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HYP
HYP
HYP - Hyprop - Reviewed Interim Results For The Six Months Ended 30 June 2008
and dividend declaration
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")
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2008
- 15.4% increase in distribution per combined unit
- Distribution per combined unit 150 cents
- Pre-tax NAV per combined unit R45.73
- R1.16 billion development and expansion programme
GROUP INCOME STATEMENT
Reviewed Pro-forma Reviewed Audited
30 June unaudited 30 June 31 December
2008 30 June 2007 2007
2007
R000 R000 R000 R000
Revenue 367 823 282 022 326 387 715 866
Investment property income 311 343 278 840 322 042 670 943
Straight-line rental 6 714 2 344 3 507 18 915
income accrual
Listed property 49 766 838 838 26 008
securities income
Property expenses (91 584) (82 373) (93 931) (202 945)
Net property income 276 239 199 649 232 456 512 921
Other operating expenses (20 268) (19 168) (19 168) (39 651)
Operating income 255 971 180 481 213 288 473 270
Net interest (3 791) 3 038 3 126 3 875
Received 25 688 51 110 51 198 85 573
Paid (29 479) (48 072) (48 072) (81 698)
Net operating income 252 180 183 519 216 414 477 145
Non-core income 1 136 1 081 1 081 2 196
Change in fair value (479 063) 681 010 800 992 1 624 286
Investment property 678 812 799 957 1 589 475
Straight-line rental (6 714) (2 344) (3 507) (18 915)
income accrual
Listed property (472 349) 4 542 4 542 53 726
securities
Profit/(loss) on disposal 9 131 (657) (657) 25 624
Investment property 9 131 2 235
Listed property (657) (657) 23 389
securities
Amortisation of debenture 42 043 20 066 20 066 43 088
premium
Amortisation of financial 871 1 742
guarantee for associate
(Loss)/income before (173 692) 885 019 1 037 896 2 174 081
debenture interest
Debenture interest (249 170) (187 680) (187 680) (405 018)
Net (loss)/income before (422 862) 697 339 850 216 1 769 063
share of income from
associate
Share of income from 3 370 5 331 5 331 66 755
associate
Investment property 3 862 5 331 5 331 9 070
income
Fair value adjustment and (492) 57 685
straight-
line rental income
accrual
Net (loss)/income before (419 492) 702 670 855 547 1 835 818
taxation
Taxation 129 620 (180 786) (214 591) (451 946)
Net (loss)/income after (289 872) 521 884 640 956 1 383 872
taxation
Attributable to -
Hyprop combined (289 872) 521 884 521 884 1 150 200
unitholders
Minorities 119 072 233 672
(289 872) 521 884 640 956 1 383 872
Reconciliation - headline (289 872) 521 884 521 884 1 150 200
earnings and distributable
earnings
Net (loss)/income after
taxation - attributable to
Hyprop combined
unitholders
Headline earnings 244 873 (301 190) (301 190) (566 670)
adjustments
Change in fair value of (490 534) (490 534) (980 585)
investment
property (net of deferred
taxation
and minority interests)
Straight-line rental 4 834 1 664 1 664 11 132
income accrual
(net of deferred taxation
and
minority interests)
Profit on disposal of (9 131) (2 235)
investment
property
Debenture interest 249 170 187 680 187 680 405 018
Headline (loss)/earnings (44 999) 220 694 220 694 583 530
Distributable earnings 295 463 (33 105) (33 105) (179 437)
adjustments
Change in fair value of 406 220 (3 883) (3 883) (45 936)
listed
property securities (net
of deferred
taxation)
(Loss)/profit on disposal 657 657 (23 389)
of listed
property securities
Deferred taxation (63 491) (8 149) (8 149) 3 535
Amortisation of debenture (42 053) (20 066) (20 066) (43 088)
premium
Amortisation of financial (871) (1 742)
guarantee
for associate
Straight-line rental (4 834) (1 664) (1 664) (11 132)
income accrual
(net of deferred taxation
and
minority interests)
Share of income from 492 (57 685)
associate
Distributable earnings 250 464 187 589 187 589 404 093
Total combined units in 166 113 144 369 188 144 369 166 113 169
issue 169 188
Weighted average combined 166 113 144 369 188 144 369 149 805 183
units in issue 169 188
(Loss)/earnings per (24.5) 491.5 491.5 1 038.2
combined unit
Headline (loss)/earnings (27.1) 152.9 152.9 389.5
per combined unit
Distributable earnings per 150.8 129.9 129.9 269.7
combined unit
Distribution details 270.00
Total distribution for the
year ended 31 December
Distribution for the six 140.00
months ended 31 December
Distribution for the six 150.00 130.00 130.00 130.00
months ended 30 June
GROUP BALANCE SHEET
Reviewed Pro-forma Reviewed Audited
30 June unaudited 30 June 31 December
2008 30 June 2007 2007
2007
R000 R000 R000 R000
Assets
Non-current assets 8 374 706 6 577 783 7 631 245 9 637 870
Investment property 7 153 112 6 301 484 7 353 714 8 126 411
Building appurtenances and 20 932 18 702 19 934 24 334
tenant
installations
Investment in associate 198 794 140 913 140 913 198 186
Listed property securities 1 001 868 116 684 116 684 1 288 939
Current assets 457 119 817 012 829 093 655 961
Short term investments 500 000
Receivables 53 152 30 169 38 721 67 639
Cash and cash equivalents 403 967 786 843 790 372 88 322
Non-current assets held-for-
sale
Investment property 40 402 40 402 188 390
Total assets 8 831 825 7 435 197 8 500 740 10 482 221
Equity and liabilities
Equity capital and reserves 3 605 437 3 266 776 4 118 683 4 832 041
Share capital and reserves 3 605 437 3 266 776 3 266 776 3 895 309
Minority interests 851 907 936 732
Non-current liabilities 4 895 818 3 890 136 4 092 059 5 304 127
Debentures and debenture 2 699 840 1 751 692 1 751 692 2 741 893
premium
Long-term loans 900 000 916 005 916 005 900 000
Financial guarantee for 4 936 6 677 6 677 5 806
associate
Deferred taxation 1 291 042 1 215 762 1 417 685 1 656 428
Current liabilities 330 570 278 285 289 998 346 053
Payables 81 400 89 217 100 930 113 495
Taxation 1 388 1 388
Combined unitholders for 249 170 187 680 187 680 232 558
distribution
Total equity and liabilities 8 831 825 7 435 197 8 500 740 10 482 221
Net asset value per combined 37.96 34.76 34.76 39.96
unit (R)
Net asset value per combined 45.73 43.18 44.58 49.93
unit
excluding deferred taxation
liability
(R)
ABRIDGED GROUP STATEMENT OF CHANGES IN EQUITY
Reviewed Pro-forma Reviewed Audited
30 June unaudited 30 June 31 December
2008 30 June 2007 2007
2007
R000 R000 R000 R000
Balance at beginning of 4 832 041 3 504 948 3 504 948 3 504 948
period
De-consolidation of minority (936 732) (760 056)
interests
Issue of shares 217
Net income for the period (289 872) 521 884 640 956 1 383 872
Attributable to minorities (27 221) (56 996)
Balance at end of period 3 605 437 3 266 776 4 118 683 4 832 041
ABRIDGED GROUP CASH FLOW STATEMENT
Reviewed Pro-forma Reviewed Audited
30 June unaudited 30 June 31 December
2008 30 June 2007 2007
2007
R000 R000 R000 R000
Cash flows from operating 3 290 39 319 43 555 87 414
activities
Cash generated from 239 639 201 225 232 594 467 830
operations
Interest received 25 688 52 191 52 279 85 573
Interest paid (29 479) (48 072) (48 072) (81 698)
Distribution to Hyprop (232 558) (166 025) (166 025) (338 484)
combined
unitholders
Distribution to minorities (27 221) (56 996)
Income from associate 11 189
Cash flows from investing 317 314 943 023 938 503 208 600
activities
Cash flows from financing (219 742) (219 742) (235 748)
activities
Net increase in cash and cash 320 604 762 600 762 316 60 266
equivalents
Cash and cash equivalents at 88 322 28 056 28 056 28 056
the beginning of the period
Deconsolidation of minority (4 959) (3 813)
interest in cash and cash
equivalents
Cash and cash equivalents at 403 967 786 843 790 372 88 322
the end of the period
FINANCIAL RESULTS
Hyprop`s shopping centres achieved a 14.2% increase in earnings, despite a
weakened economic and trading environment. This increase is as a result of
rental growth, expense control and successful expansions. Net income from
investment property increased 14.4% on a like-for-like basis. Earnings were
further enhanced by Hyprop`s investment in Sycom Property Fund ("Sycom").
The distribution of 150 cents per combined unit for the six months ended June
2008 exceeds that of the comparable period by 15.4%.
A reduction in the fair value of the investment in Sycom reduced net asset
value (NAV) per combined unit by 5% to R37.96 from R39.96 at 31 December 2007.
SEGMENTAL ANALYSIS
30 June 2008 30 June 2007
Revenue Net operating Distributable Distributable
income earnings earnings
Business segment R000 R000 R000 R000
Canal Walk 141 047 100 108 100 108 86 636
The Glen 42 904 32 086 32 086 29 012
Hyde Park 50 685 34 570 34 570 31 115
The Mall of 42 295 29 334 29 334 25 195
Rosebank
Southcoast Mall 8 948 6 359 6 359 5 317
Shopping centres 285 879 202 457 202 457 177 275
Offices 25 464 17 302 17 302 19 194
Investment 311 343 219 759 219 759 196 469
property
Listed property 49 766 49 766 49 766 838
securities
Straight-line 6 714 6 714
rental income
accrual
367 823 276 239 269 525 197 307
Fund management (20 268) (20 268) (19 168)
expenses
Net interest (3 791) (3 791) 3 038
(paid)/received
Non-core income 1 136 1 081
Share of income 3 862 5 331
from associate
367 823 252 180 250 464 187 589
INVESTMENT PROPERTY PORTFOLIO
Valuations
The valuation of Hyprop`s property portfolio by Old Mutual Properties
(Proprietary) Limited at 30 June 2008 reflected a marginal increase in value
compared to the valuation at 31 December 2007. The board has adopted a
conservative approach and not brought the increase in value to account.
Performance
Hyprop continues to benefit from strong demand for retail space at its
shopping centres. New leases totaling 26 000m? at an average rental growth of
16% and contractual annual escalations of 9.75% were concluded during the
period.
Total vacancies at 30 June 2008 of 1.2% (2007: 0.75%) increased mainly as a
result of office vacancies at Canal Walk.
Hyprop`s retail portfolio is almost fully let with vacancies of 0.71% at 30
June 2008.
Disposals
In accordance with Hyprop`s strategy to dispose of non-core assets, the
transfers of Morningview and Athol Ridge Office Parks, held-for-sale at 31
December 2007, were registered in April and June 2008 respectively. The
proceeds of R198 million will partially fund Hyprop`s development and
expansion programme.
Developments
To date, Hyprop has incurred R457 million of its R1.16 billion development and
expansion programme.
Stoneridge Centre, a R571 million lifestyle centre of 50 000 m? in Greenstone
Park, Modderfontein, will open on 24 September 2008.
Other major projects include retail extensions to The Glen Shopping Centre and
Canal Walk of 19 000 m? and 16 000 m?, respectively, as well as a 132 room
four-star Southern Sun hotel at Hyde Park Shopping Centre, all of which are
planned for completion in 2009.
INVESTMENT IN SYCOM
During the period Hyprop acquired an additional 10 361 695 Sycom units for
cash. At 30 June 2008, Hyprop`s 37% interest in Sycom, comprising 75 328 391
Sycom units, was valued at R1 billion.
NET BORROWINGS
Long-term loans of R900 million have been fixed for periods of between two and
seven years at an average rate of 9.54% (2007:9.54%).
Cash on deposit at 30 June 2008 of R404 million will be utilised for the
interim distribution and the balance for Hyprop`s development and expansion
programme.
Current net borrowings of R496 million equate to a gearing ratio of 6%.
PROSPECTS
The board remains confident that Hyprop`s prime retail focus will continue to
contribute to positive distribution growth, notwithstanding current pressures
on general consumer spend.
While the current expansion programme will affect growth in earnings in the
short term, the overall enhancement to the property portfolio will benefit
growth and distributions in the medium to long term.
The board anticipates that, barring unforeseen changes in market conditions,
Hyprop`s distribution for the six months ending 31 December 2008 will be
between 152 cents and 158 cents per combined unit. This forecast has not been
reviewed or reported on by Hyprop`s auditors.
PAYMENT OF DEBENTURE INTEREST
Distribution 41 of 150 cents per combined unit for the six months ended 30
June 2008 will be paid to combined unitholders as follows:
2008
Last day to trade cum distribution Friday, 12 September
Date combined units will trade ex Monday, 15 September
distributions
Record date Friday, 19 September
Payment date Monday, 22 September
Unitholders may not dematerialise or rematerialise their combined units
between Monday, 15 September 2008 and Friday, 19 September 2008, both days
inclusive.
BASIS OF PREPARATION
This interim report has been prepared in accordance with International
Financial Reporting Standards and International Accounting Standard IAS 34
`Interim Financial Reporting`.
The accounting policies applied are consistent with those applied in the most
recent audited financial statements.
Previously Hyprop`s interests in Canal Walk and The Glen were consolidated in
accordance with IAS 27 `Consolidated and separate financial statements` on the
basis that the co-ownership agreements afforded Hyprop control of the
financial and operating policies of these shopping centres.
In terms of the co-ownership agreements which govern Canal Walk and The Glen,
material capital expenditure requires mutual consent of the co-owners. In view
of the recent significant increases in development costs, most of the capital
expenditure now being undertaken is material and accordingly these centres are
no longer considered to be controlled solely by Hyprop.
Hyprop`s interests in Canal Walk and The Glen have therefore been
proportionately consolidated and reflect Hyprop`s share of assets,
liabilities, income and expenditure.
In order to facilitate comparison, pro-forma figures for the comparable period
on the basis of proportionate consolidation have also been presented.
REVIEW OPINION
The company`s auditors, Grant Thornton, have reviewed the financial
information set out in this interim report. Their unqualified review report is
available for inspection at the company`s registered office.
On behalf of the board.
MS Aitken Chairman
PG Prinsloo CEO
20 August 2008
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)
REGISTERED OFFICE; 3rd Floor, Hyde Park Shopping Centre, Jan Smuts Avenue,
Sandton, 2196 (PO Box 41257 Craighall 2024)
TRANSFER SECRETARIES: Computershare Investor Services (Proprietary) Limited,
Ground Floor 70 Marshall Street, Johannesburg (PO Box 61051, Marshalltown
2107)
ASSET MANAGER: Madison Property Fund Managers Limited
COMPANY SECRETARY: Probity Business Services (Proprietary) Limited
SPONSOR: Java Capital (Proprietary) Limited
INVESTOR RELATIONS: Envisage Investor & Corporate Relations
Date: 21/08/2008 08:30:01 Produced by the JSE SENS Department.
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