop`s management team through the addition of
Attfund Retail`s centre management and corporate management teams. The board in
turn will benefit from the expertise and experience of Louis Norval and Louis
van der Watt who, subject to the necessary combined unitholder approval, will
become non-executive directors on the Hyprop board after implementation of the
offer.
The acquisition remains subject to JSE, Hyprop unitholder and Competition
Commission approval.
A circular and revised listing particulars containing further details of the
proposed transaction will be posted to Hyprop unitholders in due course.
Directorate
As previously announced, Wolf Cesman resigned from the board with effect from 31
May 2010 and Khosi Sibisi resigned effective 1 December 2010. The board thanks
them for their contribution to Hyprop`s success.
Effective 3 December 2010, Mike Lewin and David Rice were appointed as non-
executive directors, while Lindie Engelbrecht was appointed as an independent
non-executive director with effect from 14 January 2011. Lindie was also
appointed to the Audit and Risk Committees, effective 1 March 2011.
CEO Mike Rodel will resign from the board on 3 March 2011. Mike has made a
meaningful contribution to Hyprop during his tenure. The board thanks him and
wishes him success in his future endeavours.
Pieter Prinsloo, a former Hyprop CEO with extensive retail property experience,
will be appointed to the board as CEO from 1 May 2011.
Prospects
Trading conditions in the retail sector will remain difficult in 2011, despite a
return to growth in the broader economy. Risks in the leisure industry, the
underperformance of Sycom and the impact of increased utility charges on the
overall cost of occupation for Hyprop tenants will also adversely affect
earnings in the year ahead.
Management focus during 2011 will be on organic growth in the existing
portfolio, the redevelopment and extension of The Mall of Rosebank and the
implementation of the Attfund Retail transaction, including the integration of
the new properties and management.
Renewal of cautionary announcement
The financial effects of the Attfund Retail acquisition are still in the process
of being finalised and will be published in due course.
Unitholders are therefore advised to continue exercising caution when trading in
Hyprop combined units until a further announcement is made.
Payment of debenture interest
Distribution 46 of 183 cents per combined unit for the six months ended 31
December 2010 will be paid to combined unitholders as follows:
2011
Last day to trade cum distribution Thursday, 17
March
Combined units trade ex dividend on Friday, 18 March
Record date Friday, 25 March
Payment of distribution Monday, 28 March
Unitholders may not dematerialise or rematerialise their combined units between
Friday, 18 March 2011 and Friday, 25 March 2011, both days inclusive.
Basis of preparation and audit opinion
These annual financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS"), International Accounting
Standard IAS34 "Interim Financial Reporting", the AC 500 standards, JSE Listings
Requirements and the Companies Act, 1973, as amended.
The accounting policies applied in preparation of the annual financial
statements are consistent with those applied in the audited financial statements
for the prior financial year.
Grant Thornton has audited the financial information set out in these results.
Their unqualified audit report is available for inspection at the company`s
registered office.
On behalf of the board
MS Aitken MF Rodel
Chairman CEO
1 March 2011
Directors
MS Aitken*+ (Chairman); MF Rodel (CEO); LR Cohen (FD); EG Dube*; KM Ellerine*; L
Engelbrecht*+; MJ Lewin*; JR McAlpine*+; DH Rice*; S Shaw-Taylor*; M Wainer*; LI
Weil*+
(* Non-executive + Independent)
Registered office
3rd Floor, Hyde Park Shopping Centre, Jan Smuts Avenue, Sandton, 2196 (PO Box
41257 Craighall, 2024)
Transfer secretaries
Computershare Investor Services (Proprietary) Limited, Ground Floor, 70 Marshall
Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Company secretary
Probity Business Services (Proprietary) Limited
Sponsor
Java Capital
Investor relations
Envisage Investor & Corporate Relations
2 March 2011
Date: 02/03/2011 07:15:01 Supplied by www.sharenet.co.za
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