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HYP - Hyprop Investments Limited - Audited results for the year ended 31
December 2007
Hyprop Investments Limited
(Registration No. 1987/005284/06)
Share Code: HYP
ISIN Code: ZAE00003430
("Hyprop" or "the company")
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2007
Record distribution growth of 20%
Distribution per combined unit 270 cents
Pre-tax NAV per combined unit R49.93 up 26%
Market Capitalisation R7.5 billion up 34%
GROUP INCOME STATEMENT
Audited 31 Audited 31
December December 2006
2007
R000 R000
Revenue 715 866 738 381
Investment property income 670 943 630 285
Straight line rental income accrual 18 915 26 235
Listed property securities income 26 008 81 861
Property expenses (202 945) (199 119)
Net property income 512 921 539 262
Other operating expenses (39 651) (29 120)
Operating income 473 270 510 142
Net interest 3 875 (106 499)
Received 85 573 2 143
Paid (81 698) (108 642)
Net operating income 477 145 403 643
Non-core income 2 196
Change in fair value 1 624 286 1 548 261
Investment property 1 589 475 1 458 212
Straight line rental income accrual (18 915) (26 235)
Listed property securities 53 726 116 284
Profit on disposal 25 624 2 675
Investment property 2 235 731
Listed property securities 23 389 1 944
Amortisation of debenture premium 43 088 35 248
Amortisation of financial guarantee for
associate 1 742
Income before debenture interest 2 174 081 1 989 827
Debenture interest (405 018) (324 831)
Net income before share of income from
associate 1 769 063 1 664 996
Share of income from associate 66 755 37 452
Investment property income 9 070 1 936
Straight line rental income accrual 1 879 406
Change in fair value of investment 55 806 35 110
property
Net income before taxation 1 835 818 1 702 448
Taxation (451 946) (429 344)
Net income after taxation 1 383 872 1 273 104
Attributable to Hyprop combined 1 150 200 1 055 321
unitholders
Minorities 233 672 217 783
1 383 872 1 273 104
Reconciliation - headline earnings and
distributable earnings
Net income after taxation - 1 150 200 1 055 321
attributable to Hyprop combined
unitholders
Headline earnings adjustments (566 670) (547 981)
Change in fair value of investment (980 585) (885 135)
property (net of deferred taxation and
minority interests)
Straight line rental income accrual
(net of deferred taxation and minority 11 132 13 054
interests)
Profit on disposal of investment (2 235) (731)
property
Debenture interest 405 018 324 831
Headline earnings 583 530 507 340
Distributable earnings adjustments (179 437) (183 241)
Change in fair value of listed property
securities (net of deferred taxation) (45 936) (99 423)
Profit on disposal of listed property
securities (23 389)
Amortisation of debenture premium (43 088) (35 248)
Amortisation of financial guarantee for
associate (1 742)
Straight line rental income accrual
(net of deferred taxation and minority (11 132) (13 054)
interests)
Deferred taxation 3 535
Share of income from associate (57 685) (35 516)
Distributable earnings 404 093 324 099
Total combined units in issue 166 113 169 144 369 188
Weighted average combined units in
issue - for earnings and headline 149 805 183 144 074 873
earnings
Weighted average combined units in
issue - for distributable earnings 149 805 183 144 369 188
Cents Cents
Earnings per combined unit 1 038.2 957.9
Headline earnings per combined unit 389.5 352.1
Distributable earnings per combined 269.7 224.5
unit
Distribution details Interest on Interest on
debentures debentures
(cents per (cents per
unit) unit)
Total distribution for the year ended
31 December 270.00 225.00
Distribution for the six months ended
31 December 140.00 115.00
Distribution for the six months ended
30 June 130.00 110.00
GROUP BALANCE SHEET
Audited 31 Audited 31
December December
2007 2006
R000 R000
Assets
Non-current assets 9 637 870 7 766 336
Investment property 8 126 411 6 467 537
Building appurtenances and tenant
installations 24 334 21 160
Investment in associate 198 186 142 620
Listed property securities 1 288 939 1 135 019
Current assets 655 961 86 166
Short term investments 500 000
Receivables 67 639 58 110
Cash and cash equivalents 88 322 28 056
Non-current assets held-for-sale
Investment property 188 390 38 060
Total assets 10 482 221 7 890 562
Equity and liabilities
Equity capital and reserves 4 832 041 3 504 948
Share capital and reserves 3 895 309 2 744 892
Minority interests 936 732 760 056
Non-current liabilities 5 304 127 4 119 534
Debentures and debenture premium 2 741 893 1 771 757
Long-term loans 900 000 1 135 748
Financial guarantee for associate 5 806 7 548
Deferred taxation 1 656 428 1 204 481
Current liabilities 346 053 266 080
Payables 113 495 100 055
Combined unitholders for distribution 232 558 166 025
Total equity and liabilities 10 482 221 7 890 562
Net asset value per combined unit (R) 39.96 31.29
Net asset value per combined unit -
excluding deferred taxation liability (R) 49.93 39.63
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY
Audited 31 December Audited 31 December
2007 2006
R000 R000
Balance at beginning of
year 3 504 948 2 282 870
Issue of shares 217 13
Net income for the year 1 383 872 1 273 104
Attributable to (56 996) (51 039)
minorities
Balance at end of year 4 832 041 3 504 948
ABRIDGED GROUP CASH FLOW STATEMENT
Audited 31 Audited 31
December December
2007 2006
R000 R000
Cash flows from operating activities 87 414 40 696
Cash generated from operations 467 830 498 782
Interest received 85 573 2 143
Interest paid (81 698) (108 642)
Distribution to Hyprop combined unitholders (338 484) (300 512)
Distribution to minorities (56 996) (51 039)
Income from associate 11 189
Taxation (36)
Cash flows from investing activities 208 600 (46 997)
Cash flows from financing activities (235 748) 9 837
Net increase in cash and cash equivalents 60 266 3 536
Cash and cash equivalents at the beginning
of the year 28 056 24 520
Cash and cash equivalents at the end of the
year 88 322 28 056
INTRODUCTION
Hyprop is a property loan stock company which owns premium quality regional and
super regional shopping centres contributing 84% of total income.
DISTRIBUTIONS
Hyprop continued to achieve excellent financial results. The total distribution
per combined unit of 270 cents for the year ended 31 December 2007 exceeds that
of the previous year by a record 20%. The final distribution of 140 cents
reflects growth of 21.7% relative to the comparative period in 2006.
FINANCIAL RESULTS
31 December 31 December 31 December 31 December
2007 2007 2007 2006
Revenue Net Distributab Distributab
operating le earnings le earnings
income
Business segment (R000) (R000) (R000) (R000)
Canal Walk 319 691 224 919 179 294 156 107
The Glen 107 096 78 743 59 176 51 843
Hyde Park 96 994 66 731 66 731 58 639
The Mall of
Rosebank 79 697 52 782 52 782 47 218
Southcoast Mall
15 891 10 953 10 953 9 665
Shopping centres
619 369 434 128 368 936 323 472
Offices 51 574 33 870 33 870 50 731
Investment
property 670 943 467 998 402 806 374 203
Listed property
securities
26 008 26 008 26 008 81 861
Straight line
rental income
accrual
18 915 18 915
715 866 512 921 428 814 456 064
Fund management
expenses
(39 651) (39 651) (29 120)
Net interest 3 875 3 664 (106 725)
Non-core income* 2 196
Profit on disposal
of listed property
securities 1 944
Share of income
from associate* 9 070 1 936
715 866 477 145 404 093 324 099
*Income from Hyprop's joint transformation initiative, Vunani Properties
Investment Fund (Proprietary) Limited (VPIF).
Earnings from shopping centres grew by an impressive 14%, benefitting from
rental increases, low vacancies, high yielding expansions and expense control.
Earnings from offices reduced mainly as a result of the disposal of five office
buildings to VPIF in October 2006.
Net income from investment property grew 12.5% on a like-for-like basis.
Distribution growth was further enhanced by the disposal of Hyprop's investment
in SA Retail Properties Limited ("SA Retail") and Hyprop's acquisition of a
31.7% interest in Sycom Property Fund ("Sycom").
In May 2007, Hyprop concluded the disposal of 108 097 051 linked units in SA
Retail for R1.135 billion plus interest of R36.7 million. A portion of the
proceeds was utilised to repay floating debt with the balance invested in short
term deposits. As a consequence, interest paid reduced and there was a
significant increase in interest received as compared to 2006.
In October 2007, Hyprop acquired 54 204 750 Sycom units, funded by the issue of
21 743 981 Hyprop combined units on a yield-enhancing basis. The price paid
included the right to participate in Sycom distributions for the three months
ended 31 December 2007. In addition, Hyprop acquired 7 466 378 Sycom units in
exchange for 5 577 924 Resilient Property Fund linked units during the year. A
further 3 295 568 Sycom units were acquired for cash.
At year-end, Hyprop's holding of 64 966 696 Sycom units was valued at R1.29
billion. Subsequent to year-end, Hyprop acquired an additional 6 161 505 Sycom
units for cash, increasing Hyprop's interest in Sycom to 34.7%.
VALUATIONS
Business Rentable Total value Value Value per
segment area attributable m2
to Hyprop
Dec 2007 Dec 2006
(m2) (R000) (R000) (R000) R
Canal Walk 135 402 4 150 000 3 250 000 3 320 000 30 649
The Glen 54 030 1 370 000 1 117 000 1 029 555 25 356
Hyde Park 37 011 1 140 000 920 000 1 140 000 30 802
The Mall of
Rosebank 33 774 820 000 700 000 820 000 24 279
Southcoast
Mall 28 174 303 700 274 000 151 850 10 779
Shopping
centres 288 391 7 783 700 6 261 000 6 461 405 26 990
Offices 38 885 436 390 343 360 436 390 11 223
Investment
property 327 276 8 220 090 6 604 360 6 897 795 25 117
Development
property -
Stoneridge 269 814 57 832 269 814
Listed
property
securities 1 288 939 1 135 019 1 288 939
Investment
in
associate 198 186 142 620 198 186
(VPIF)
327 726 9 977 029 7 939 831 8 654 734
Investment property has been independently valued by Old Mutual Properties
(Proprietary) Limited using the discounted cash flow method. Development
property has been valued at cost.
The board is satisfied that the value of investment property is fair and
reasonable and representative of Hyprop's high quality assets.
Listed property securities in 2007 reflects Hyprop's interest in Sycom (2006: SA
Retail).
The growth in value of investment property increased net asset value per
combined unit by 28% to R39.96. Excluding deferred taxation, net asset value per
combined unit of R49.93 is 11% higher than the closing combined unit price of
R45.00 on the JSE at 31 December 2007.
NET BORROWINGS
Net borrowings of R312 million equate to a gearing ratio of 3.6%. Long-term
loans of R900 million, at an average interest rate of 9.54% (2006: 9.8%), have
been fixed for periods of between two and seven years.
In December 2007, Hyprop invested R500 million in credit linked notes with The
Standard Bank of South Africa Limited on a short term basis.
DEVELOPMENTS
Projects currently in progress and planned:
Development Size Cost Budgeted Anticipated
(Hyprop initial completion
share) yield date
(R000) %
Stoneridge Shopping
Centre 50 000m2 508 000 8.3 Oct 08
Additional retail at
Canal Walk 16 000m2 200 000 9.2 May 09
Hotel at Hyde Park 132 rooms 176 000 11.4 Jul 09
Additional retail at
The Glen 19 000m2 277 000 10.9 Nov 09
1 161 000 9.5
Developments will be funded by cash resources and debt.
DISPOSALS
Morningview Office Park and Atholl Ridge were sold for R56 million and R135
million respectively. Transfer is expected during the first half of 2008.
VACANCIES
Vacancies at year-end were 0.75% (2006: 1.1%) of rentable area.
PROSPECTS
With quality assets and low gearing, Hyprop's business is financially sound. The
company is well positioned to respond to opportunities in the current volatile
market and uncertain economic conditions.
The planned developments, anticipated to yield favourable returns, will
contribute to long-term income growth within the portfolio.
Retail space in Hyprop's shopping centres continues to be in demand and any
reduction in turnover levels due to the anticipated weakness in consumer spend
in 2008 is unlikely to materially impact on income.
The board anticipates, subject to market conditions remaining stable, an
increase in distributions of between 12% and 14% for the year ending 31 December
2008 compared to 2007. This forecast has not been reviewed or reported on by
Hyprop's auditors.
PAYMENT OF DEBENTURE INTEREST
Distribution 40 of 140 cents per combined unit for the six months ended 31
December 2007 will be paid to combined unitholders as follows:
Last date to trade cum distribution Wednesday 19 March 2008
Date combined units will trade ex distributions Thursday 20 March 2008
Record date Friday 28 March 2008
Payment date Monday 31 March 2008
Unitholders may not dematerialise or rematerialise their combined units between
Thursday, 20 March 2008 and Friday, 28 March 2008.
BASIS OF PREPARATION AND AUDIT OPINION
These consolidated annual financial statements have been prepared in accordance
with International Financial Reporting Standards ("IFRS"), including IAS 34 and
the requirements of the South African Companies Act 1973. The accounting
policies are consistent with those applied in the most recent audited financial
statements. Grant Thornton has audited the financial information set out in
these results and their audit report is available for inspection at the
company's registered office.
On behalf of the board.
MS Aitken Chairman
PG Prinsloo CEO
29 February 2008
REGISTERED OFFICE
3rd Floor, Hyde Park Shopping Centre, Jan Smuts Avenue, Sandton, 2196
(PO Box 41257 Craighall 2024)
TRANSFER SECRETARIES
Computershare Investor Services 2004 (Proprietary) Limited,
Ground Floor 70 Marshall Street, Johannesburg (PO Box 61051, Marshalltown 2107)
ASSET MANAGER
Madison Property Fund Managers Limited
DIRECTORS
MS Aitken*+ (Chairman); PG Prinsloo (CEO); LR Cohen (FD); WE Cesman* (alt JA
Finn); EG Dube*; JR McAlpine*+; LI Weil*; S Shaw-Taylor*; MY Sibisi*+; M Wainer*
(alt MN Flax)
(* Non-executive + Independent)
COMPANY SECRETARY
Probity Business Services (Proprietary) Limited
INVESTOR RELATIONS
Envisage Investor & Corporate Relations
SPONSOR
Java Capital (Proprietary) Limited
Date: 03/03/2008 09:10:01 Produced by the JSE SENS Department.
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