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Hyprop - Reviewed Results For The Six Months Ended 30 June 2005
Release Date: 23/08/2005 10:00:01 Code(s): HYP
Hyprop - Reviewed Results For The Six Months Ended 30 June 2005
Hyprop Investments Limited
(Incorporated in the Republic of South Africa)
(Registration No. 1987/005284/06)
Share Code: HYP
ISIN Code: ZAE00003430
(`Hyprop`)
REVIEWED RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2005 (`interim period`)
Interim distribution of 91 cents per combined unit
Forecast growth of 12% for the year
Total assets exceed R4 billion
COMMENTS
INTRODUCTION
Hyprop continued to achieve growth with a distribution of 91,00 cents per
combined unit up 18% over the comparative period. After adjusting for non-
recurring income amounting to approximately 4 cents per unit, comprising
distributions from linked units in SA Retail Properties Limited (`SA Retail`)
and the write-back of a bad debt provision in Canal Walk, satisfactory growth of
13% was achieved.
The growth in rentals at Hyprop`s shopping centres, especially Canal Walk,
remains the driving force behind the strong performance.
FINANCIAL RESULTS
Distributable earnings per combined unit increased by 17% to 93,00 cents over
the comparative period as a result of strong retail rental growth, strict
expense control and reductions in interest rates.
Net asset value per combined unit increased by 10% to R19,54 from December 2004.
A revaluation surplus of R250 million on the property portfolio represents an 8%
increase from December 2004.
DISTRIBUTION
Hyprop combined unitholders are referred to the interim distribution
announcement dated 17 June 2005. Hyprop paid an interim distribution of 91,00
cents per combined unit on 4 July 2005.
OFFER TO ACQUIRE LINKED UNITS IN SA RETAIL
Hyprop`s offer to linked unitholders of SA Retail remains subject to competition
authorities` approval. A decision in this regard is expected shortly.
Hyprop currently holds 14 881 643 linked units in SA Retail acquired at an
aggregate cost of R114,3 million. In addition Hyprop has an undertaking in
respect of 55 904 550 SA Retail linked units to accept the offer of Hyprop
combined units, giving Hyprop a 31% interest in SA Retail.
Hyprop combined units accepted by SA Retail unitholders will rank pari passu
with existing combined units from 1 July 2005.
DEVELOPMENTS
The Glen Shopping Centre (`The Glen`)
The Glen`s R91 million expansion is complete and has significantly strengthened
the centre`s retail offering.
Southcoast Mall
Hyprop owns a 50% undivided share in a 28 000m2 shopping centre under
development on KwaZulu-Natal`s south coast. The centre is scheduled to open in
November 2005 and Hyprop`s total investment of R96 million is expected to yield
an initial 11,5% return.
DISPOSALS
Offices
Hyprop disposed of two commercial properties for a cash consideration of R14,2
million.
Listed securities
Hyprop disposed of 9 637 020 units in Prima Property Trust (`Prima`) during the
interim period. The balance of 1 541 996 Prima units was sold subsequent to 30
June 2005.
Of Hyprop`s 6 705 882 linked units in Freestone Property Holdings Limited, 480
000 were disposed of during the interim period.
BORROWINGS
Hyprop`s net borrowings amounted to R972 million, equating to a 28% debt-to-open
market value ratio. Subsequent to 30 June 2005 interest rates have been fixed in
respect of 82% of borrowings for periods varying from 5 to 10 years. The average
interest rate at 30 June 2005 was 10,8%.
VALUATION OF INVESTMENT PROPERTIES
Investment properties have been fair valued for the first time at an interim
period. However no adjustment to the comparative period in the previous year has
been made. The valuation of the properties was independently undertaken by The
Property Partnership.
SEGMENTAL ANALYSIS
The segmental spread of the property portfolio is as follows:
Value Net
Rentable Total attributable property
Area value to Hyprop income
Business segment (m2) (R000) (R000) (R000)
Canal Walk 131 320 1 915 000 1 532 000 85 642
The Glen 51 800 625 000 469 690 28 645
Hyde Park 37 121 562 670 562 670 26 597
The Mall of Rosebank 33 774 436 830 436 830 20 595
Southcoast Mall * 28 000 34 957 34 957
Retail 282 015 3 574 457 3 036 147 161 479
Offices 69 120 382 960 382 960 24 985
Portfolio 351 135 3 957 417 3 419 107 186 464
Straight-line rental income accrual 7 487
Fund management expenses (15 372)
351 135 3 957 417 3 419 107 178 579
*Valued at cost as the centre is currently under development.
LETTING ACTIVITIES
Letting activities by rentable area were as follows:
Activities for the period ended 30 June 2005
New Tenants
Renewals lettings vacated
Business segment (m2) (%) (m2) (%) (m2) (%)
Canal Walk 10 555 3,3 2 284 0,7 1 883 0,6
The Glen 2 566 0,8 387 0,1 384 0,1
Hyde Park 1 167 0,4 382 0,1 382 0,1
The Mall of Rosebank 1 143 0,4 1 145 0,4 1 299 0,4
Retail 15 431 4,9 4 198 1,3 3 948 1,2
Offices 12 556 3,9 8 211 2,5 3 504 1,1
Total 27 987 8,8 12 409 3,8 7 452 2,3
Available for letting by rentable area at 30 June 2005:
30 June 2005 31 December 2004
Business segment (m2) (%) (m2) (%)
Canal Walk 3 712 1,1 4 113 1,3
The Glen 449 0,1 452 0,1
Hyde Park
The Mall the Rosebank 299 0,1 145 0,1
Retail 4 460 1,3 4 710 1,5
Offices 2 776 0,8 7 407 2,2
Total 7 236 2,1 12 117 3,7
Vacancies in the retail portfolio remain low. The office portfolio reflects a
substantial reduction in vacancies. Canal Walk is expected to benefit from the
high number of lease renewals to take place in the last quarter of 2005.
PROSPECTS
Hyprop anticipates growth in distributions of 12% for the year ending 31
December 2005. This exceeds the previous forecast of 7% made in the 2004 annual
results announcement. The revised forecast excludes any financial impact
relating to Hyprop`s offer to acquire linked units in SA Retail. The forecast
has not been reviewed or reported on by Hyprop`s auditors.
DIRECTORATE
Mr EG Dube was appointed to the board as an independent non-executive director
on 15 April 2005.
BASIS OF PREPARATION AND ACCOUNTING POLICIES
This interim report has been prepared in accordance with International Financial
Reporting Standards (IFRS) and International Accounting Standard (IAS) 34 -
Interim Financial Reporting.
In order to comply with international interpretation of IAS17 - Leases, total
revenue reflects rental income recognised on a straight-line basis. The
comparative figures have been restated accordingly. To retain comparability with
prior periods, the rental income charged to tenants and the straight-line rental
income accrual have been separately disclosed. In order to avoid double counting
in the income statement, the fair value adjustment to investment properties has
been reduced by the straight-line rental income accrual. To avoid double
counting in the balance sheet, the fair valuation of investment properties has
been reduced by the cumulative straight-line rental income accrual and the
latter separately disclosed. Prior year reserves have been adjusted by the
deferred taxation differential on the straight-line rental income accrual.
Whilst debenture capital was previously recognised at cost, it is now recognised
at amortised cost in terms of IAS39. The comparative period income statements,
balance sheets and reserves have been restated accordingly and the amortised
portion of debenture capital has been transferred to non-distributable reserves.
Neither of the above two changes in accounting policy will have any effect on
the company`s distributions or distributable earnings, either in the current
period or in future periods. All other accounting policies have remained
consistent with prior periods.
The effect of the changes in accounting policies referred to above on the prior
period earnings, headline earnings and net asset value per combined unit is as
follows:
Reviewed Audited
30 June 2004 31 December 2004
R000 R000
Earnings per combined unit (cents)
- as previously reported 79,2 819,1
Change in accounting policies (0,9) (1,4)
Earnings per combined unit (cents)
- restated 78,3 817,7
Headline earnings per combined unit
(cents) - as previously reported 78,6 163,8
Change in accounting policies 10,4 16,4
Headline earnings per combined unit
(cents) - restated 89,0 180,2
Net asset value per combined unit
(R) - as previously reported 11,89 17,91
Change in accounting policies (0,11) (0,11)
Net asset value per combined unit (R)
- restated 11,78 17,80
REVIEW OPINION
Grant Thornton has reviewed the financial information set out in this interim
report. Their review report is available for inspection at the company`s
registered office.
On behalf of the board
PF Kirchmann PG Prinsloo
Chairman Managing Director
23 August 2005
GROUP INCOME STATEMENT
Reviewed Reviewed Audited
30 June 30 June 31 December
2005 2004 2004
R000 R000 R000
Revenue 283 155 267 385 543 926
Conventional rental income 275 668 252 585 517 545
Straight line rental income
accrual 7 487 14 800 26 381
Property and other operating
expenses (104 576) (100 399) (200 662)
Net property income 178 579 166 986 343 264
Distributions received from
listed securities 6 188 479 1 384
Net interest (48 310) (53 720) (101 822)
Received 1 789 1 844 3 141
Paid (50 099) (55 564) (104 963)
Net operating income 136 457 113 745 242 826
Change in fair value 255 734 (16 434) 899 474
Investment properties 249 838 923 955
Straight-line rental income
accrual (7 487) (14 800) (26 381)
Listed securities 13 383 (1 634) 1 900
Profit/(Loss) on disposal 618 199 11 685
Investment properties 274 10 994
Listed securities 344 (451)
Associates 650 691
Amortisation of debenture
premium 1 703 1 283 2 535
Income before debenture interest
and taxation 394 512 98 793 1 156 520
Debenture interest (105 920) (71 400) (168 659)
Net income before taxation 288 592 27 393 987 861
Taxation (36 436) (2 938) (137 853)
Net income after taxation 252 156 24 455 850 008
Attributable to -
Hyprop combined unitholders 204 603 (565) 672 101
Minority interests 47 553 25 020 177 907
252 156 24 455 850 008
Reconciliation - headline
earnings and
distributable earnings
Net income after taxation -
attributable to
Hyprop combined unitholders 204 603 (565) 672 101
Headline earnings adjustments (186 298) 9 697 (655 478)
Change in fair value of
investment properties
(net of deferred capital
gains taxation and
minority interests) (191 113) (662 090)
Straight-line rental income
accrual (net of
deferred capital gains
taxation and minority
interests) 5 089 10 246 18 279
Profit on disposal of
investment properties (274) (549) (10 994)
Profit on disposal of
investment in associates
(net of capital gains taxation) (673)
Debenture interest 105 920 71 400 168 659
Headline earnings 124 225 80 531 185 282
Distributable earnings
adjustments (15 813) (8 402) (19 329)
Change in fair value of
listed securities (net of
deferred capital gains
taxation) (11 442) 1 389 (1 615)
Amortisation of debenture
premium (1 703) (1 283) (2 535)
Straight-line rental income
accrual (net of
deferred income taxation and
minority interests) (4 226) (8 508) (15 179)
Other fair value adjustments 1 558
Distributable earnings 108 412 72 130 165 953
Total combined units
in issue 116 630 923 98 009 179 116 630 923
Weighted average combined
units in issue 116 630 923 90 509 179 102 818 269
Earnings, headline earnings and
distributable earnings per
combined unit
Earnings per combined unit
(cents) 266,2 78,3 817,7
Headline earnings per
combined unit (cents) 106,5 89,0 180,2
Distributable earnings per
combined unit (cents) 93,0 79,7 161,4
Total Interest Dividends
distribution on on
per combined deben- ordinary
unit tures shares
Distribution
details (cents per (cents per (cents per
unit) unit) unit)
Distribution 35 for the
six months ended
30 June 2005 91,00 90,82 0,18
Total distribution for
the year 31 December 2004 163,00 162,67 0,33
Distribution 34 for the five
months ended
31 December 2004 74,00 73,85 0,15
Distribution 33 - for
July 2004 12,00 11,98 0,02
- for the six months ended
30 June 2004 77,00 76,84 0,16
GROUP BALANCE SHEET
Reviewed Reviewed Audited
30 June 30 June 31 December
2005 2004 2004
R000 R000 R000
Assets
Non-current assets 4 086 580 2 736 604 3 681 868
Investment properties 3 810 827 2 645 830 3 563 983
Investment properties under
development 34 957 11 681
Straight-line rental income
accrual 94 739 75 671 87 252
Building appurtenances and
tenant installations 20 158 15 103 18 952
Listed securities 125 899
Current assets 57 751 42 343 118 451
Listed securities 34 626 19 007 46 398
Receivables 7 640 15 900 59 534
Cash and cash equivalents 15 485 7 436 12 519
Total assets 4 144 331 2 778 947 3 800 319
Equity and liabilities
Equity capital and reserves 1 706 923 750 309 1 475 502
Share capital and reserves 1 200 878 323 704 996 490
Minority interests 506 045 426 605 479 012
Non-current liabilities 2 272 197 1 912 652 2 178 705
Debentures and debenture
premium 1 078 112 830 542 1 079 815
Long-term loans 987 811 1 042 916 929 027
Deferred taxation 206 274 39 194 169 864
Current liabilities 165 211 115 986 146 112
Payables 59 028 40 480 59 760
Taxation 49 39 45
Combined unitholders for
distribution 106 134 75 467 86 307
Total equity and liabilities 4 144 331 2 778 947 3 800 319
Net asset value per combined
unit (R) 19,54 11,78 17,80
ABRIDGED GROUP CASH FLOW STATEMENT
Reviewed Reviewed Audited
30 June 30 June 31 December
2005 2004 2004
R000 R000 R000
Cash flows from operating
activities 71 632 57 307 87 189
Cash generated from operations 231 467 204 843 392 158
Interest received 1 789 1 844 3 141
Interest paid (50 099) (55 564) (104 963)
Distribution to Hyprop
combined unitholders (86 307) (62 745) (149 361)
Distributions to minority
shareholders (25 196) (30 793) (53 491)
Taxation (22) (278) (295)
Cash flows from investing
activities (127 451) (18 039) (179 660)
Cash flows from financing
activities 58 785 (40 855) 95 967
Net increase/(decrease) in cash
and cash equivalents 2 966 (1 587) 3 496
Cash and cash equivalents
at the beginning
of the period 12 519 9 023 9 023
Cash and cash equivalents at
the end of
the period 15 485 7 436 12 519
GROUP STATEMENT OF CHANGES IN EQUITY
Non-dis-
Share tributable Retained Minority
capital reserve income interests Total
Group R000 R000 R000 R000 R000
Balance at 1 January 2004
as previously
reported 891 320 142 7 107 432 378 760 518
change in accounting
policy - amortisation
of debenture
premium 5 010 5 010
deferred taxation
differential on
straight-line
rental income
accrual (8 826) (8 826)
Balance at
1 January 2004
- restated 891 316 326 7 107 432 378 756 702
Issue of ordinary
share capital 90 90
Net (loss)/profit
for the year * (565) 25 020 24 455
Net transfer from non-
distributable reserve (1 203) 1 203
Dividends (145) (145)
Distributions to
minority
shareholders (30 793) (30 793)
Balance at
30 June 2004 981 315 123 7 600 426 605 750 309
Balance at 1 January 2005
as previously
reported 1 166 996 089 4 341 479 012 1 480 608
change in
accounting policy
amortisation
of debenture
premium 7 545 7 545
deferred taxation
differential on
straight-line
rental income
accrual (12 651) (12 651)
Balance at
1 January 2005
- restated 1 166 990 983 4 341 479 012 1 475 502
Net profit for
the year * 204 603 47 553 252 156
Net transfer to non-
distributable
reserve 201 991 (201 991)
Dividends (215) (215)
Distributions to
minority shareholders (25 196) (25 196)
Minority share of
additions to
investment properties 4 676 4 676
Balance at
30 June 2005 1 166 1 192 974 6 738 506 045 1 706 923
* Minority net profit includes minority share of fair value adjustment to
investment properties.
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 2001(PO Box 61051 Marshalltown 2107)
SPONSOR
Java Capital (Proprietary) Limited
DIRECTORS
PF Kirchmann* (Chairman) PG Prinsloo (Managing Director) MS Aitken* WE
Cesman* EG Dube*# JR McAlpine*# LE Weil* S Shaw-Taylor* PJ Thurling* M
Wainer* SV Webb*
* Non-executive # Independent
COMPANY SECRETARY
Probity Business Services (Proprietary) Limited
www.hyprop.co.za
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