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HYP
HYP
HYP - Hyprop - Audited Results for the year ended 31 December 2006
Hyprop Investments Limited
("Hyprop" or "the company")
(Registration No. 1987/005284/06)
Share Code: HYP
ISIN Code: ZAE000003430
AUDITED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2006
Distribution per combined unit up 18.4%
Pre-tax NAV R39.63 per combined unit up 34%
Market capitalisation R5.6 billion
Total return 36.3%
13 years uninterrupted distribution growth
GROUP INCOME STATEMENT
Audited 31 Audited 31
December December
2006 2005
R000 R000
Revenue 738 381 635 041
Investment property income 630 285 571 503
Straight-line rental income 26 235 22 889
accrual
Listed property securities income 81 861 40 649
Property expenses (199 119) (190 410)
Net property income 539 262 444 631
Other operating expenses (29 120) (23 094)
Operating income 510 142 421 537
Net interest (106 499) (105 805)
Received 2 143 2 104
Paid (108 642) (107 909)
Net operating income 403 643 315 732
Change in fair value 1 548 261 1 374 384
Investment property 1 458 212 1 364 974
Straight-line rental income (26 235) (22 889)
accrual
Listed property securities 116 284 32 299
Profit on disposal 2 675 4 306
Investment property 731 212
Listed property securities 1 944 4 094
Amortisation of debenture premium 35 248 5 066
Income before debenture interest 1 989 827 1 699 488
Debenture interest (324 831) (247 342)
Net income before share of profit 1 664 996 1 452 146
from associate
Share of income from associate - 37 452
including fair value adjustment
to investment property
Net income before taxation 1 702 448 1 452 146
Taxation - deferred (429 344) (378 217)
Net income after taxation 1 273 104 1 073 929
Attributable to -
Hyprop combined unitholders 1 055 321 892 496
Minorities 217 783 181 433
1 273 104 1 073 929
Reconciliation - headline
earnings and distributable
earnings
Net income after taxation - 1 055 321 892 496
attributable to Hyprop combined
unitholders
Headline earnings adjustments (547 981) (599 754)
Change in fair value of (885 135) (860 296)
investment property (net of
deferred taxation and minority
interests)
Straight-line rental income 13 054 13 412
accrual (net of deferred taxation
and minority interests)
Profit on disposal of investment (731) (212)
property
Debenture interest 324 831 247 342
Headline earnings 507 340 292 742
Distributable earnings (183 241) (46 094)
adjustments
Change in fair value of listed (99 423) (27 616)
property securities (net of
deferred taxation)
Amortisation of debenture premium (35 248) (5 066)
Straight-line rental income (13 054) (13 412)
accrual (net of deferred taxation
and minority interests)
Share of income from associate (35 516)
Distributable earnings 324 099 246 648
Total combined units in issue 144 369 143 137
188 272
Weighted average combined units 144 074 124 287
in issue - for earnings and 873 108
headline earnings
Weighted average combined units 144 369 129 884
in issue - for distributable 188 098
earnings
Earnings, headline earnings and Cents Cents
distributable earnings per
combined unit
Earnings per combined unit 957.9 917.1
Headline earnings per combined 352.1 235.5
unit
Distributable earnings per 224.5 189.9
combined unit
DISTRIBUTION
Total Interest Dividends
distribution on on
(cents per debentures ordinary
unit) (cents per shares
unit) (cents per
unit)
Total distribution for the year 225.00 225.00
31 December 2006
Distribution 38 for the six 115.00 115.00
months ended 31 December 2006
Distribution 37 for the six 110.00 110.00
months ended 30 June 2006
Total distribution for the year 190.00 189.62 0.38
31 December 2005
Distribution 36 for the six 99.00 98.80 0.20
months ended 31 December 2005
Distribution 35 for the six 91.00 90.82 0.18
months ended 30 June 2005
GROUP BALANCE SHEET
Audited 31 Audited 31
December December
2006 2005
R000 R000
Assets
Non-current assets 7 766 336 6 055 938
Investment property 6 467 537 5 088 972
Building appurtenances and tenant 21 160 24 651
installations
Investment in associate 142 620
Listed property securities 1 135 019 942 315
Current assets 86 166 89 363
Listed property securities 8 759
Receivables 58 110 56 084
Cash and cash equivalents 28 056 24 520
Non-current assets classified as held-for-
sale
Investment property 38 060 34 800
Total assets 7 890 562 6 180 101
Equity and liabilities
Equity capital and reserves 3 504 948 2 282 870
Share capital and reserves 2 744 892 1 689 558
Minority interests 760 056 593 312
Non-current liabilities 4 119 534 3 663 638
Debentures and debenture premium 1 771 757 1 762 591
Long-term loans 1 135 748 1 125 911
Financial guarantee for associate 7 548
Deferred taxation 1 204 481 775 136
Current liabilities 266 080 233 593
Payables 100 055 91 851
Taxation 36
Combined unitholders for distribution 166 025 141 706
Total equity and liabilities 7 890 562 6 180 101
Net asset value per combined unit (R) 31.29 24.12
Net asset value per combined unit - excluding 39.63 29.53
deferred taxation liability (R)
GROUP STATEMENT OF CHANGES IN EQUITY
Group Share Non- Retained Minority Total
capital distri- income interests
butable
reserve
R000 R000 R000 R000 R000
Balance at 1 1 166 791 788 4 341 454 061 1 251 356
January 2005
Issue of 265 265
ordinary share
capital
Net income for 892 496 181 433 1 073 929
the year
Net transfer to 888 422 (888 422)
non-
distributable
reserve
Dividends (498) (498)
Distribution to (50 202) (50 202)
minorities
Minority share 8 020 8 020
of additions to
investment
property
Balance at 31 1 431 1 680 210 7 917 593 312 2 282 870
December 2005
Issue of 13 13
ordinary share
capital
Net income for 1 055 321 217 783 1 273 104
the year
Net transfer to 1 054 244 (1 054 244)
non-
distributable
reserve
Distribution to (57 189) (57 189)
minorities
Minority share 6 150 6 150
of additions to
investment
property
Balance at 31 1 444 2 734 454 8 994 760 056 3 504 948
December 2006
ABRIDGED GROUP CASH FLOW STATEMENT
Audited 31 Audited 31
December December
2006 2005
R000 R000
Cash flows from operating activities 40 697 95 703
Cash generated from operations 498 783 444 657
Interest received 2 143 2 104
Interest paid (108 642) (107 909)
Distribution to Hyprop combined unitholders (300 512) (192 441)
Net cash paid to minorities (51 039) (50 637)
Taxation (36) (71)
Cash flows from investing activities (46 997) (280 587)
Cash flows from financing activities 9 836 196 885
Net increase in cash and cash equivalents 3 536 12 001
Cash and cash equivalents at the beginning of 24 520 12 519
the year
Cash and cash equivalents at the end of the 28 056 24 520
year
COMMENTS
FINANCIAL RESULTS
Hyprop achieved record distribution growth of 18.4% per combined unit for
the year. The distribution of 225 cents per combined unit is a result of
strong contractual and turnover rental growth, strict expense control and
reduction in interest rates.
A property revaluation surplus of R1.5 billion and the issue of 1 231 916
combined units to acquire linked units in SA Retail Properties Limited ("SA
Retail") together resulted in a 30% increase in combined unitholder funds
to R4.5 billion.
Significant growth in the value of investment property resulted in an
increase in net asset value per combined unit of 30% to R31.29. Excluding
deferred taxation, the net asset value per combined unit is R39.63, a 2.9%
premium to the closing unit price on 31 December 2006 of R38.50.
DISPOSAL OF INVESTMENT IN SA RETAIL
Subsequent to year-end, Hyprop concluded an unconditional agreement to
dispose of its investment of 108 097 051 linked units in SA Retail to the
Public Investment Corporation Limited at a consideration of R10.50 per
linked unit, totalling R1,135 billion. Hyprop will earn interest on the
sale price at 9% per annum from 1 October 2006 until payment date, which is
expected by end April 2007.
The proceeds from the disposal will be utilised to repay existing debt,
which combined with the interest earned on the sale price, will be
distribution enhancing.
DEVELOPMENTS
Stoneridge Shopping Centre
In October 2006 Hyprop commenced construction of Phase 1 of Stoneridge
Shopping Centre in Greenstone Park, Modderfontein. The 50 000m2 lifestyle
centre, estimated to cost R544 million with an expected initial return of
9%, is scheduled for completion in October 2008. Hyprop will own 90% and
the developer, Abland (Proprietary) Limited, 10%.
Canal Walk Shopping Centre (80% undivided share)
The upgrade and leasing of the outdoor restaurant area, La Piazza, at
Hyprop`s flagship centre in the Western Cape, was completed in December
2006 at a cost of R11.6 million (R9.3 million for Hyprop), yielding an
initial return of 14%.
Construction of a 3 500m2 Mr Price Home store has commenced at a cost of
R32.3 million (R25.6 million for Hyprop). This project is scheduled for
completion in November 2007 with an expected initial return of 13%.
Negotiations are in progress for the acquisition of approximately 16 000m2
of rights, subject to local authority approval, to enable development of
additional retail space.
The Glen Shopping Centre (75.15% undivided share)
The 2 200m2 extension to the Edgars store and construction of additional
parking at a combined cost of R18 million (R 13.5 million for Hyprop), and
at an initial yield of 10.5%, is nearing completion.
Application has been made for an additional 10 000m2 of retail rights in
respect of which a decision by the local authority is expected by June
2007.
Southcoast Mall (50% undivided share)
Undeveloped land located at the entrance to the centre was acquired during
the year at a cost of R6.7 million (R3.35 million for Hyprop) on which a
service station, free-standing retail outlets and motor dealerships will be
developed.
BEE
As previously announced Hyprop`s joint transformation initiative with
Vunani Properties (Proprietary) Limited ("Vunani") led to the establishment
of Vunani Property Investment Fund (Proprietary) Limited ("VPIF") on 2
October 2006. VPIF`s initial investment property portfolio consists of 18
mainly commercial buildings and was valued at R524 million at year-end.
Vunani owns 50.2% and Hyprop 49.8% of VPIF.
Hyprop will earn an interest margin on a R26 million loan together with
ongoing credit enhancement fees in return for providing financial
guarantees to secure bank finance for VPIF. The guarantees have been valued
in terms of IAS39 and recognised as a liability at year-end. VPIF has been
accounted for as an associate.
The board is considering implementing a BEE equity transaction, details of
which will be announced in due course.
BORROWINGS
At 31 December 2006 borrowings amounted to R1.1 billion of which 79% is
fixed for periods exceeding three years at an average interest rate of 9.8%
(2005: 10.1%). Subsequent to the repayment of debt from the proceeds of the
SA Retail disposal, Hyprop will have minimal debt and a borrowing capacity
of approximately R3 billion.
VALUATIONS
Business Rentable Total value 2006 Value Value per
segment area attributable rentable
to Hyprop area
2006 2005
(m2) (R000) (R000) (R000) (R/m2)
Canal Walk 132 316 3 250 000 2 500 000 2 600 000 24 562
The Glen 51 464 1 117 000 830 700 839 426 21 704
Hyde Park 37 102 920 000 725 000 920 000 24 797
The Mall of 33 774 700 000 537 400 700 000 20 726
Rosebank
Southcoast 27 642 274 000 206 300 137 000 9 912
Mall
Stoneridge* 57 832 57 832
Shopping 282 298 6 318 832 4 799 400 5 254 258 22 384
centres
Offices 44 604 343 360 449 800 343 360 7 697
Investment 326 902 6 662 192 5 249 200 5 597 618 20 380
property
Listed 1 135 019 951 074 1 135 019
property
securities
7 797 211 6 200 274 6 732 637
*Valued at cost as the centre is currently under construction
Investment property was independently valued by Old Mutual Properties
(Proprietary) Limited using the discounted cash flow method.
The value of investment property increased by R1.5 billion or 27% to R6.7
billion. The significant increase in the property values is attributed to
growth in net income together with improvements in property yields.
SEGMENTAL ANALYSIS
The segmental income spread is as follows:
Business Revenue Net property Net property Increase
segment (including income income
minorities) (including (Hyprop
minorities) share)
(R000) (R000) (R000) (%)
Canal Walk 288 073 195 661 156 107 11.8
The Glen 95 520 69 252 51 843 16.0
Hyde Park 85 813 58 639 58 639 9.0
The Mall of 71 805 47 218 47 218 12.9
Rosebank
Southcoast 14 188 9 665 9 665
Mall
Shopping 555 399 380 435 323 472
centres
Offices 74 886 50 731 50 731
Investment 630 285 431 166 374 203
property
Listed 81 861 81 861 81 861
property
securities
712 146 513 027 456 064
Straight-line 26 235 26 235 21 056
rental income
accrual
Fund (29 120) (29 120)
management
expenses
738 381 510 142 448 000
Robust contractual and turnover rental growth as well as improved expense
control contributed to the increase in shopping centre net property income.
On a like-for-like basis net property income increased by 12.7% and the
expense-to-revenue ratio reduced from 24% to 22%.
VACANCIES
Available for letting by rentable area:
Business 31 December 2006 31 December 2005
segment
(m2) (%) (m2) (%)
Canal Walk 1 305 1.0 3 751 3.1
The Glen 253 0.5
Hyde Park
The Mall of 297 0.9 399 1.2
Rosebank
Southcoast 1 560 5.6 2 461 8.9
Mall
Shopping 3 162 1.1 6 864 2.6
centres
Offices 277 0.6 2 486 2.8
Total 3 439 1.1 9 350 2.7
Continued favourable trading conditions for retailers in 2006 resulted in
increased demand for retail space. Management proactively capitalised on
these conditions to maintain high occupancy levels and improve the tenant
mix.
DIRECTORATE
Khosi Sibisi was appointed as an independent non-executive director and
Laurence Cohen was appointed to the board as Financial Director.
Michael Flax and Janys Finn were appointed as alternate directors to Marc
Wainer and Wolf Cesman, respectively.
Peter Thurling resigned as a non-executive director and was appointed as an
alternate director to Michael Aitken. Sarah Webb resigned as a non-
executive director.
PROSPECTS
The board anticipates that Hyprop`s distribution per combined unit for the
year ending 31 December 2007 will, subject to market conditions remaining
stable, increase by 12% to 15% relative to the distribution for 2006. This
forecast has not been reviewed or reported on by Hyprop`s auditors.
PAYMENT OF DEBENTURE INTEREST
Combined unitholders will receive debenture interest payment number 38 of
115 cents per debenture for the period 1 July 2006 to 31 December 2006.
Last date to trade cum distribution Thursday 15 March 2007
Date combined units will trade
ex distribution Friday 16 March 2007
Record date Friday 23 March 2007
Payment date Monday 26 March 2007
Unitholders may not dematerialise or rematerialise their combined units
between Friday, 16 March 2007 and Friday, 23 March 2007.
BASIS OF PREPARATION AND AUDIT OPINION
These annual financial statements have been prepared in accordance with
International Financial Reporting Standards ("IFRS") 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 annual financial statements 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 CEO
1 March 2007
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
SPONSOR
Java Capital (Proprietary) Limited
DIRECTORS
PF Kirchmann*+ (Chairman); PG Prinsloo (CEO); MS Aitken*+ (alt PJ
Thurling); 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
Date: 01/03/2007 09:00:01 Produced by the JSE SENS Department.
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