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Unaudited interim results for the six months ended 31 December 2014
HYPROP INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/005284/06)
JSE share code: HYP ISIN: ZAE000003430
(Approved as a REIT by the JSE)
(“Hyprop” or “the company”)
Unaudited interim results for the six months ended 31 December 2013
- Distribution up 9,5% to 231 cents per unit
- Total property assets up to R25 billion from R22,5 billion
- Acquired Manda Hill in Zambia (87% of African Land)
- Somerset Mall included from 1 October 2013
- Rosebank Mall redevelopment remains on track
STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
Six months Six months Six months
31 December 2013 31 December 2012 30 June 2013
R’000 R’000 R’000
Revenue 1 171 491 1 124 503 1 099 489
Investment property income 1 114 638 1 027 412 1 008 671
Straight-line rental income accrual 19 588 23 257 15 879
Listed property securities income 37 265 73 834 74 939
Property expenses (369 386) (363 907) (347 277)
Net property income 802 105 760 596 752 212
Other operating expenses (28 733) (29 462) (26 720)
Operating income 773 372 731 134 725 492
Net interest (185 160) (193 841) (191 723)
Received 27 471 11 336 17 234
Paid (212 631) (205 177) (208 957)
Net operating income 588 212 537 293 533 769
Change in fair value 526 270 851 119 1 403 721
Investment property 658 494 700 649 1 198 105
Straight-line rental income accrual (19 588) (23 257) (15 879)
Listed property securities (on disposal) (82 881) 258 377 (2 842)
Derivative instruments (29 755) (84 650) 224 337
Profit/(loss) on disposal 191 628 (15 529) 28 061
Investment property 4 607 (11 886) 90
Associate 17 431
Listed property securities 169 590 (3 643)
Sycom rights offer nil paid letters 27 971
Amortisation of debenture premium 47 350 249 923 49 119
Gain on bargain purchase 64 802
Income before debenture interest 1 418 262 1 622 806 2 014 670
Debenture interest (561 922) (512 969) (517 831)
Net income before share of income from associate 856 340 1 109 837 1 496 839
Share of income from associate 144 4 262
Profit before taxation 856 340 1 109 981 1 501 101
Taxation (493) (191 382) 2 239 008
Profit for the period 855 847 918 599 3 740 109
Other comprehensive income
Exchange differences on translation of
foreign operations 10 484 (6) 319
Total comprehensive income for the period 866 331 918 593 3 740 428
Total profit for the period attributable to:
Unitholders of the company 855 285 918 599 3 740 109
Non-controlling interest 562
Profit for the period 855 847 918 599 3 740 109
Total comprehensive income attributable to:
Unitholders of the company 865 769 918 593 3 740 428
Non-controlling interest 562
Total comprehensive income for the period 866 331 918 593 3 740 428
Abridged reconciliation - headline earnings and
distributable earnings
Net income after taxation 855 847 918 599 3 740 109
Debenture interest 561 922 512 969 517 831
Earnings 1 417 769 1 431 568 4 257 940
Headline earnings adjustments (792 684) (325 623) (3 296 367)
Change in fair value of investment property (658 494) (87 586) (1 198 105)
(Profit)/loss on disposal: Investment property (4 607) 11 886 (90)
Associate company (17 431)
Amortisation of debenture premium (47 350) (249 923) (49 119)
Gain on bargain purchase (64 802)
Deferred taxation - investment property (2 021 082)
Sycom rights offer nil paid letters (27 971)
Headline earnings 625 085 1 105 945 961 573
Distributable earnings adjustments (63 199) (591 071) (444 320)
Change in fair value: Listed property securities 82 881 (212 974) 2 842
Derivative instruments 29 755 84 650 (224 337)
(Profit)/loss on disposal of listed property
securities (169 590) 3 643
Net income: Hyprop Investments (Mauritius) (8 353) (3 789)
African Land (4 324)
Dividends: Hyprop Investments (Mauritius) 2 486 1 434
African Land 3 762
Investment in associate - Mantrablox (3 969)
Transaction costs (2013: Sycom; 2012: Attfund
Retail) 184 1 711 1 791
Taxation 1 443 1 520
Deferred taxation - listed property securities
and other (469 544) (219 812)
Distributable earnings 561 886 514 874 517 253
Total combined units in issue 243 256 092 243 113 169 243 113 169
Weighted average combined units in issue 243 136 472 243 113 169 243 113 169
Basic and diluted earnings per combined unit 583,1 588,8 1 751,4
Basic and diluted headline earnings per
combined unit 257,1 454,9 395,5
Distributable earnings per combined unit 231,0 211,8 212,8
Distribution details
Total distribution for the year 231,0 211,0 213,0
Six months ended 31 December 231,0 211,0
Six months ended 30 June 213,0
STATEMENT OF FINANCIAL POSITION
Unaudited Audited
31 December 2013 30 June 2013
R’000 R’000
Assets
Non-current assets 25 218 389 20 282 124
Investment property 24 539 960 19 782 728
Building appurtenances and tenant installations 85 849 63 065
Investment in associate 137 108
Goodwill 12 059 12 059
Loans receivable 579 102 384 307
Derivative instruments 1 282 39 857
Current assets 431 283 298 996
Receivables 159 653 224 175
Loans receivable 157 561
Cash and cash equivalents 114 069 74 821
Non-current assets held-for-sale 51 982 2 400 822
Listed property securities 51 982 2 279 253
Investment in associate 121 569
Total assets 25 701 654 22 981 942
Equity and liabilities 11 803 062 10 814 409
Share capital and reserves 11 679 616 10 814 409
Non-controlling interest 123 446
Liabilities
Non-current liabilities 11 339 596 10 341 977
Debentures and debenture premium 5 785 643 5 822 497
Interest-bearing liabilities 5 479 952 4 436 486
Derivative instruments 44 110 52 984
Deferred taxation 29 891 30 010
Current liabilities 2 558 996 1 825 556
Payables 482 259 359 725
Interest-bearing liabilities 1 514 815 948 000
Combined unitholders for distribution 561 922 517 831
Total liabilities 13 898 592 12 167 533
Total equity and liabilities 25 701 654 22 981 942
Net asset value per combined unit (R) 71,80 68,43
ABRIGED STATEMENT OF CHANGES IN EQUITY
Unaudited Audited
31 December 2013 30 June 2013
R’000 R’000
Balance at beginning of period 10 814 409 7 073 981
Total comprehensive income for the period 855 285 3 740 109
Non-controlling interest 123 446
Dividend attributable to minorities- African Land (562)
Foreign currency translation reserve 10 484 319
Balance at end of period 11 803 062 10 814 409
ABRIGED STATEMENT OF CASH FLOWS
Unaudited Audited
31 December 2013 30 June 2013
R’000 R’000
Cash flows from operating activities 161 995 (49 773)
Cash generated from operations 885 974 660 705
Interest received 27 471 17 234
Interest paid (233 061) (215 147)
Taxation paid (558) 16
Distribution to combined unitholders (517 831) (512 969)
Income from associate 388
Cash flows from investing activities (1 167 223) (241 730)
Cash flows from financing activities 1 021 767 198 450
Net increase/(decrease) in cash and
cash equivalents 16 539 (93 053)
Cash acquired with subsidiary 22 709
Cash and cash equivalents at beginning of period 74 821 167 874
Cash and cash equivalents at end of period 114 069 74 821
COMMENTARY
INTRODUCTION
Hyprop is South Africa’s largest JSE-listed specialist shopping centre Real Estate Investment Trust (“REIT”), and one
of South Africa’s oldest listed property companies (1988). The company currently has R25 billion in assets under
management.
The property portfolio includes 12 prime shopping centres in South Africa, exposure to malls in the rest of Africa
through Atterbury Africa, a joint venture with Attacq Limited (previously the Atterbury Group) and African Land Investments
Limited (“African Land"). Atterbury Africa has a 47% interest in Accra Mall (19 000m2) in Accra, Ghana while African
Land owns Manda Hill Shopping Centre (43 400m2) in Lusaka, Zambia.
FINANCIAL RESULTS
Hyprop has declared a distribution of 231 cents per combined unit for the six months ended 31 December 2013 (“the
period”), an increase of 9,5% on the corresponding period in 2012.
SEGMENTAL OVERVIEW
Six months ended Six months ended
31 December 2013 31 December 2012
Distributable Distributable
Revenue earnings Revenue earnings
Business segment R’000 R’000 R’000 R’000
Canal Walk 257 115 186 424 234 884 168 012
Super regional 257 115 186 424 234 884 168 012
Clearwater Mall 161 384 111 130 154 746 100 314
The Glen 102 543 69 260 98 374 63 718
Woodlands Boulevard 104 677 71 628 93 795 63 960
CapeGate 97 877 59 814 93 377 59 368
Somerset Mall 52 677 39 124
Large regional 519 158 350 956 440 292 287 360
Hyde Park 91 355 61 853 87 961 55 694
Regional 91 355 61 853 87 961 55 694
Atterbury Value Mart 53 644 40 455 49 998 37 978
Willowbridge 41 610 24 108 38 817 23 556
Stoneridge 32 871 15 146 32 637 15 151
Somerset Value Mart 10 920 7 226 10 448 7 311
Value centres 139 045 86 935 131 900 83 996
Shopping centres 1 006 673 686 168 895 037 595 062
Stand-alone offices 34 067 21 680 32 341 21 692
Development property1 58 053 28 122 73 007 43 687
Held for sale2 11 082 1 169
Investment property 1 098 793 735 970 1 011 467 661 610
Listed property securities3 37 267 37 267 73 834 73 834
Fund management expenses (25 119) (29 127)
Net interest (193 709) (192 465)
Atterbury Africa 2 486
African Land 9 262 3 762
Word4Word Marketing 6 581 1 229 15 945 1 022
Straight-line rental income accrual 19 588 23 257
Total 1 171 491 561 886 1 124 503 514 874
1 Rosebank Mall and Mall offices - transferred to development property from September 2012
2 Southcoast Mall and Southern Sun Hyde Park
3 Sycom units
Excluding the recently acquired Somerset Mall, distributable earnings from the regional and super-regional malls
increased by 9,6%, benefiting in part from extensions at Canal Walk and The Glen. The value centres showed muted
growth of 3,5% while distributable earnings from offices was maintained. The property cost-to-income ratio, affected
by timing delays in respect of operating cost expenditure, improved to 33,1% (30 June 2013: 34,4%), while the total
cost-to-income ratio at a fund level remained unchanged at 34,6%.
Distributable earnings from development property (Rosebank Mall) decreased by R15,6 million compared with the previous
corresponding period, which was in line with budget.
Distributable earnings from listed property securities decreased due to the exchange of 81,5 million Sycom units for
Somerset Mall, effective 1 October 2013.
Total arrears (excluding Rosebank Mall and including Somerset Mall) at 31 December 2013 were R17,4 million (30 June
2013: R17,1 million) and the corresponding allowance for doubtful debts was R5,0 million (30 June 2013: R6,7 million).
Vacancies
Demand from retailers at Hyprop’s regional shopping malls remains strong with vacancies of less than 1%. Retail
vacancies across the portfolio improved from 2,1% to 1,2%, driven in part by new lettings at the value centres (CapeGate
Lifestyle, Willowbridge and Stoneridge), albeit at lower rentals. Office vacancies increased slightly from 8,1% to 8,2%.
Overall, the portfolio was 98,2% let at 31 December 2013 (June 2013: 97,3%).
% of total GLA
Vacancy profile by sector* 31 December 2013 30 June 2013
Retail 1,2 2,1
Office 8,2 8,1
Total 1,8 2,7
*Excludes Rosebank Mall
PROPERTY PORTFOLIO
Value per
Value attributable to Hyprop rentable area
Rentable area 31 December 2013 30 June 2013 31 December 2013
Business Segment (m2) R’000 R’000 (R/m2)
Canal Walk 153 531 5 911 200 5 627 200 48 127
Super regional 153 531 5 911 200 5 627 200 48 127
Clearwater 86 028 3 316 000 3 203 000 38 546
The Glen 76 849 1 957 809 1 854 094 33 898
Woodlands Boulevard 71 617 1 979 000 1 886 000 27 633
CapeGate 97 346 1 643 000 1 602 000 16 878
Somerset Mall 67 133 2 243 000 33 411
Large regional 398 973 11 138 809 8 545 094 29 541
Hyde Park 37 003 1 634 000 1 556 000 44 159
Regional 37 003 1 634 000 1 556 000 44 159
Atterbury Value Mart 47 745 987 000 987 000 20 672
Willowbridge 44 663 630 000 585 000 14 106
Stoneridge 48 584 409 500 421 200 9 365
Somerset Value Mart 12 386 185 000 185 000 14 936
Value centres 153 378 2 211 500 2 178 200 14 715
Shopping centres 742 885 20 895 509 17 906 494 31 049
Stand-alone offices 34 118 471 400 442 000 13 817
Development property1 1 697 000 1 494 000
Investment property 777 003 23 063 909 19 842 494
Listed property securities2 51 982 2 279 253
Atterbury Africa 579 102 336 994
African Land3 1 339 561
Property Assets 25 034 554 22 458 741
1 Rosebank Mall and Mall Offices - transferred to development property from September 2012
2 Sycom units
3 Hyprop’s 87% share in African Land
Investment property
Investment property was independently valued by Old Mutual Investment Group South Africa using the discounted cash
flow method. Excluding the effect of the acquisition of Somerset Mall, investment property increased in value by 4,9%,
resulting in a fair value adjustment of R658 million. The increase in value was driven by income growth, supported by strong
demand for quality shopping centres.
Developments
The Rosebank Mall redevelopment remains on track for final completion in September 2014. Thirty new stores (out of a
total of 147) opened for trading during 2013. Lease commitments increased to 98% of rentable area (June 2013: 95%). Total
capital cost remains at R932 million with an estimated yield of 7%.
The extension of Edgars and the enlargement of Foschini at The Glen, as well as the extension of Edgars at Canal Walk,
were completed on time and within budget.
Energy saving initiatives
In 2012 Hyprop introduced its Green Design and Environmental Strategy. Reducing electricity consumption forms an
integral part of this strategy. To this end Hyprop commenced with a R11,5 million energy reduction project across the
portfolio, which is expected to yield annual savings of R9,7 million.
DISPOSALS
Sycom units
Following the exchange of 81,5 million Sycom units for Somerset Mall, Hyprop disposed of 575 000 Sycom units for
R14 million in December 2013. Subsequent to period end, the remaining 2,2 million units were sold for R51,9 million.
Mantrablox Proprietary Limited
In December 2013, Attacq exercised its option to acquire Hyprop’s 20% interest in Mantrablox Proprietary Limited,
which owns Garden Route Mall. The shares and loan account in Mantrablox were sold for R139 million, realising a profit of
R17,4 million.
Proceeds of these disposals were applied to reduce borrowings.
INVESTMENTS IN SUB-SAHARAN AFRICA (EXCLUDING SOUTH AFRICA)
In line with Hyprop’s strategy to become a dominant African shopping centre REIT, the company
intends to invest up to R3 billion in sub-Saharan Africa (excluding South Africa) over the next five years.
Of the R3 billion, R1 billion is currently allocated to Atterbury Africa (up from the R750 million originally
committed) for developing and owning shopping centres in select African countries. The balance of R2 billion has been allocated
to African Land, with the objective of acquiring existing, high quality, income-producing shopping centres. As agreed
with Attacq, the investment in African Land will be restructured in due course, after which Hyprop will own 50% of African
Land and Atterbury Africa the remaining 50%.
Atterbury Africa
Hyprop received a dividend of R2,5 million for the period from its 37,5% share in Atterbury Africa. The dividend
comprises income from Accra Mall, currently the only income-producing property in the portfolio. Hyprop’s investment in
Atterbury Africa increased to R579 million (30 June 2013: R337 million), due to capital contributions for the West Hills
development and the acquisition of additional land in Ghana.
Overview of the Atterbury Africa property portfolio:
Attributable
Rentable area Ownership value
Property (m2) (%) USD ’000 Comments
Income-producing property
Accra Mall 19 000 47 38 328 Existing centre, currently fully let
(Accra, Ghana)
Developments
West Hills Mall 27 500 45 42 087 Construction work on new mall progressing
(Accra, Ghana) well and scheduled for opening in October 2014
Achimota Land 14 500* 75 4 630 Acquisition of land rights concluded. Design
(Accra, Ghana) finalised and pre-letting commenced
Kumasi Land 27 800* 75 4 851 Acquisition of land rights concluded
(Kumasi, Ghana)
Waterfalls Project 27 500* 25 1 374 Land holding with development rights for retail
(Lusaka, Zambia) and a hotel
*Proposed
African Land
Hyprop acquired an 87% shareholding in African Land for R768 million, at an 8,1% yield, effective 5 December 2013. The
acquisition provides exposure to Manda Hill shopping centre, in Lusaka, Zambia, which was valued at USD149 million
at period-end. African Land contributed R3,8 million to Hyprop’s distributable income for the period.
NET ASSET VALUE
The net asset value per combined unit (“NAV”) at 31 December 2013 increased by 4,9% to R71,80
(30 June 2013: R68,43). The increase was primarily due to an increase in the independent valuation
of the investment property portfolio.
At 31 December 2013, the closing combined unit price of R76,50 represented a premium of 6,5% to the NAV per combined
unit.
BORROWINGS
31 December 2013 30 June 2013
Rm Rm
SA bank facilities 3 726 3 404
Debt capital market debt (DCM):
Corporate bonds 1 600 1 150
Commercial paper 498 498
USD debt 1 170 333
Cash and cash equivalents (272) (240)
Net borrowings 6 722 5 145
Gearing 26,6% 22,9%
Net borrowings increased to R6,7 billion at 31 December 2013 (30 June 2013: R5,1 billion) mainly as a result of the
acquisition of African Land and capital expenditure on the Rosebank Mall redevelopment and developments in Atterbury
Africa.
At period-end, interest rates were hedged in respect of 70% (30 June 2013: 87%) of borrowings, at a weighted average
rate of 7,5% (30 June 2013: 8,1%). Fixed rate debt decreased primarily due to the financing of African Land being
unhedged, pending a re-structure of the investment.
In November 2013, Hyprop successfully issued a R450 million six-year corporate bond to refinance a maturing bank
facility. This brings total debt capital market (“DCM”) issuance to R2,098 billion, or 30% of total borrowings.
PROSPECTS
Hyprop, with its large, quality assets, strong contractual lease escalations and sound balance sheet is well-
positioned to withstand the impact of the challenging economic environment on consumer spend.
The investment strategy into sub-Saharan Africa (excluding South Africa) has been enhanced with the acquisition of
African Land. Hyprop will continue to invest in large, quality shopping centres, improve the tenant quality across the
portfolio and dispose of non-core assets (subject to market conditions).
Taking into account the anticipated benefit from African Land for the rest of the financial year, and strong net income
growth from the existing portfolio, Hyprop expects distribution growth of between 8,5% and 10,5% for the full year to
30 June 2014. This is an upward revision from the guidance provided in June 2013 of between 6,5% and 8,5%.
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;
- appropriate allowances for vacancies have been incorporated into the forecast; and
- no major corporate failures will occur.
The forecast has not been reviewed or reported on by the company’s auditors.
PAYMENT OF DISTRIBUTION
All rental income earned by the company, less property expenses and interest on debt, is distributed to unitholders
semi-annually.
Distribution 53 of 231 cents per combined unit for the six months ended 31 December 2013 will be paid to combined
unitholders as follows:
March 2014
Last day to trade cum distribution Thursday, 20
Combined units trade ex distribution Monday, 24
Record date Friday, 28
Payment of distribution Monday, 31
Unitholders may not dematerialise or rematerialise their combined units between Monday, 24 March 2014 and Friday,
28 March 2014, both days inclusive. An announcement relating to the tax treatment of the distribution will be released
separately.
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 the preparation of these results are consistent with those applied in the audited
financial statements for the prior financial period.
These financial results have not been reviewed or audited by the company’s auditors.
Preparation of the financial information was supervised by Laurence Cohen CA(SA) in his capacity as Financial
Director.
On behalf of the board
GR Tipper PG Prinsloo
Chairman CEO
19 February 2014
DIRECTORS
GR Tipper*† (Chairman), PG Prinsloo (CEO), LR Cohen (FD), EG Dube*†, KM Ellerine*, L Engelbrecht*†, MJ Lewin*†,
TV Mokgatlha*†, L Norval*, S Shaw-Taylor*, LLS van der Watt*†
*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
Nikki Catrakilis-Wagner
011 447 0090
www.hyprop.co.za
21 February 2014
Date: 21/02/2014 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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