Hyprop Investments Limited (SA) HY 2013 results

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Hyprop Investments Limited (SA) HY 2013 results

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Hyprop Investments Limited (SA) HY 2013 results

  1. 1. AUDITED RESULTS for the six months ended 30 June 2013 Total distribution 213 cents up 7,6% Somerset Mall acquisition edevelopment of R Rosebank Mall on track dividend from First Atterbury Africa btained REIT status from O 1 July 2013 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”) www.hyprop.co.za 2
  2. 2. AUDITED RESULTS for the six months ended 30 June 2013 STATEMENT OF COMPREHENSIVE INCOME Audited 30 June 2013 R’000 Revenue Investment property income Straight-line rental income accrual Listed property securities income Property expenses Net property income Other operating expenses Operating income Net interest Received Paid Net operating income Change in fair value Investment property Straight-line rental income accrual Listed property securities Derivative instruments Profit/(loss) on disposal Investment property Listed property securities Sycom rights offer nil paid letters Amortisation of debenture premium Non-core income Income before debenture interest Debenture interest Net income before share of income from associate Share of income from associate Profit before taxation Taxation Profit for the period Other comprehensive income Exchange differences on translation of foreign operations Total comprehensive income for the period Unaudited 30 June 2012 R’000 Audited 31 December 2012 R’000 1 099 489 1 008 671 15 879 74 939 (347 277) 752 212 (27 729) 724 483 (191 723) 17 234 (208 957) 1 053 122 988 772 (14 049) 78 399 (350 377) 702 745 (24 423) 678 322 (210 986) 10 844 (221 830) 2 177 625 2 016 184 9 208 152 233 (714 284) 1 463 341 (53 885) 1 409 456 (404 827) 22 180 (427 007) 532 760 1 403 721 1 198 105 (15 879) (2 842) 224 337 28 061 90 467 336 422 786 437 275 14 049 56 882 (85 420) 308 308 1 004 629 1 273 905 1 137 924 (9 208) 315 259 (170 070) (15 221) (11 886) (3 335) 238 002 487 925 1 128 432 (481 364) 647 068 647 068 (561 787) 85 281 2 751 238 (994 333) 1 756 905 144 1 757 049 (753 169) 1 003 880 85 281 (6) 1 003 874 27 971 49 119 1 009 2 014 670 (517 831) 1 496 839 4 262 1 501 101 2 239 008 3 740 109 319 3 740 428
  3. 3. Audited 30 June 2013 R’000 Abridged reconciliation - headline earnings and distributable earnings Total profit for the period Debenture interest Earnings Headline earnings adjustments Change in fair value of investment property (net of deferred taxation) Deferred taxation - investment property (Profit)/loss on disposal of investment property Profit on nil paid letters Amortisation of debenture premium (Profit)/loss on disposal of listed property securities Headline earnings/(loss) Distributable earnings adjustments Change in fair value of listed property securities (net of deferred taxation) Change in fair value of derivative instruments Taxation Deferred taxation - listed property securities and other Hyprop Investments (Mauritius) Investment in associate - Mantrablox Transaction costs - Attfund and Sycom Distributable earnings Total combined units in issue Weighted average combined units in issue Basic and diluted earnings per combined unit Basic and diluted headline earnings/(loss) per combined unit Distributable earnings per combined unit Distribution details Total distribution for the year Six months ended 31 December Six months ended 30 June Unaudited 30 June 2012 R’000 Audited 31 December 2012 R’000 3 740 109 517 831 4 257 940 (3 296 367) 85 281 481 364 566 645 (593 960) 1 003 880 994 333 1 998 213 (915 940) (1 198 105) (355 650) (443 236) (2 021 082) (90) (27 971) (49 119) 11 886 (238 002) (308) (487 925) 3 335 961 573 (444 320) (27 315) 508 700 1 082 273 (86 014) 2 842 (46 264) (259 238) (224 337) 1 520 (219 812) (2 355) (3 969) 1 791 85 420 170 070 1 443 469 544 1 711 517 253 243 113 169 243 113 169 1 751,4 395,5 212,8 481 385 243 113 169 243 113 169 233,1 (11,2) 198,0 996 259 243 113 169 243 113 169 821,9 445,2 409,8 213,0 198,0 213,0 198,0 409,0 211,0 198,0 1
  4. 4. AUDITED RESULTS for the six months ended 30 June 2013 STATEMENT OF FINANCIAL POSITION Audited 30 June 2013 R’000 Assets Non-current assets Investment property Building appurtenances and tenant installations Investment in associate Goodwill Long-term loans receivable Listed property securities Derivative instruments Current assets Receivables Short-term loan receivable Cash and cash equivalents Non-current assets held-for-sale Listed property securities Investment in associate Investment property Total assets Equity and liabilities Share capital and reserves Liabilities Non-current liabilities Debentures and debenture premium Long-term loans Derivative instruments Deferred taxation Current liabilities Payables Short-term loans Derivative instruments Combined unitholders for distribution Total liabilities Total equity and liabilities Net asset value per combined unit ( R ) Net asset value per combined unit - excluding deferred taxation liability ( R ) 2 Unaudited 30 June 2012 R’000 Audited 31 December 2012 R’000 20 282 124 19 782 728 63 065 108 12 059 384 307 19 996 275 17 750 318 44 548 117 702 12 493 47 496 2 023 718 20 996 662 18 418 240 55 356 117 803 12 059 111 109 2 282 095 345 600 210 277 398 364 183 056 47 434 167 874 131 074 39 857 298 996 224 175 74 821 2 400 822 2 279 253 121 569 135 323 290 337 109 529 180 808 131 074 22 981 942 20 632 212 21 526 100 10 814 409 6 155 388 7 073 981 10 341 977 5 822 497 4 436 486 52 984 30 010 1 825 556 359 725 517 831 12 167 533 22 981 942 68,43 12 489 184 6 121 539 4 146 304 139 227 2 082 114 1 987 640 367 397 1 125 292 13 587 481 364 14 476 824 20 632 212 50,50 12 718 115 5 871 616 4 371 035 204 519 2 270 945 1 734 004 373 090 815 000 32 945 512 969 14 452 119 21 526 100 53,25 68,56 59,06 62,59 948 000
  5. 5. ABRIDGED STATEMENT OF CHANGES IN EQUITY Balance at beginning of period Foreign currency translation reserve Total comprehensive income for the period Balance at end of period Audited 30 June 2013 R’000 7 073 981 319 3 740 109 10 814 409 Unaudited 30 June 2012 R’000 6 070 107 85 281 6 155 388 Audited 31 December 2012 R’000 6 070 107 (6) 1 003 880 7 073 981 ABRIDGED STATEMENT OF CASH FLOWS Audited 30 June 2013 R’000 Cash flows from operating activities Cash generated from operations Interest received Interest paid Taxation paid Distribution to combined unitholders Income from associate Cash flows from investing activities Cash flows from financing activities Net decrease in cash and cash equivalents Cash and cash equivalents transferred to non-current assets held-for-sale Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Unaudited 30 June 2012 R’000 Audited 31 December 2012 R’000 (49 773) 660 705 17 234 (215 147) 16 (512 969) 388 (241 730) 198 450 (93 053) 121 820 666 195 10 844 (221 830) (324) (333 065) 191 277 1 478 600 22 180 (427 007) (68 067) (814 429) 72 427 (267 318) (73 071) 125 580 (352 879) (36 022) 167 874 74 821 208 394 135 323 208 394 167 874 (4 498) 3
  6. 6. AUDITED RESULTS for the six months ended 30 June 2013 COMMENTARY INTRODUCTION Hyprop is South Africa’s third largest listed property fund (30 June 2013) and the largest 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 semiannually. The company’s primary objective is to provide sustainable income growth and capital appreciation to investors over the long term. CONVERSION TO A REAL ESTATE INVESTMENT TRUST (“REIT”) Following the introduction of REIT legislation in South Africa on 1 April 2013, Hyprop changed its year-end to 30 June and converted to a REIT from 1 July 2013. In due course Hyprop will implement a capital restructure to simplify its capital structure and ensure compliance with legislation. FINANCIAL RESULTS Hyprop has declared a distribution for the six month period ended 30 June 2013 (“the period”) of 213 cents per combined unit, an increase of 7,6% on the corresponding period in 2012. SEGMENTAL OVERVIEW Business segment Canal Walk Super regional Clearwater Mall The Glen Woodlands Boulevard CapeGate Large regional Hyde Park Regional Atterbury Value Mart Willowbridge Stoneridge Somerset Value Mart Value centres Shopping centres Stand-alone offices Development property 1 Held-for-sale 2 Investment property Listed property securities 3 Fund management expenses Net interest Atterbury Africa dividend Word4Word Marketing Straight-line rental income accrual Non-core income Total 4 30 June 2013 Distributable earnings R’000 244 917 178 398 244 917 178 398 154 291 102 821 99 038 63 602 94 511 65 380 94 695 59 298 442 535 291 101 83 504 53 686 83 504 53 686 51 026 38 363 40 028 22 644 32 096 15 170 10 822 7 036 133 972 83 213 904 928 606 398 53 424 34 034 44 745 19 953 (185) 1 003 097 660 200 74 939 74 939 (26 213) (195 237) 1 435 5 574 1 120 15 879 1 009 1 099 489 517 253 Revenue R’000 Rosebank Mall - transferred to development property from September 2012 2 Southcoast Mall and Southern Sun Hyde Park 3 Sycom (30 June 2013) - held-for-sale 1 30 June 2012 Distributable earnings R’000 225 845 161 850 225 845 161 850 139 256 98 881 92 566 59 847 88 302 60 623 89 348 57 408 409 472 276 759 78 168 48 400 78 168 48 400 47 753 37 937 37 850 21 752 29 930 12 330 10 135 6 795 125 668 78 814 839 153 565 823 55 826 36 351 53 191 29 072 35 125 6 325 983 295 637 571 78 399 78 399 (24 423) (210 986) Revenue R’000 5 477 (14 049) 824 1 053 122 481 385
  7. 7. Distributable earnings from shopping centres grew by 7,2% (excluding Rosebank Mall) with strong performances from Canal Walk (10,2%) and Hyde Park (10,9%). Distributable earnings from offices in the prior period included a rental guarantee, resulting in a reduction in distributable earnings in the current period. Planned vacancies at Rosebank Mall due to the redevelopment project had an estimated R16 million impact on distributable earnings. The dilution was in line with budget. The dilution will continue for the next 12 months, while the centre remains under construction. Income from listed property securities reduced due to the disposal of the investments in Vunani and Acucap during 2012. The reduction in net interest paid is primarily due to asset sales during 2012 of R524 million. The property cost-to-income ratio improved to 34,4% (31 December 2012: 35,4%), while the total cost-to-income ratio at a fund level improved to 34,6% (31 December 2012: 35,4%). Total arrears at 30 June 2013, comprising normal arrears, legal cases and outstanding tenant deposits, improved to R17,9 million (31 December 2012: R19,8 million) and the total allowance for doubtful debts was R9,0 million (31 December 2012: R10,2 million). Vacancies Retail vacancies increased slightly compared to December 2012, mainly due to increased vacancies at the value centres (Stoneridge and Willowbridge). Demand for retail at the shopping malls continues to be strong with vacancies of less than 1%. Office vacancies reduced from 9,1% to 8,1%. Vacancy profile by sector* Retail Office Total % of total GLA 30 June 2013 2,1 8,1 2,7 31 December 2012 1,7 9,1 2,5 *Excludes Rosebank Mall (under development) 5
  8. 8. AUDITED RESULTS for the six months ended 30 June 2013 PROPERTY PORTFOLIO Value attributable to Hyprop Business segment Canal Walk Super regional Clearwater The Glen Woodlands Boulevard CapeGate Large regional Hyde Park Regional Atterbury Value Mart Willowbridge Stoneridge Somerset Value Mart Value centres Shopping centres Stand-alone offices Development property¹ Held-for-sale² Investment property Listed property securities3 Atterbury Africa Rentable area (m2) 153 531 153 531 86 031 74 348 71 607 97 346 329 332 37 003 37 003 47 745 44 663 48 584 12 386 153 378 673 244 52 206 35 950 30 June 2013 R’000 5 627 200 5 627 200 3 203 000 1 854 094 1 886 000 1 602 000 8 545 094 1 556 000 1 556 000 987 000 585 000 421 200 185 000 2 178 200 17 906 494 749 000 1 187 000 761 400 19 842 494 2 279 253 336 994 22 458 741 761 400 31 December 2012 R’000 5 200 000 5 200 000 2 945 000 1 751 130 1 770 000 1 509 000 7 975 130 1 420 000 1 420 000 952 000 620 000 432 900 170 000 2 174 900 16 770 030 710 000 990 000 130 000 18 600 030 2 282 095 111 109 20 993 234 Value per rentable area 30 June 2013 (R/m2) 45 815 45 815 37 231 33 182 26 338 16 457 27 808 42 051 42 051 20 672 13 098 9 633 14 936 14 507 29 667 14 347 Rosebank Mall - transferred to development property from September 2012 ² Southern Sun Hyde Park Sycom (30 June 2013) - held-for-sale ¹ 3 Investment property Investment property was independently valued by Old Mutual Investment Group South Africa using the discounted cash flow method. Investment property increased in value to R19,8 billion, after a fair value adjustment for the period of R1,2 billion. The increase in valuation of the shopping centre portfolio was driven primarily by income growth and reductions in discount rates and cap rates, supported by strong demand for quality shopping centres. Developments Construction work on the Rosebank Mall redevelopment is progressing well with the completion of the basement parking and the Bath Avenue entrance. The first newly built shops are set to open in the last quarter of 2013. Final completion is scheduled for September 2014. The total capital cost, including a further extension to the Bath Avenue bridge, is R932 million with an anticipated yield of 7%. Lease commitments currently stand at 95% of the lettable area. The store enlargements and relocations at Hyde Park have been substantially completed. The 2 700m² Edgars extension and the enlargement of the Foschini store at The Glen, and the 2 700m² Edgars extension at Canal Walk, are scheduled to begin trading in the second half of 2013. The total cost of these projects is R91 million (Hyprop share: R72,3 million) and are expected to produce an average yield of 11%. Disposal of investment in Sycom and acquisition of Somerset Mall The acquisition of 100% of Somerset Mall from Sycom in exchange for 81,5 million Sycom units remains subject to the transfer of a 50% undivided share in the mall from AECI pension fund to Sycom. This is anticipated to occur in the next few months. 6
  9. 9. The transaction, valued at R2,3 billion, is based on an income for income swap with no dilution in distributable earnings expected for Hyprop. As part of the transaction, Hyprop will dispose of its remaining 2 725 688 Sycom units. In May 2013 Hyprop disposed of its Sycom rights offer nil paid letters for R28 million. Atterbury Africa Hyprop received its first dividend (R1,4 million) from its 37,5% shareholding in Atterbury Africa during the period. Atterbury Africa, jointly controlled by Hyprop and the Atterbury Group, has made significant progress in developing quality shopping centres in the rest of Africa, having secured additional development projects in Accra, Ghana. At 30 June 2013, R337 million (31 December 2012: R111,1 million) of Hyprop’s R750 million initial commitment had been invested. Overview of the Atterbury Africa property portfolio: Property Accra Mall (Accra, Ghana) West Hills Mall (Accra, Ghana) Achimota Land (Accra, Ghana) Waterfalls Project (Lusaka, Zambia) Rentable area (m²) Ownership 19 000 47% 26 500 45% - 75% - 25% Attributable value US ‘000 Comments 35 250 Existing centre, currently fully let, financial results ahead of budget is progressing 42 087 Construction work on new mall October 2014 well and is scheduled for opening in 41 623 Acquisition of land rights concluded. Design finalised and pre-letting commenced 1 374 Landaholding with development rights for retail and hotel NET ASSET VALUE The net asset value per combined unit (“NAV”) at 30 June 2013 was R68,43, representing a 28,5% increase on the NAV of R53,25 at 31 December 2012. The substantial increase in NAV per combined unit was as a result of the elimination of deferred capital gains taxation (together with the fair value adjustment to investment property), following the conversion to a REIT on 1 July 2013. See further detail in this regard under basis of preparation below. Excluding deferred taxation, the NAV at year-end was R68,56 (31 December 2012: R62,59), a 9,5% increase on the prior year, primarily due to an increase in the independent valuation of the investment property portfolio. The closing combined unit price of R78 on 30 June 2013 represents a 13,8% premium to the year-end NAV, excluding deferred taxation. BORROWINGS Net borrowings at 30 June 2013 of R5,1 billion (31 December 2012: R4,9 billion) equate to a gearing ratio of 22,9%, down from 23,1% in 2012. The ratio reduced mainly due to the increase in valuation of the property portfolio. At year-end, interest rates were hedged in respect of 87% (31 December 2012: 82%) of borrowings, at a weighted average rate of 8,1% (31 December 2012: 8,4%). Hyprop increased its debt capital market (“DCM”) issuance in April 2013, with the conversion of R648 million of existing bank debt to DCM funding. This brings total DCM issuance to R1,6 billion, or 31% of total borrowings. DIRECTORATE Independent non-executive chairman Mike Aitken retired, and non-executive directors Marc Wainer and Jabu Mabusa resigned from the board on 27 June 2013. Gavin Tipper replaced Mike Aitken as independent non-executive chairman on the same date. Les Weil, an independent non-executive director and chairman of the audit committee, passed away on 28 June. Lindie Engelbrecht, an independent non-executive director and incumbent audit committee member, replaces Les as chairman of the audit committee. On 28 August 2013, Thabo Mokgatla was appointed to the board of Hyprop as an independent non-executive director. Thabo has also been appointed to the audit committee. He is a Chartered Accountant (SA) and is a director on the boards of a number of listed companies. 7
  10. 10. AUDITED RESULTS for the six months ended 30 JuneJune 2013 for the six months ended 30 2013 PROSPECTS Hyprop’s large, quality assets with strong contractual escalations and operational efficiencies are defensive qualities for a property portfolio in a difficult South African economy. Hyprop will continue to focus on growing its assets with acquisitions of dominant shopping centres, as with Somerset Mall, while looking for yield enhancing expansions of existing centres and further shopping centre developments in the rest of Africa. Taking into account the short-term dilution due to the Rosebank Mall redevelopment, Hyprop expects to show distribution growth of between 6,5% and 8,5% for the year ending 30 June 2014. 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. The forecast has not been reviewed or reported on by the company’s auditors. PAYMENT OF DEBENTURE INTEREST Distribution 52 of 213 cents per combined unit for the six months ended 30 June 2013 will be paid to combined unitholders as follows: September 2013 Last day to trade cum distribution Thursday, 19 Combined units trade ex distribution Friday, 20 Record date Friday, 27 Payment of distribution Monday, 30 Unitholders may not dematerialise or rematerialise their combined units between Friday, 20 September 2013 and Friday, 27 September 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 the preparation of these results are consistent with those applied in the audited financial statements for the prior financial year, except for the adoption of IFRS 10 Consolidated Annual Financial Statements, IFRS 11 Joint Arrangements, IFRS 12 Disclosures of Interests in Other Entities, IFRS 13 Fair Value Measurements and IAS 28 (Revised) Investments in Associates and Joint Ventures. The adoption of these standards did not have a material impact on the group annual financial statements. South African REITs are not subject to capital gains taxation on the disposal of investment property and on the disposal of listed property securities that are constituted as REITs. Accordingly, at 30 June 2013, Hyprop eliminated accumulated deferred capital gains taxation applicable to the investment property portfolio and the investment in Sycom. The deferred capital gains taxation was eliminated through the statement of comprehensive income, and resulted in a material increase in earnings, headline earnings and net asset value per combined unit. Grant Thornton has audited the group annual financial statements. The auditor’s report does not necessarily cover all of the information included in this announcement. Unitholders are therefore advised to obtain a copy of the auditor’s unqualified audit report together with the financial information from the registered office of the company. 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 28 August 2013 8
  11. 11. DIRECTORS: GR Tipper*† (Chairman); PG Prinsloo (CEO); LR Cohen (FD); EG Dube*†; KM Ellerine*; L Engelbrecht*†; MJ Lewin*; 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 Envisage Investor Corporate Relations
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