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Audited results for the year ended 31 December 2012
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 2012
Total unitholder return 44,8%
Total distribution 409 cents up 6,8%
Market capitalisation R17,7 billion up 37%
Gearing 23,1%
R920 million redevelopment of Rosebank Mall commenced
STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
31 December 31 December
2012 2011
R’000 R’000
Revenue 2 177 625 1 583 157
Investment property income 2 016 184 1 350 937
Straight-line rental income accrual 9 208 100 214
Listed property securities income 152 233 132 006
Property expenses (714 284) (511 681)
Net property income 1 463 341 1 071 476
Other operating expenses (53 885) (43 855)
Operating income 1 409 456 1 027 621
Net interest (404 827) (208 325)
Received 22 180 31 416
Paid (427 007) (239 741)
Net operating income 1 004 629 819 296
Change in fair value 1 273 905 335 646
Investment property 1 137 924 236 654
Straight-line rental income accrual (9 208) (100 214)
Listed property securities 315 259 258 716
Derivative instruments (170 070) (59 510)
Loss on disposal (15 221) (9 835)
Investment property (11 886) (6 129)
Listed property securities (3 335) (3 706)
Amortisation of debenture premium 487 925 231 354
Impairment of goodwill (547 654)
Non-core income 4 555
Income before debenture interest 2 751 238 833 362
Debenture interest (994 333) (741 703)
Net income before share of income from
associate 1 756 905 91 659
Share of income from associate 144 9 949
Profit before taxation 1 757 049 101 608
Taxation (753 169) (185 639)
Profit/loss for the year 1 003 880 (84 031)
Other comprehensive income
Exchange differences on translation of
foreign operations (6)
Total comprehensive income/(loss) for the
year 1 003 874 (84 031)
Abridged reconciliation - headline earnings
and distributable earnings
Net income/(loss) after taxation 1 003 880 (84 031)
Debenture interest 994 333 741 703
Earnings 1 998 213 657 672
Headline earnings adjustments (915 940) 122 613
Change in fair value of investment
property (net of deferred taxation) (443 236) (203 522)
Impairment of goodwill 547 654
Loss on disposal of listed property
securities 3 335 3 706
Loss on disposal of investment
property 11 886 6 129
Amortisation of debenture premium (487 925) (231 354)
Headline earnings 1 082 273 780 285
Distributable earnings adjustments (86 014) (37 054)
Change in fair value of listed
property securities (net of deferred
taxation) (259 238) (222 496)
Change in fair value of derivative
instruments 170 070 59 510
Taxation 1 443 87 986
Deferred taxation 28 302
Attfund transaction costs 1 711 9 644
Distributable earnings 996 259 743 231
Total combined units in issue 243 113 169 243 113 169
Weighted average combined units in issue 243 113 169 192 061 114
Basic and diluted earnings per combined 821,9
unit 342,4
Basic and diluted headline earnings per 445,2
combined unit 406,3
Distributable earnings per combined unit 409,8 383,6
Distribution details
Total distribution for the year 409,00 383,00
Six months ended 31 December 211,00 202,00
Four months ended 31 December 137,00
Special distribution - two months
ended 31 August 65,00
Six months ended 30 June 198,00 181,00
STATEMENT OF FINANCIAL POSITION
Audited Audited
31 December 31 December
2012 2011
R’000 R’000
Assets
Non-current assets 20 996 662 19 746 691
Investment property 18 418 240 17 357 277
Building appurtenances and tenant
installations 55 356 35 873
Investment in associate 117 803 117 658
Goodwill 12 059 12 493
Long-term loans receivable 111 109 47 217
Listed property securities 2 282 095 2 176 173
Current assets 398 364 327 641
Receivables 183 056 119 247
Short-term loan receivable 47 434
Cash and cash equivalents 167 874 208 394
Non-current assets held-for-sale
Investment property 131 074 123 822
Total assets 21 526 100 20 198 154
Equity and liabilities
Share capital and reserves 7 073 981 6 070 107
Liabilities
Non-current liabilities 12 718 115 12 116 277
Debentures and debenture premium 5 871 616 6 359 541
Long-term loans 4 371 035 4 191 622
Derivative instruments 204 519 44 463
Deferred taxation 2 270 945 1 520 651
Current liabilities 1 734 004 2 011 770
Payables 373 090 308 482
Short-term loans 815 000 1 347 292
Derivative instruments 32 945 22 931
Combined unitholders for distribution 512 969 333 065
Total liabilities 14 452 119 14 128 047
Total equity and liabilities 21 526 100 20 198 154
Net asset value per combined unit(R) 53,25 51,12
Net asset value per combined unit –
excluding deferred taxation liability (R) 62,59 57,37
ABRIDGED STATEMENT OF CHANGES IN EQUITY
Audited Audited
31 December 31 December
2012 2011
R’000 R’000
Balance at the beginning of the year 6 070 107 6 154 138
Foreign currency translation reserve (6)
Total comprehensive income/(loss) for the
year 1 003 880 (84 031)
Balance at the end of the year 7 073 981 6 070 107
ABRIDGED STATEMENT OF CASH FLOWS
Audited Audited
31 December 31 December
2012 2011
R’000 R’000
Cash flows from operating activities 191 277 (47 667)
Cash generated from operations 1 478 600 879 948
Interest received 22 180 31 416
Interest paid (427 007) (239 741)
Taxation paid (68 067) (17 983)
Distribution to combined unitholders (814 429) (712 625)
Income from associate 11 318
Cash flows from investing activities 125 580 (4 420 885)
Cash flows from financing activities (352 879) 4 609 200
Net (decrease)/increase in cash and cash
equivalents (36 022) 140 648
Cash and cash equivalents transferred to
non-current assets held-for-sale (4 498)
Cash and cash equivalents at the beginning
of the year 208 394 67 746
Cash and cash equivalents at the end of
the year 167 874 208 394
COMMENTARY
INTRODUCTION
Hyprop is South Africa’s largest listed specialised shopping centre fund,
with eleven 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 409 cents per
combined unit, an increase of 6,8% on the previous year and in line with
forecast.
The final distribution of 211 cents per combined unit reflects growth of
4,5%, compared with the corresponding period in 2011. Distributable earnings
in the second half of 2011 included a once-off benefit amounting to 3,7
cents, which impacted relative growth in the second half of 2012. Excluding
the once-off benefit, second half growth in 2012 was 6,4%.
SEGMENTAL OVERVIEW
31 December 2012 31 December 2011
Distributable Distributable
Revenue earnings Revenue earnings
Business segment R’000 R’000 R’000 R’000
Canal Walk 460 729 329 862 423 566 301 315
Super regional 460 729 329 862 423 566 301 315
Clearwater Mall 1 294 002 199 195 96 654 61 562
The Glen 190 940 123 565 178 087 112 927
Woodlands Boulevard
1 182 097 124 583 59 054 40 619
Cape Gate 1 182 725 116 776 57 266 36 911
Large regional 849 764 564 119 391 061 252 019
Hyde Park 166 129 104 094 152 944 93 963
Southcoast Mall 2 12 346 6 287 20 968 11 565
Regional 178 475 110 381 173 912 105 528
Atterbury Value
Mart 1 97 751 75 915 31 062 24 163
Willowbridge 1 76 667 45 308 25 932 15 253
Stoneridge 62 567 27 481 58 339 25 795
Somerset Value Mart
1 20 583 14 106 6 903 4 597
Value Centres 257 568 162 810 122 236 69 808
Shopping Centres 1 746 536 1 167 172 1 110 775 728 670
Stand-alone offices
3 110 820 72 438 70 569 45 320
Hotels 4 33 861 1 207 47 326 (5 866)
Development
property 5 103 545 58 364 105 823 70 222
Investment property 1 994 762 1 299 181 1 334 493 838 346
Listed property
securities 152 233 152 233 132 006 132 006
Fund management expenses (53 550) (34 209)
Net interest (403 451) (208 325)
Share of income from
associate 144 9 949
Word4Word Marketing 21 422 1 702 16 444 909
Straight-line rental
income accrual 9 208 100 214
Non-core income 4 555
Total 2 177 625 996 259 1 583 157 743 231
1 Acquired 1 September 2011
2 Sold July 2012
3 Includes offices acquired from Attfund Retail from 1 September 2011
4 Southern Sun Hyde Park – sold September 2012
5 Rosebank Mall – transferred to development property from September 2012
Income from the properties acquired from Attfund Retail was included from 1
September 2011, the effective date of the acquisition. The comparative period
therefore only includes income from the Attfund Retail properties for the
four months ended December 2011.
On a like-for-like basis (Canal Walk, The Glen, Hyde Park and Stoneridge)
revenue and distributable earnings were up 8,3% and 9,6% respectively, while
property expenses increased by 5,9%. Rosebank Mall was transferred to
development property from 1 September 2012.
The property cost-to-income ratio improved to 35,4% (2011:37,9%), while the
overall cost-to-income ratio on a fund level improved to 35,4% (2011:37,5%).
Total arrears at 31 December 2012, comprising normal arrears, legal cases and
outstanding tenant deposits improved to R19,8 million (31 December 2011:
R41,3 million) and the total allowance for doubtful debts was R10,2 million
(31 December 2011: R17,4 million).
Vacancies
Strong demand for retail, especially at the large shopping centres, reduced
retail vacancies on a like-for-like basis to 1,7%. Although occupancies in
offices remain under pressure, especially in the Pretoria market, some
progress has been made in reducing overall office vacancies to 9,1%.
Vacancy profile by sector* % of total GLA % of total GLA
2012 2011
Retail 1,7 3,0
Office 9,1 12,2
Total 2,5 3,9
*Vacancies exclude Rosebank Mall (under development) and Southcoast Mall
(sold July 2012)
PROPERTY PORTFOLIO
Value per
Value attributable rentable
to Hyprop area
31 31
Rentable 31 December December December
area 2012 2011 2012
Business segment (m2) R’000 R’000 (R/m2)
Canal Walk 157 447 5 200 000 4 880 000 41 284
Super regional 157 447 5 200 000 4 880 000 41 284
Clearwater 85 174 2 945 000 2 500 000 34 576
The Glen 74 624 1 751 130 1 623 365 31 223
Woodlands Boulevard 70 319 1 770 000 1 604 000 25 171
Cape Gate 99 619 1 509 000 1 435 000 15 148
Large regional 329 736 7 975 130 7 162 365 25 942
Hyde Park 36 894 1 420 000 1 337 000 38 489
Southcoast Mall 1 122 000
Regional 36 894 1 420 000 1 459 000 38 489
Atterbury Value Mart 47 707 952 000 885 000 19 955
Willowbridge 44 027 620 000 607 000 14 082
Stoneridge 51 293 432 900 409 500 9 377
Somerset Value Mart 12 546 170 000 154 000 13 550
Value centres 155 573 2 174 900 2 055 500 14 289
Shopping centres 679 650 16 770 030 15 556 865 27 510
Stand-alone offices 51 243 710 000 769 000 13 856
Hotel 2 130 000 145 000
Development property 3 35 950 990 000 1 039 000
Investment property 766 843 18 600 030 17 509 865 26 730
Listed property securities 2 282 095 2 176 173
Atterbury Africa 111 109
766 843 20 993 234 19 686 038
1 Sold July 2012
2 Southern Sun Hyde Park – sold September 2012
3 Rosebank Mall – transferred to development property from September 2012
Investment Property
Investment property was independently valued by Old Mutual Investment Group:
Property Investments Proprietary Limited using the discounted cash flow
method.
Investment property increased in value to R18,6 billion, after accounting for
a fair value adjustment of R1,1 billion.
The valuation increase in the shopping centre portfolio was driven primarily
by income growth and strong demand for quality retail space. The stand-alone
office buildings, on the other hand, saw reductions in value due to
vacancies, with a consequent negative impact on income growth.
Developments
Construction work on the R920 million Rosebank Mall redevelopment is
progressing well. The redevelopment project, with an anticipated completion
date of September 2014, will increase the rentable area of Rosebank Mall to
over 62 000m². Lease commitments currently stand at 90% of the rentable area.
Further extensions to accommodate larger Edgars stores at The Glen and Canal
Walk have been approved at a total cost of R91,6 million (Hyprop share: R71,8
million).
Listed Property Securities
Hyprop’s investment in Sycom was valued at R2,3 billion at 31 December 2012,
based on the closing price at that date of R27,55 per unit. Hyprop’s
investment represents 33,9% of the Sycom units in issue.
Atterbury Africa
Hyprop initiated its strategy to develop and own quality shopping centres in
the rest of Africa with the acquisition of a 37,5% shareholding in Atterbury
Africa, through a wholly-owned subsidiary, Hyprop Investments (Mauritius)
Limited.
At year-end, R111,1 million of Hyprop’s R750 million initial commitment had
been invested. Funding was arranged through Standard Bank (Isle of Man).
Atterbury Africa recently increased its interest in the successful Accra Mall
in Ghana to 47% (previously 42,5%), while construction has commenced on the
West Hills shopping centre, located in the western suburbs of Accra.
Negotiations to acquire interests in various other projects are well
advanced.
DISPOSALS
The following disposals were concluded during the year:
Sale proceeds Valuation at Effective date
31 December 2011
R’million R’million
Vunani units 105,0 99,0 March 2012
Acucap units 108,5 97,0 July 2012
50% interest in
Southcoast Mall 110,5 122,0 July 2012
Trade Centre at
CapeGate 70,0 70,0 September 2012
Southern Sun Hyde
Park 130,0 145,0 September 2012
Total 524,0 533,0
NET ASSET VALUE
The net asset value per combined unit (“NAV”) at year-end was R53,25,
representing a 4,2% increase on the NAV of R51,12 at 31 December 2011.
Excluding deferred taxation, the NAV at year-end was R62,59 (2011: R57,37), a
9,1% increase on the prior year. The closing combined unit price of R73 on 31
December 2012 represents a 16,6% premium to the year-end NAV, excluding
deferred taxation.
BORROWINGS
Net borrowings at 31 December 2012 of R4,9 billion equate to a gearing ratio
of 23,1%, down from 26,2% in 2011.
At year-end, interest rates were hedged in respect of 82% of borrowings, at a
weighted average rate of 8,4% (2011: 8,2%).
Hyprop extended its debt capital market (“DCM”) issuance in September 2012,
with the issue of a R300 million five year bond at an all-in fixed rate of
7,3%. This issuance brings total DCM issuance to date to R1 billion, or 20%
of total borrowings.
DIRECTORATE
Gavin Tipper and Jabu Mabuza were appointed to the board as independent non-
executive directors effective 8 March 2012 and 21 June 2012, respectively.
Hyprop’s chairman, Michael Aitken, has indicated his intention to retire from
the board as chairman and independent non-executive director, effective June
2013. The board is in the process of identifying a replacement independent
non-executive chairman. To achieve continuity, preference will be given to
appointing a candidate from amongst existing board members. A further
announcement in this regard will be made in due course.
REAL ESTATE INVESTMENT TRUST (“REIT”) LEGISLATION
Hyprop views the REIT legislation in South Africa as very positive for the
sector. REIT conversion by listed property companies will bring uniformity to
capital structures and tax certainty, as well as being more attractive for
international investors.
Hyprop will convert to a REIT once the legislation is effective. Further
detail in this regard will be communicated to unitholders in due course.
PROSPECTS
Hyprop will continue to focus on growing assets through acquisitions and the
expansion of existing centres to meet tenant demand. Investment in dominant
shopping centres, both locally and elsewhere in Africa, will remain the
primary objective. Given the right opportunities, the company will continue
to dispose of non-core assets.
Taking into account the short-term dilution due to the Rosebank Mall
redevelopment, Hyprop expects to show distribution growth of between 5% and
7% for 2013.
The growth in distributions is based on the following key assumptions:
- forecast investment property income is based on contractual rental
escalations and market related renewals; and
- appropriate allowances for vacancies have been incorporated into
the forecast.
This forecast has not been reviewed or reported on by the company’s auditors.
PAYMENT OF DEBENTURE INTEREST
Distribution 51 of 211 cents per combined unit for the six months ended 31
December 2012 will be paid to combined unitholders as follows:
March 2013
Last day to trace cum distribution Thursday, 14
Combined units trade ex distribution Friday, 15
Record date Friday, 22
Payment date Monday, 25
Unitholders may not dematerialise or rematerialise their combined units
between Friday, 15 March 2013 and Friday, 22 March 2013, both days inclusive.
BASIS OF PREPARATION
These results have been prepared in accordance with International Financial
Reporting Standards (“IFRS”), International Accounting Standard IAS34
‘Interim Financial Reporting’, the SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee and Financial Reporting Pronouncements
as issued by the Financial Standards Council, the JSE Limited Listings
Requirements and the South African Companies Act, 2008.
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. The auditors’ report does not necessarily cover all the
information in this announcement.
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
27 February 2013
DIRECTORS:
MS Aitken*† (Chairman); PG Prinsloo (CEO); LR Cohen (FD); EG Dube*†; KM
Ellerine*; L Engelbrecht*†; MJ Lewin*; JA Mabuza*†; L Norval*; S Shaw-
Taylor*; GR Tipper *†; LLS van der Watt*; M Wainer*; LI Weil*†
(* Non-executive † Independent)
REGISTERED OFFICE:
2nd Floor, Cradock Heights, 21 Cradock Avenue, Rosebank
(PO Box 52509, Saxonwold 2132)
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
INVESTOR RELATIONS
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