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HYP
HYP
Hyprop - Audited results for the year ended 31 December 2005
Hyprop Investments Limited
Registration number 1987/005284/06
Share code HYP
ISIN code ZAE000003430
"Hyprop" or "the company"
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2005 ("the year")
Distribution per combined unit of 190 cents up 16,6%
Total return of 61%
Increase in value of investment property R1,4 billion
Total assets R6,2 billion up 63%
COMMENTS
INTRODUCTION
Hyprop has achieved record distribution growth of 16,6% per combined unit for
the year. The distribution of 190 cents together with capital growth in unit
value has yielded an excellent total return of 61% to combined unitholders.
Hyprop"s prime shopping centres contributed 87% of investment property income,
with 46% derived from flagship centre Canal Walk.
FINANCIAL RESULTS
Distributable earnings per combined unit of 189,9 cents increased by 16,6% over
that of the previous year, exceeding the directors" forecast of 183 cents per
combined unit.
Contractual rental escalations, strict expense control and reduced vacancies
account for an 11,6% increase in distributable earnings per combined unit.
Additional distributable earnings growth of 5% was achieved by reduced interest
margins, profits from the disposal of listed property securities and
distributions received from Hyprop"s investment in SA Retail Properties Limited
("SA Retail").
The 83% growth in combined unitholder funds from R1,9 billion to R3,4 billion
arose from the issue of 26 506 349 combined units and a property revaluation
surplus of R1,4 billion.
The significant growth in the value of the investment property portfolio
increased the net asset value per combined unit by 50% to R24,12. The adjusted
net asset value, assuming no deferred taxation, is R29,53 per combined unit,
which is in line with Hyprop"s closing trading price of R29,90 per combined unit
at 31 December 2005.
DISTRIBUTION
The board has approved a final distribution of 99,00 cents per combined unit.
The total distribution for the year is 190,00 (2004: 163,00) cents per combined
unit.
ACQUISITIONS
SA Retail
During the year Hyprop acquired 101 822 670 linked units in SA Retail. 30 255
426 linked units were acquired for cash at an average cost per linked unit of
R8,23. The balance was acquired through the issue of one Hyprop combined unit
for every 2,7 SA Retail linked units.
Hyprop"s 45,1% stake in SA Retail is a strategic investment which is expected to
realise future financial benefit for combined unitholders.
DEVELOPMENTS
Southcoast Mall
Southcoast Mall, a 28 000 m2 shopping centre on KwaZulu-Natal"s south coast in
which Hyprop owns a 50% undivided share, successfully commenced trading in
November 2005. Hyprop"s investment of R98 million is expected to yield 10,2% in
the first year.
Stoneridge Centre
In October 2005 Hyprop acquired 18ha in Greenstone Park, Modderfontein for R51
million. The property has 70 000 m2 of retail rights to be developed in phases.
Planning is advanced for the development of a 55 000 m2 shopping centre and
construction will commence as soon as letting and feasibility targets have been
met. On completion Hyprop will own 90% and Abland (Proprietary) Limited, the
developer, will own 10%.
DISPOSALS
Listed property securities
During the year Hyprop disposed of its investment in Prima Property Trust and 5
349 823 linked units in Freestone Property Holdings Limited ("Freestone"), which
in aggregate realised a distributable profit of R4,1 million. At year-end Hyprop
owned 1 356 059 linked units in Freestone.
BORROWINGS
Hyprop"s financial position is sound with a 21% debt-to-open market value ratio.
Potential borrowing capacity for future business expansion amounts to
approximately R1,8 billion.
At 31 December 2005 the average interest rate on net borrowings of
R1,126 billion was 10,1%. Interest rates have been fixed in respect of 80% of
borrowings for periods ranging from five to ten years.
Subsequent to year-end Hyprop has refinanced R900 million of borrowings
utilising the capital debt market which will result in a reduction of the
interest rate on this amount by approximately 50 basis points.
SEGMENTAL ANALYSIS
The segmental spread is as follows:
Net
property
Value income
Rentable Total attributable (including
Area value to Hyprop minorities)
Business segment (m2) (R000) (R000) (R000)
Canal Walk 131 320 2 500 000 2 000 000 175 758
The Glen 51 800 830 700 624 270 60 031
Hyde Park 37 121 725 000 725 000 53 778
The Mall of Rosebank 33 774 537 400 537 400 41 836
Southcoast Mall 27 642 103 150 103 150 838
Retail 281 657 4 696 250 3 989 820 332 241
Offices 69 120 449 800 449 800 50 045
Investment property 350 777 5 146 050 4 439 620 382 286
Listed property
securities 951 074 951 074 40 649
Straight line rental
income accrual 22 889
Fund management expenses (24 287)
350 777 6 097 124 5 390 694 421 537
Canal Walk"s net income grew by 22% due to increased revenue arising from robust
trading conditions and improved cost control. The expansion of The Glen was
successfully completed in the first quarter of 2005 and net income increased by
30%. Hyde Park and The Mall of Rosebank achieved satisfactory net income growth
of 12% and 13% respectively.
VALUATION OF INVESTMENT PROPERTY
The investment property portfolio was independently valued by Old Mutual
Properties (Proprietary) Limited at 31 December 2005. The R1,4 billion
revaluation surplus has resulted in a 43% increase in the value of the portfolio
to R5,2 billion.
OPERATIONAL REVIEW
Letting activities by rentable area were as follows:
New Tenants
Renewals lettings vacated
Business segment (m2) (%) (m2) (%) (m2) (%)
Canal Walk 18 245 15 6 334 5 5 972 5
The Glen 4 117 8 5 811 11 5 612 11
Hyde Park 2 964 11 664 2 664 2
The Mall of
Rosebank 2 491 7 1 144 3 1 398 4
Retail 27 817 11 13 953 5 13 646 5
Offices 15 969 18 16 122 18 11 200 13
Total 43 786 12 30 075 9 24 846 7
Available for letting by rentable area:
31 December 2005 31 December 2004
Business segment (m2) (%) (m2) (%)
Canal Walk 3 751 3,1 4 113 3,4
The Glen 253 0,5 452 0,9
Hyde Park - - - -
The Mall of Rosebank 399 1,2 145 0,4
Southcoast Mall 2 461 8,9 - -
Retail 6 864 2,3 4 710 2,0
Offices 2 486 2,8 7 408 8,4
Total 9 350 2,7 12 118 3,7
(%) is a ratio of rentable area to each centre/portfolio
Favourable trading conditions continued to benefit retailers in 2005. Management
proactively capitalised on the steady demand for retail space to maintain a high
occupancy rate and improved tenant mix. In the last quarter of 2005, renewals
and new lettings were successfully concluded at Canal Walk which will positively
impact on rental growth for 2006.
PROSPECTS AND TRADING UPDATE
Hyprop intends to maintain its record of consistent income and capital growth by
pursuing:
* opportunities in its existing portfolio to enhance tenant mix and retail
offering; and
* acquisitions and new developments that will contribute to the long-term
growth of the portfolio.
Hyprop anticipates superior growth in distributions in the forthcoming year. It
is however unlikely that the rate of distribution growth per combined unit will
equal that which was achieved in 2005.
PAYMENT OF DEBENTURE INTEREST AND DIVIDEND
Combined unitholders will receive debenture interest payment number 36 of 98,80
cents per debenture and dividend number 36 of 0,20 cents per share, totalling
99,00 cents per combined unit for the period 1 July 2005 to 31 December 2005.
Last date to trade cum distribution Thursday 16 March 2006
Date combined units will trade
ex distributions Friday 17 March 2006
Record date Friday 24 March 2006
Payment date Monday 27 March 2006
There may be no dematerialisation on rematerialisation between Friday,17 March
2006 and Friday, 24 March 2006, both days inclusive.
On behalf of the board
PF Kirchmann PG Prinsloo
Chairman Managing Director
2 March 2006
GROUP INCOME STATEMENT
Audited Audited
31 Dec 2005 31 Dec 2004
R000 R000
Revenue 635 041 545 310
Investment property income 571 503 517 545
Straight line rental income accrual 22 889 26 381
Listed property securities income 40 649 1 384
Property and other operating expenses (213 504) (200 662)
Net property income 421 537 344 648
Net interest (105 805) (101 822)
Received 2 104 3 141
Paid (107 909) (104 963)
Net operating income 315 732 242 826
Change in fair value 1 374 384 899 474
Investment property 1 364 974 923 955
Straight line rental income accrual (22 889) (26 381)
Listed property securities 32 299 1 900
Profit on disposal 4 306 11 685
Investment property 212 10 994
Listed property securities 4 094
Associates 691
Amortisation of debenture premium 5 066 2 535
Income before debenture interest
and taxation 1 699 488 1 156 520
Debenture interest (247 342) (168 659)
Net income before taxation 1 452 146 987 861
Taxation (378 217) (264 701)
Net income after taxation 1 073 929 723 160
Attributable to -
Hyprop combined unitholders 892 496 570 756
Minorities 181 433 152 404
1 073 929 723 160
Reconciliation - headline earnings and
distributable earnings
Net income after taxation - attributable
to Hyprop combined unitholders 892 496 570 756
Headline earnings adjustments (847 096) (552 926)
Change in fair value of investment
property (net of deferred taxation and
minority interests) (860 296) (556 224)
Straight line rental income accrual (net
of deferred taxation and minority
interests) 13 412 14 965
Profit on disposal of investment property (212) (10 994)
Profit on disposal of investment in associates
(net of taxation) (673)
Debenture interest 247 342 168 659
Headline earnings 292 742 186 489
Distributable earnings adjustments (46 094) (19 115)
Change in fair value of listed property
securities (net of deferred taxation) (27 616) (1 615)
Amortisation of debenture premium (5 066) (2 535)
Straight line rental income accrual
(net of deferred taxation and minority
interests) (13 412) (14 965)
Distributable earnings 246 648 167 374
Total combined units in issue 143 137 272 116 630 923
Weighted average combined units in
issue - for earnings and headline
earnings 124 287 108 102 818 269
Weighted average combined units
in issue - for distributable
earnings 129 884 098 102 818 269
Earnings, headline earnings and
distributable earnings per combined
unit Cents Cents
Earnings per combined unit 917,1 719,1
Headline earnings per combined unit 235,5 181,4
Distributable earnings per combined unit 189,9 162,8
Total Interest Dividends
distribution on on
per combined deben- ordinary
unit tures shares
(cents per unit) (cents per unit) (cents per unit)
Distribution details
Total distribution
for the year
31 December 2005 190,00 189,62 0,38
Distribution 36 for
the six months ended
31 December 2005 99,00 98,80 0,20
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
Audited Audited
31 Dec 2005 31 Dec 2004
R000 R000
Assets
Non-current assets 6 055 938 3 681 868
Investment property 4 978 831 3 563 983
Investment property under development 11 681
Straight line rental income accrual 110 141 87 252
Building appurtenances and tenant
installations 24 651 18 952
Listed property securities 942 315
Current assets 124 163 121 424
Investment property held for sale 34 800
Listed property securities 8 759 46 398
Receivables 56 084 62 507
Cash and cash equivalents 24 520 12 519
Total assets 6 180 101 3 803 292
Equity and liabilities
Equity capital and reserves 2 282 870 1 251 356
Share capital and reserves 1 689 558 797 295
Minority interests 593 312 454 061
Non-current liabilities 3 663 638 2 405 824
Debentures and debenture premium 1 762 591 1 079 815
Long-term loans 1 125 911 929 027
Deferred taxation 775 136 396 982
Current liabilities 233 593 146 112
Payables 91 851 59 760
Taxation 36 45
Combined unitholders for distribution 141 706 86 307
Total equity and liabilities 6 180 101 3 803 292
Net asset value per combined unit (R) 24,12 16,09
Net asset value per combined unit -
assuming no deferred taxation
liability (R) 29,53 19,50
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
- prior year
adjustment -
amortisation of
debenture
premium 5 010 5 010
- reclassification
of distribution
to minorities (1 600) (1 600)
- change in rate
of deferred
taxation (106 544) (2 421) (108 965)
Balance at
1 January 2004
- restated 891 218 608 7 107 428 357 654 963
Issue of
ordinary share
capital 275 275
Net profit for
the year * 570 756 152 404 723 160
Net transfer to
non-distribu-
table reserve 573 180 (573 180) -
Dividends (342) (342)
Distribution to
minorities (49 066) (49 066)
Minority share of
additions to
investment
property 28 893 28 893
Disposal by minority
of interest in
The Glen (106 527) (106 527)
Balance at
31 December 2004 1 166 791 788 4 341 454 061 1 251 356
Balance at
1 January 2005
- as previously
reported 1 166 996 089 4 341 479 012 1 480 608
- prior year
adjustment
- amortisation of
debenture
premium 7 545 7 545
- reclassification
of distribution
to minorities 2 973 2 973
- change in rate
of deferred
taxation (211 846) (27 924) (239 770)
Balance at
1 January 2005
- restated 1 166 791 788 4 341 454 061 1 251 356
Issue of ordinary
share capital 265 265
Net profit for
the year * 892 496 181 433 1 073 929
Net transfer to
non-distributable
reserve 888 422 (888 422) -
Dividends (498) (498)
Distribution to
minorities (50 202) (50 202)
Minority share of
additions to
investment
property 8 020 8 020
Balance at
31 December 2005 1 431 1 680 210 7 917 593 312 2 282 870
* Minority net profit includes minority share of fair value adjustment to
investment properties
ABRIDGED GROUP CASH FLOW STATEMENT
Audited Audited
31 Dec 2005 31 Dec 2004
R000 R000
Cash flows from operating activities 95 703 87 189
Cash generated from operations 444 657 392 158
Interest received 2 104 3 141
Interest paid (107 909) (104 963)
Distribution to Hyprop combined
unitholders (192 441) (149 361)
Distribution to minorities (50 637) (53 491)
Taxation (71) (295)
Cash flows from investing activities (280 587) (179 660)
Cash flows from financing activities 196 885 95 967
Net increase in cash and cash equivalents 12 001 3 496
Cash and cash equivalents at the beginning
of the year 12 519 9 023
Cash and cash equivalents at the end
of the year 24 520 12 519
BASIS OF PREPARATION AND ACCOUNTING POLICIES
Grant Thornton has audited the financial information set out in this report.
Their unqualified audit report is available for inspection at the company"s
registered office.
These are the first financial statements of Hyprop prepared in accordance with
International Financial Reporting Standards (IFRS).
Previously property revenue included rental income and operating expense
recoveries from investment property only. As listed property securities income
has become a material contributor to revenue, Hyprop has changed its
classification of revenue to include income from listed property securities.
In order to comply with IAS17 - Leases, property income reflects rental income
recognised on a straight line basis. The fair value adjustment to investment
property has been reduced accordingly.
Whilst debentures were previously recognised at cost, they are now recognised at
amortised cost in terms of IAS39, using the effective interest rate method. The
amortised portion has been transferred to non-distributable reserves.
Deferred taxation on the fair value adjustment of investment property was
previously provided at capital gains taxation rates. In terms of IAS12, Hyprop
has now applied a combination of income taxation and capital gains taxation
rates based on the manner in which the property is expected to be realised.
Over or under distributions to minorities were previously offset against
minority interests. These are now included in receivables or payables as
appropriate.
Comparative figures in respect of the above changes have been restated
accordingly.
These changes do not have any effect on the company"s distributions or
distributable earnings in the current or future years.
The effect of the above changes in respect of the prior year earnings, headline
earnings and equity, is as follows:
Audited
31 Dec 2004
R000
Earnings as previously
reported 673 523
Prior year adjustments (102 767)
Earnings restated 570 756
Headline earnings as previously
reported 168 425
Prior year adjustments 18 064
Headline earnings restated 186 489
Equity as previously
reported 1 480 608
Prior year adjustments (229 252)
Equity restated 1 251 356
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)
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
Date: 02/03/2006 08:59:49 AM Produced by the JSE SENS Department
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