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HYP - Hyprop Investments Limited - Audited results for the year ended 31
December 2011
Hyprop Investments Limited
(Incorporated in the Republic of South Africa)
(Registration No. 1987/005284/06)
Share Code: HYP
ISIN: ZAE000003430
("Hyprop" or "the company")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2011
Half year distribution growth 10,4%
Total distribution 383 cents up 7,3%
Market capitalisation R12,9 billion up 37%
Total assets R20,2 billion up 76%
NAV excluding deferred taxation R57,37
Gearing 26,2%
Statement of comprehensive income
Audited Audited
31 Dec 2011 31 Dec 2010
R`000 Restated
R`000
Revenue 1 583 157 1 119 048
Investment property income 1 350 937 984 910
Straight-line rental income accrual 100 214 14 148
Listed property securities income 132 006 119 990
Property expenses (511 681) (371 932)
Net property income 1 071 476 747 116
Other operating expenses (43 855) (36 044)
Operating income 1 027 621 711 072
Net interest (208 325) (121 554)
Received 31 416 7 006
Paid (239 741) (128 560)
Net operating income 819 296 589 518
Change in fair value (212 008) 586 121
Investment property 236 654 517 262
Straight-line rental income accrual (100 214) (14 148)
Listed property securities 258 716 75 430
Goodwill (547 654)
Derivative instruments (59 510) 7 577
Loss on disposal of investment property (6 129)
Loss on disposal of listed property securities (3 706)
Amortisation of debenture premium 231 354 110 810
Amortisation of financial guarantee for associate 953
Non-core income 4 555 905
Income before debenture interest 833 362 1 288 307
Debenture interest (741 703) (593 024)
Net income before share of income from associate 91 659 695 283
Share of income from associate 9 949 55 201
Investment property income 9 949 15 518
Straight-line rental income accrual 320
Change in fair value of investment property 39 363
Profit before taxation 101 608 750 484
Taxation (185 639) (80 696)
Total comprehensive (loss)/income for the year (84 031) 669 788
Abridged reconciliation - headline earnings and
distributable earnings
Net (loss)/income after taxation (84 031) 669 788
Debenture interest 741 703 593 024
Earnings 657 672 1 262 812
Headline earnings adjustments 122 613 (489 099)
Change in fair value of investment property (net (203 522) (378 289)
of deferred taxation)
Impairment of goodwill 547 654
Loss on disposal of listed property securities 3 706
Loss on disposal of investment property 6 129
Amortisation of debenture premium (231 354) (110 810)
Headline earnings 780 285 773 713
Distributable earnings adjustments (37 054) (180 937)
Change in fair value of listed property (222 496) (64 870)
securities (net of deferred taxation)
Change in the fair value of derivative 59 510 (7 577)
instruments
Amortisation of financial guarantee for associate (953)
Share of income from associate (39 683)
Taxation 87 986
Deferred taxation 28 302 (68 837)
Attfund transaction costs 9 644 983
Distributable earnings 743 231 592 776
Total combined units in issue 243 113 169 166 113 169
Weighted average combined units in issue 192 061 114 166 113 169
Earnings per combined unit 342,4 760,2
Headline earnings per combined unit 406,3 465,8
Distributable earnings per combined unit 383,6 356,9
Distribution details
Total distribution for the year 383,00 357,00
Six months ended 31 December 202,00 183,00
Four months ended 31 December 137,00
Special distribution - two months ended 31 August 65,00
Six months ended 30 June 181,00 174,00
Statement of financial position
Audited Audited Audited
31 Dec 2011 31 Dec 2010 31 Dec 2009
Restated Restated
R`000 R`000 R`000
Assets
Non-current assets 19 746 691 11 303 054 10 550 405
Investment property 17 357 277 9 481 454 8 858 711
Building appurtenances and tenant 35 873 21 237 20 993
installations
Investment in associate 117 658 210 055 169 499
Goodwill 12 493
Derivative instruments 13 227
Loan receivable 47 217 47 813 47 364
Listed property securities 2 176 173 1 529 268 1 453 838
Current assets 327 641 154 331 258 153
Receivables 119 247 86 584 80 591
Cash and cash equivalents 208 394 67 747 177 562
Non-current assets held for sale
Investment property 123 822
Total assets 20 198 154 11 457 385 10 808 558
Equity and liabilities
Share capital and reserves 6 070 107 6 154 138 5 484 350
Liabilities
Non-current liabilities 12 563 569 4 826 690 4 909 093
Debentures and debenture premium 6 359 541 2 447 895 2 558 705
Long-term loans 4 638 914 1 490 000 1 550 000
Derivative instruments 44 463 21 111 12 447
Financial guarantee for associate 953
Deferred taxation 1 520 651 867 684 786 988
Current liabilities 1 564 478 476 557 415 115
Payables 308 482 172 570 134 691
Short term loans 900 000
Derivative instruments 22 931 3 015
Combined unitholders for distribution 333 065 303 987 277 409
Total liabilities 14 128 047 5 303 247 5 324 208
Total equity and liabilities 20 198 154 11 457 385 10 808 558
Net asset value per combined unit(R) 51,12 51,78 48,42
Net asset value per combined unit -
excluding deferred taxation liability
(R)
57,37 57,01 53,16
Abridged statement of changes in equity
Audited Audited Audited
31 Dec 2011 31 Dec 2010 31 Dec 2009
Restated Restated
R`000 R`000 R`000
Balance at beginning of year 6 154 138 5 484 350 4 247 182
Restatement of prior period balances 685 143
Total comprehensive (loss)/income for
the period (84 031) 669 788 552 025
Balance at end of year 6 070 107 6 154 138 5 484 350
Abridged statement of cash flows
Audited Audited
31 Dec 2011 31 Dec 2010
R`000 R`000
Cash flows from operating activities (47 667) 62 608
Cash generated from operations 879 948 735 963
Interest received 31 416 7 006
Interest paid (239 741) (128 560)
Taxation paid (17 983)
Distribution to combined unitholders (712 625) (566 446)
Income from associate 11 318 14 645
Cash flows from investing activities (4 420 885) (112 423)
Cash flows from financing activities 4 609 200 (60 000)
Net increase/(decrease) in cash and cash
equivalents 140 648 (109 815)
Cash and cash equivalents at the beginning of the
year 67 746 177 562
Cash and cash equivalents at the end of the year 208 394 67 747
COMMENTARY
INTRODUCTION
Hyprop is South Africa`s largest listed specialised shopping centre fund, with
twelve directly owned shopping centres. All rental income earned by the
company less property expenses and interest on debt is distributed to
unitholders semi-annually. The company`s primary objective is to provide
sustainable income growth and capital appreciation to investors over the long
term.
FINANCIAL RESULTS
Hyprop has declared a total distribution for the year of 383 cents per
combined unit, an increase of 7,3% on the previous year. The final
distribution of 137 cents, together with the special distribution of 65 cents
paid on 17 October 2011, reflects aggregate growth of 10,4% compared with the
corresponding period in 2010.
SEGMENTAL OVERVIEW
31 Dec 2011 31 Dec 2010
Business segment Revenue Distributable Revenue Distributable
R`000 earnings R`000 earnings
R`000 R`000
Canal Walk 423 566 301 315 387 809 276 462
Super regional 423 566 301 315 387 809 276 462
Clearwater Mall* 96 654 61 562
The Glen 178 087 112 927 163 328 103 096
Woodlands Boulevard* 59 054 40 619
CapeGate* 57 266 36 911
Large regional 391 061 252 019 163 328 103 096
Hyde Park 152 944 93 963 140 613 88 080
The Mall of Rosebank 105 823 70 222 107 414 64 995
Southcoast Mall 20 968 11 565 21 600 13 372
Regional 279 735 175 750 269 627 166 447
Willowbridge* 25 932 15 253
Stoneridge 58 339 25 795 49 523 27 552
Somerset Value Mart* 6 903 4 597
Atterbury Value Mart* 31 062 24 163
Value Centres 122 236 69 808 49 523 27 552
Shopping Centres 1 216 598 798 892 870 287 573 557
Offices # 70 569 45 320 49 857 28 015
Hotels 47 326 (5 866) 64 766 11 406
Investment property 1 334 493 838 346 984 910 612 978
Listed property
securities 132 006 132 006 119 990 119 900
Fund management expenses (34 209) (35 061)
Net interest
(paid)/received (208 325) (121 554)
Share of income from
associate - VPIF 9 949 15 518
Word4Word Marketing* 16 444 909
Straight-line rental
income accrual 100 214 14 148
Non-core income 4 555 905
Total Revenue 1 583 157 743 231 1 119 048 592 776
* Acquired from 1 September 2011
# Includes offices acquired from Attfund Retail from 1 September 2011
The Attfund Retail portfolio has been included from 1 September 2011, being
the effective date of the acquisition.
Like-for-like growth from Hyprop`s shopping centres in revenue and
distributable earnings was 8,0% and 7,4%, respectively. Property expenses
increased by 9%. Canal Walk and The Glen performed particularly well during
the year, with distributable earnings growth of 9% and 10%, respectively.
Distributable earnings from hotels reduced due to a net loss at The Grace
(prior to sale) as well as underperformance at Southern Sun Hyde Park.
Distributable earnings from listed property securities increased by 10% as a
result of improved distribution growth from Sycom and due to the addition of
8,9 million Sycom units, acquired in terms of the Attfund Retail acquisition.
Distributable earnings in the second half include a once-off benefit amounting
to 3,7 cents resulting from a deferred payment in respect of the 15 million
Attfund Retail consideration units which were re-purchased by the company.
Non-core income includes Hyprop`s investment in Word4Word Marketing (Pty)
Limited and fee income from Vunani Property Investment Fund ("VPIF").
Income from associate relates to distributions received from VPIF. This income
reduced due to Hyprop selling 50% of its interest in VPIF concurrently with
VPIF`s listing on the JSE.
Notwithstanding the larger portfolio, total arrears at 31 December 2011 were
R41 million (2010: R41 million). Total provision for doubtful debts at year-
end amounted to R17,4 million (2010: R20,8 million).
Vacancies
Total vacancies in the portfolio at 31 December 2011 were 4,1% (2010: 3,9%):
Vacancy profile by sector % of total GLA % of total GLA
2011 2010
Retail 3,6 3,8
Office 10,0 4,7
PROPERTY PORTFOLIO
Value attributable Value per
to Hyprop rentable
area
Rentable 31 December 31 31
area 2011 December December
(m2) R`000 2010 2011
Business segment R`000 (R/m2)
Canal Walk 157 450 4 880 000 4 556 000 38 742
Super regional 157 450 4 880 000 4 556 000 38 742
Clearwater* 85 370 2 500 000 29 284
The Glen 74 624 1 623 365 1 535 433 28 945
Woodlands Boulevard* 69 867 1 604 000 22 958
CapeGate* 106 016 1 435 000 13 536
Large regional 335 877 7 162 365 1 535 433 22 922
Hyde Park 36 910 1 337 000 1 277 000 36 223
The Mall of Rosebank 35 950 923 000 918 000 25 675
Southcoast Mall 29 361 122 000 129 500 8 310
Regional 102 221 2 382 000 2 324 500 24 496
Willowbridge* 45 011 607 000 13 486
Stoneridge 51 293 409 500 407 700 8 871
Somerset Value Mart* 12 546 154 000 12 275
Atterbury Value Mart* 47 707 885 000 18 551
Value Centres 156 557 2 055 500 407 700 13 420
Shopping Centres 752 105 16 479 865 8 823 633 24 470
Offices# 51 240 769 000 331 000 15 008
Hotel 145 000 271 000
Investment Property 803 345 17 393 865 9 425 633 24 047
Development Property 116 000 73 674
Listed Property securities 2 176 173 1 529 268
Investment in VPIF 210 055
803 345 19 686 038 11 238 630 24 047
* Acquired from 1 September 2011
# Includes offices acquired from Attfund Retail from 1 September 2011
Investment Property
Investment property was independently valued by Old Mutual Investment Group:
Property Investments (Pty) Limited using the discounted cash flow method.
Offices include the three Pretoria office buildings acquired with the Attfund
Retail portfolio.
Development property relates to the Rosebank Gardens site, which will form
part of The Mall of Rosebank redevelopment. During the year Hyprop acquired
Intaprop (Pty) Limited`s 30% undivided share in the Rosebank Gardens site for
R45 million.
The investment in associate is Hyprop`s 20% interest in Garden Route Mall
(2010: VPIF).
Disposals
In terms of a pre-emptive right, Attfund Retail`s 25% interest in Centurion
Mall was sold to Fountainhead Property Trust for R751,5 million, effective 1
September 2011.
The Grace Hotel was sold during the year for R85 million. The sale was
effective in November and transfer was registered in January 2012.
Developments
The planned redevelopment of The Mall of Rosebank ("The Mall") has progressed
further with the commencement of demolitions on the Rosebank Gardens site.
Redevelopment of The Mall itself will commence once town-planning approvals
have been received and letting requirements have been met. It is anticipated
that construction will start during 2012. Further information will be
communicated to unitholders in due course.
Further extensions to Canal Walk, to meet tenant demand, and the refurbishment
of Willowbridge South are also planned to commence in the next 12 months.
Listed Property Securities
Hyprop had the following listed property investments at 31 December 2011:
Fund type Number of % held Value
units R`000
Sycom Property Fund Limited PUT 84 225 688 39,0% 1 980
Vunani Property Investment Fund PLS 14 198 976 11,8% 99
Limited
Acucap Properties Limited 1,5%
PLS 2 610 430 97
Total value 2 176
The investments in listed property securities do not form part of Hyprop`s
core portfolio and will be evaluated in line with the company`s long term
strategy.
NET ASSET VALUE
The net asset value per combined unit ("NAV") at year-end was R51,12,
representing a 1,3% decrease on the re-stated NAV of R51,78 at 31 December
2010.
Excluding deferred taxation, the NAV at year-end was R57,37, a premium of 7,7%
to Hyprop`s closing combined unit price of R53,25 on 31 December 2011.
BORROWINGS
Net borrowings at 31 December 2011 of R5,3 billion equate to a gearing ratio
of 26,2%, up from 12,6% in 2010.
At year-end, interest rates were hedged in respect of 60% of borrowings, at a
weighted average rate of 8,2% (2010: 9,4%) and a weighted average maturity of
5 years.
Subsequent to year-end, a further R450 million of floating debt was hedged for
four years at a weighted average rate of 8,2%, taking the hedged book to 70%
of borrowings at a weighted average rate of 8,3%. The weighted average
maturity remains 5 years.
DIRECTORATE
Louis Norval and Louis van der Watt were appointed to the board as non-
executive directors effective 1 September 2011. David Rice resigned from the
board on 25 November 2011. The board thanks David for his contribution to the
company.
PROSPECTS
The board will continue to focus on the disposal of non-core assets, the
expansion and redevelopment of existing centres and improvement of operational
efficiencies. Attention will also be given to alternative forms of finance to
further reduce the overall cost of debt.
Hyprop will continue to invest in high quality, sizable shopping centres. The
board will consider investment in shopping centres elsewhere, including in the
rest of Africa.
Taking into account the implementation of the Attfund Retail acquisition and
short term dilution due to higher gearing, Hyprop expects to show distribution
growth of between 4% and 6% for 2012.
This forecast has not been reviewed or reported on by the company`s auditors.
PAYMENT OF DEBENTURE INTEREST
Distribution 49 of 138 cents per combined unit for the four months ended 31
December 2011 will be paid to combined unitholders as follows:
2012
Last day to trade cum Thursday, 15 March
distribution
Combined units trade ex Friday, 16 March
distribution on
Record date Friday, 23 March
Payment of distribution Monday, 26 March
Unitholders may not dematerialise or rematerialise their combined units
between Friday, 16 March 2012 and Friday, 23 March 2012, both days inclusive.
CHANGE IN ACCOUNTING POLICY
Deferred taxation
Hyprop has early adopted the amendment to IAS 12. Deferred taxation is now
recognised on the revaluation of the building component of investment
properties at the capital gains tax rate on the presumption that the
investment will be recovered through disposal and will therefore attract
capital gains tax. Hyprop has applied the amendment retrospectively as
required by IAS 8.
The early adoption has had the effect of reducing the 2009 deferred taxation
balance with a corresponding increase in opening 2010 reserves by R685
million. The effect on the 2010 deferred taxation balance and opening reserves
was a net decrease of R752 million. The prior year adjustments are disclosed
by way of a third column in the statement of financial position.
BASIS OF PREPARATION
These results have been prepared in accordance with International Financial
Reporting Standards ("IFRS"), International Accounting Standard IAS34 `Interim
Financial Reporting`, the AC 500 Standards as issued by the Accounting
Standards Board, the JSE Limited Listings Requirements and the South African
Companies Act, 2008.
Other than the change in accounting policy referred to above, the accounting
policies applied in preparation of these results are consistent with those
applied in the audited financial statements for the prior financial year.
Grant Thornton has audited the group annual financial statements. Their
unqualified audit report is available for inspection at the company`s
registered office.
Preparation of the financial information was supervised by Laurence Cohen
CA(SA) in his capacity as Financial Director.
On behalf of the board.
MS Aitken Chairman
PG Prinsloo CEO
28 February 2012
DIRECTORS
MS Aitken*+ (Chairman); PG Prinsloo (CEO); LR Cohen (FD); EG Dube*; KM
Ellerine*; L Engelbrecht*+; MJ Lewin*; L Norval*; S Shaw-Taylor*; L van der
Watt*; M Wainer*; LI Weil*+
(* Non-executive + Independent)
REGISTERED OFFICE
2nd Floor, Cradock Heights, 21 Cradock Avenue, Rosebank
(PO Box 41257, Craighall, 2024)
TRANSFER SECRETARIES
Computershare Investor Services (Proprietary) Limited, Ground Floor 70,
Marshall Street, Johannesburg (PO Box 61051, Marshalltown, 2107)
COMPANY SECRETARY
Probity Business Services (Proprietary) Limited
SPONSOR
Java Capital (Proprietary) Limited
INVESTOR RELATIONS
Envisage Investor & Corporate Relations
Date: 29/02/2012 07:05:13 Supplied by www.sharenet.co.za
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