| Thu 24 Feb 2005, 11:29 | | Results For The Year |
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Hyprop Investments Limited - Audited Results For The Year Ended 31 December 2004
Hyprop Investments Limited
(Incorporated in the Republic of South Africa)
(Registration No. 1987/005284/06)
Share Code: HYP
ISIN Code: ZAE00003430
(`Hyprop`)
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2004
Highlights
Distribution per combined unit of 163 cents up 16,4%
Distribution per combined unit exceeded forecast of 150,50 cents by 8,3%
Net asset value per combined unit up 53,2% to R17,91
Total assets up 34,7% to R3,8 billion
55,5% total return for 2004
Valuation of investment properties increased by R924 million
Excellent performance by Canal Walk
GROUP INCOME STATEMENT
Audited Audited
12 months 12 months
ended ended
31 Dec 31 Dec
2004 2003
R000 R000
Revenue 517 545 316 691
Property and other operating expenses (199 278) (121 440)
Net property income 318 267 195 251
Net finance charges (101 822) (43 522)
Received 3 141 1 767
Paid (104 963) (45 289)
Net operating income 216 445 151 729
Change in fair value 925 855 118 753
Investment properties 923 955 116 684
Financial assets 1 900 2 069
Net profit on disposal 11 685 6 814
Investment properties 10 994 6 814
Financial assets 691 -
Income before debenture interest
and taxation 1 153 985 277 296
Debenture interest (168 659) (124 364)
Net income before taxation 985 326 152 932
Taxation (133 896) (21 160)
Current taxation (264) -
Capital gains taxation attributable
to minorities (4 157) -
Secondary tax on companies (44) (31)
Deferred taxation (129 431) (21 129)
Net income after taxation 851 430 131 772
Minority interest (177 907) (64 149)
Loss from associates - (223)
Net profit for the year 673 523 67 400
EARNINGS AND HEADLINE EARNINGS
Earnings per combined unit (cents) 819,1 215,4
Headline earnings per combined unit (cents) 163,8 142,4
Reconciliation - headline earnings
Net profit for the year 673 523 67 400
Change in fair value of investment
properties (923 955) (116 684)
Deferred capital gains taxation 133 024 20 467
Fair value adjustment attributable to
minority shareholders (net
of deferred taxation) 128 841 37 687
Profit on disposal of investment properties (10 994) (6 450)
Profit on disposal of financial assets
(net of CGT) (673) -
Debenture interest paid 168 659 124 364
Headline earnings - combined units 168 425 126 784
Total combined units in issue 116 630 923 89 009 179
Weighted average combined units in issue 102 818 269 89 009 179
Total Interest Dividends
distribution on on
per combined deben- ordinary
unit tures shares
Distribution details (cents per unit) (cents per unit) (cents per unit)
Total distribution for the year
31 December 2004 163,000 162,670 0,330
Distribution 34 for the five months ended
31 December 2004 74,000 73,850 0,150
Distribution 33 for the seven months ended
31 July 2004 89,000 88,820 0,180
Total distribution for the year
31 December 2003 140,000 139,720 0,280
Distribution 32 for the six months ended
31 December 2003 74,900 74,750 0,150
Distribution 31 for the six months ended
30 June 2003 65,100 64,970 0,130
GROUP BALANCE SHEET
Audited at Audited at
31 Dec 31 Dec
2004 2003
R000 R000
Assets
Non-current assets
Investment properties 3 681 868 2 715 680
Current assets 118 451 105 298
Receivables 59 534 70 336
Financial assets 46 398 25 939
Cash and cash equivalents 12 519 9 023
Total assets 3 800 319 2 820 978
Equity and liabilities
Equity capital and reserves 1 480 608 760 518
Share capital and reserves 1 001 596 328 140
Minority interest 479 012 432 378
Non-current liabilities 2 173 599 1 948 412
Debenture and debenture premium 1 087 360 712 706
Long-term loans 929 027 1 207 990
Deferred taxation 157 212 27 716
Current liabilities 146 112 112 048
Payables 59 760 45 348
Taxation 45 32
Combined unitholders for distribution 86 307 66 668
Total equity and liabilities 3 800 319 2 820 978
Net asset value per combined unit (R) 17,91 11,69
GROUP STATEMENT OF CHANGES IN EQUITY
Non-dis-
Share tributable Retained
capital reserve income Total
Group R000 R000 R000 R000
Balance at 1 January 2003 648 254 651 5 447 260 746
Issue of ordinary share
capital 243 243
Net profit for the year 67 400 67 400
Net transfer to non-
distributable reserve 65 491 (65 491) -
Dividends (249) (249)
Balance at 31 December 2003 891 320 142 7 107 328 140
Issue of ordinary share
capital 275 275
Net profit for the year 673 523 673 523
Net transfer to non-
distributable reserve 675 947 (675 947) -
Dividends (342) (342)
Balance at 31 December 2004 1 166 996 089 4 341 1 001 596
ABRIDGED GROUP CASH FLOW STATEMENT
Audited Audited
12 months 12 months
ended ended
31 Dec 31 Dec
2004 2003
R000 R000
Cash flows from operating activities 87 189 (2 586)
Cash generated from operations 392 158 167 041
Interest income 3 141 1 767
Finance charges (104 963) (45 288)
Distributions to unitholders (149 361) (100 848)
Cash distributed to minority shareholders (53 491) (25 247)
Taxation (295) (11)
Cash flows from investing activities (179 660) (1 271 328)
Cash flows from financing activities 95 967 1 279 691
Net increase in cash and cash equivalents 3 496 5 777
Cash and cash equivalents at the beginning
of the year 9 023 3 246
Cash and cash equivalents at the end of
the year 12 519 9 023
COMMENTS
INTRODUCTION
Hyprop achieved exceptional distribution growth of 16,4% for the year ended 31
December 2004 (`the year`), exceeding the forecast of 150,50 cents per combined
unit by 8,3%. Hyprop`s premium regional shopping centres contributed 80% of the
group`s total income.
Canal Walk Shopping Centre (`Canal Walk`), the group`s flagship super-regional
shopping centre in the Western Cape purchased in October 2003, yielded a net
return on cost of 12,4% for the year.
Hyprop further benefited from the expansion of a number of its shopping centres,
low vacancies, limited tenant replacements and strict expense control.
FINANCIAL RESULTS
Headline earnings for the year increased by 15,0% to 163,80 cents per combined
unit, exceeding the forecast of 150,50 cents and continuing an uninterrupted 11-
year growth in earnings.
Turnover and net property rental income both increased by 63% through portfolio
expansion and exceptional trading performances from Hyprop`s shopping centres.
Combined unitholder funds increased by 101% to R2,09 billion arising from the
issue of 27 621 744 combined units and a revaluation surplus of R924 million.
Net asset value increased by 53,2% to R17,91 per combined unit.
The reduction in the debt-to-open market value ratio from 51% to 28% highlights
Hyprop`s solid financial position.
DISTRIBUTION
Hyprop paid an interim distribution of 89,00 cents per combined unit for the
seven months to 31 July 2004 (77,00 cents for six months to 30 June 2004 and
12,00 cents for July 2004).
The board has approved a final distribution of 74,00 cents per combined unit for
the five months to 31 December 2004.
The total distribution for the year of 163,00 (2003: 140,00) cents per combined
unit equates to 16,4% growth, exceeding the forecast of 150,50 cents.
ACQUISITIONS
Hyprop increased its interest in The Glen Shopping Centre (`The Glen`) to 75,15%
by acquiring an additional 25,05% for a consideration of R112,80 million,
effective from 1 October 2004. The initial yield on the acquisition is expected
to be 10,4%.
DEVELOPMENTS
Following its strategy of strengthening and expanding its retail portfolio,
Hyprop`s developments during the year included:
The Glen
The first phase of The Glen`s R92 million expansion was completed in November
2004, on time and on budget. Retailers in the expanded centre recorded
outstanding trading results during December 2004.
On final completion, expected to be in June 2005, The Glen will provide 51 800
m2 of retail space mainly tenanted by national retailers. Hyprop`s additional
investment of R69,14 million is expected to yield a 13,0% return.
Southcoast Mall
In November 2004 Hyprop acquired a 50% undivided share in the development of a
27 000m2 shopping centre on KwaZulu-Natal`s south coast. The centre, to be
anchored by Checkers, Game, House and Home and Mica, is scheduled for opening in
November 2005. Hyprop`s investment of R96 million is expected to yield an
initial 11,5% return.
DISPOSALS
Offices
Hyprop disposed of 12 commercial properties aggregating 20 000 m2 of office
space to various parties, for a total consideration of R78,6 million, in line
with its strategy of reducing its investment in non-core commercial properties.
The largest single sale comprised 10 office buildings sold to Freestone Property
Holdings Limited (`Freestone`) for an aggregate consideration of R57 million.
The consideration will be settled in part by cash of R28,50 million and the
balance by the issue of 6 705 882 Freestone-linked units at R4,25 per unit. The
transaction is effective from 31 December 2004 and transfer is expected to be
completed by the end of March 2005.
Prima Property Trust (`Prima`) units
During the year Hyprop reduced its investment of 25 861 111 units in Prima by
disposing of 14 682 095 Prima units, at an average price of 98 cents per unit.
SEGMENTAL ANALYSIS
The segmental spread of the property portfolio is as follows:
Business Value Net
Segment Rentable Total attributable property
area value to Hyprop income
(m2) (R000) (R000) (R000)
Canal Walk 131 320 1 800 000 1 440 000 143 665
The Glen 51 800 598 620 449 860 46 059
Hyde Park 37 121 516 710 516 710 47 968
The Mall
of Rosebank 33 774 398 000 398 000 36 963
Southcoast Mall * 27 000 11 681 11 681 -
Retail 281 015 3 325 011 2 816 251 274 655
Offices 72 484 354 000 354 000 58 778
353 499 3 679 011 3 170 251 333 433
Investments - 2 857 1 819 (15 166)
353 499 3 681 868 3 172 070 318 267
*Valued at cost as the centre is currently under construction
The portfolio was independently valued at year-end. The gross value increased
by 40%, largely due to strong income growth and higher occupancy in the retail
portfolio supported by a successful acquisition and expansion strategy.
Specifically the expansion of Hyde Park and an increased share in The Glen`s
expansion contributed to the growth.
Shopping centres constitute 89% in value of Hyprop`s aggregate property
investments, in line with its strategy of investing in regional shopping
centres. Hyprop`s revaluation surplus for the year of R924 million increased its
property investments to R3,7 billion.
LETTING ACTIVITIES
Letting activities for the year by rentable area were as follows:
Business segment Activities for the year ended 31 December 2004
New Tenants Area
Renewals lettings vacated additions
(m2) (%) (m2) (%) (m2) (%) (m2) (%)
Canal Walk 2 330 0,7 8 895 2,8 2 695 0,8 974 0,3
The Glen 2 871 0,9 12 580 3,9 6 274 1,9 5 799 1,8
Hyde Park 2 076 0,6 2 975 0,9 1 337 0,4 1 279 0,4
The Mall of
Rosebank 1 711 0,5 3 243 1,0 2 061 0,6 707 0,2
Retail 8 988 2,7 27 693 8,6 12 367 3,7 8 759 2,7
Offices 12 421 3,8 12 442 3,9 14 315 4,4 (5 950) (1,8)
21 409 6,5 40 135 12,5 26 682 8,1 2 809 0,9
Available for letting by rentable area at 31 December 2004:
Business segment 31 December 2004 31 December 2003
(m2) (%) (m2) (%)
Canal Walk 4 113 1,3 9 339 2,8
The Glen 452 0,1 959 0,3
Hyde Park - - 359 0,1
The Mall of Rosebank 145 0,1 620 0,2
Retail 4 710 1,5 11 277 3,4
Offices 7 407 2,2 11 483 3,4
12 117 3,7 22 760 6,8
Retail vacancy at Canal Walk reduced significantly through the consolidation of
space and subsequent letting to larger retailers. The Glen and Hyde Park,
despite expansion, maintained low vacancies. Trading conditions at The Mall of
Rosebank remained robust with a continued demand for retail space.
Vacancies in the office portfolio were further reduced in a challenging market.
BORROWINGS
During the year Hyprop significantly reduced its borrowings, after payment for
The Glen acquisition and expansion, utilising R376 million raised from the issue
of combined units.
At 31 December 2004 Hyprop`s net borrowings amounted to R882,6 million, equating
to a 28% debt-to-open market value ratio.
Subsequent to year-end interest rates have been fixed in respect of 34% of
borrowings for a five-year period from 1 November 2005. The balance has been
fixed for various periods up to three years. The average rate of interest at
year-end was 11,3%.
DIRECTORATE
Mr JR McAlpine was appointed to the board as an independent non-executive
director effective from 1 February 2005.
PROSPECTS
Hyprop should continue to achieve increased investment returns through a
combination of income growth and capital enhancement, with economic conditions
for 2005 predicted to remain positive.
The growth in distributions for the year was exceptional. The board has budgeted
growth in distributions to combined unitholders for the year ending 31 December
2005 to be approximately 7%. This budget has not been reviewed or reported on by
Hyprop`s auditors.
PAYMENT OF DEBENTURE INTEREST AND DIVIDEND
Combined unitholders will receive debenture interest payment 34 of 73.85 cents
per debenture and dividend payment 34 of 0.15 cents per share for the period 1
August 2004 to 31 December 2004. The distribution aggregates to 74.00 cents per
combined unit.
Last date to trade cum distribution Friday, 11 March 2005
Date combined units will trade
ex distribution Monday, 14 March 2005
Record date Friday, 18 March 2005
Payment date Tuesday, 22 March 2005
Combined unitholders may not dematerialise or rematerialise their combined units
between Monday, 14 March 2005 and Friday, 18 March 2005, both days inclusive.
BASIS OF PREPARATION
The annual financial statements have been prepared in accordance with South
African Statements of Generally Accepted Accounting Practice. The accounting
policies applied in the preparation of the annual financial statements are
consistent with those applied in the prior year ended 31 December 2003.
AUDIT OPINION
Grant Thornton has audited the financial information set out in this report and
their unqualified audit report is available for inspection at the Company`s
registered office.
On behalf of the board
PF Kirchmann PG Prinsloo
Chairman Managing Director
24 February 2005
Registered office
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 2001
PO Box 61051 Marshalltown 2107
SPONSOR
Java Capital (Proprietary) Limited
Directors
PF Kirchmann* (Chairman) PG Prinsloo (Managing Director) MS Aitken*
J Bentel* WE Cesman* JR McAlpine*
S Shaw-Taylor* PJ Thurling*
M Wainer* SV Webb*
LI Weil* PL Whewell*
*Non-executive director
COMPANY SECRETARY
LR Cohen CA(SA)
www.hyprop.co.za
