Condensed consolidated interim results for the six months ended 31 December 2016 PROPERTY INVESTMENT EXCELLENCE

Transcription

1 Condensed consolidated interim results PROPERTY INVESTMENT EXCELLENCE

2 HIGHLIGHTS Dividend up 16,6% Acquired Skopje City Mall, Skopje, Macedonia Sale of Willowbridge South R460 million Developments of R260 million underway (SA portfolio) HYPROP INVESTMENTS LIMITED (Incorporated in the Republic of South Africa) (Registration number 1987/005284/06) JSE share code: HYP ISIN: ZAE (Approved as a REIT by the JSE) ( Hyprop or the company or the group ) Front cover image: Skopje City Mall, Skopje, Macedonia

3 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME six months six months 2015 Audited 12 months Revenue Investment property income Straight-line rental income accrual Property expenses ( ) ( ) ( ) Net property income Other operating expenses (48 185) (36 644) (76 593) Operating income Net interest ( ) ( ) ( ) Received Paid ( ) ( ) ( ) Net operating income Other income Change in fair value Investment property Straight-line rental income accrual (31 123) (67 388) ( ) Investment in joint venture (10 102) Derivative instruments (53 182) Loss on disposal (2 934) Investment property (377) Investment in subsidiary (2 557) Impairment of goodwill (18 134) Net income before equity-accounted investments Share of income/(loss) from joint ventures (41 007) Share of income from associate Dividends received Profit before taxation Taxation (3 710) (857) (50 930) Profit for the period/year Other comprehensive income Exchange differences on translation of foreign operations (14 771) (1 491) Total comprehensive income for the period/year Total profit for the period/year attributable to: Shareholders of the company Non-controlling interests (25 485) (708) Profit for the period/year Total comprehensive income attributable to: Shareholders of the company Non-controlling interests (34 816) Total comprehensive income for the period/year

4 CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (continued) six months six months 2015 Audited 12 months Profit for the period/year Earnings Headline earnings adjustments ( ) ( ) ( ) Change in fair value of investment property ( ) ( ) ( ) Change in fair value of investment in joint venture (10 102) Loss on disposal: Investment in subsidiary Investment property 377 Impairment of goodwill Headline earnings Distributable earnings adjustments ( ) ( ) Change in fair value: Derivative instruments (50 602) ( ) Investments in sub-saharan Africa (excluding SA) (51 221) (65 041) (35 131) Investments in South African subsidiaries Investments in South-Eastern Europe (24 572) Capital items Taxation Deferred taxation Antecedent dividend Distributable earnings Total shares in issue Weighted average shares in issue Total shares in issue for dividend per share (excludes treasury shares) Basic earnings per share (cents) 639,0 800, ,1 Headline earnings per share (cents) 395,9 392,2 574,3 Diluted earnings per share (cents) 634,0 800, ,1 Diluted headline earnings per share (cents) 391,2 392,2 567,3 2

5 CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION 2015 Audited Assets Non-current assets Investment property South African portfolio Ikeja City Mall (Lagos, Nigeria) Building appurtenances and tenant installations Investments in sub-saharan Africa (excluding SA) Investment in associate Loans receivable Goodwill Derivative instruments Current assets Receivables Loans receivable Derivative instruments Cash and cash equivalents Non-current assets held-for-sale Investment property Total assets Equity Stated capital and reserves Non-controlling interest Liabilities Non-current liabilities Interest-bearing liabilities Derivative instruments Deferred taxation Current liabilities Payables Interest-bearing liabilities Derivative instruments Liabilities directly associated with non-current assets held-for-sale Total liabilities Total equity and liabilities Net asset value per share (R) 98,47 94,33 94,50 3

6 CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 2015 Audited Balance at beginning of period/year Total profit for the period/year attributable to Hyprop shareholders Issue of shares Non-controlling interest (34 816) Treasury shares (27 898) (27 789) Dividends ( ) ( ) ( ) Share-based payment reserve Foreign currency translation reserve (5 440) Balance at end of period/year Distribution details Total distribution for the period/year (cents) 347,3 297,8 619,9 Six months ended (cents) 322,1 Six months ended (cents) 347,3 297,8 297,8 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS 2015 Audited Cash flows from operating activities ( ) Cash generated from operations Interest received Interest paid ( ) ( ) ( ) Taxation paid (9 496) (15 466) Dividends paid ( ) ( ) ( ) Cash flows from investing activities ( ) ( ) Cash flows from financing activities (83 804) Net increase in cash and cash equivalents Cash acquired with subsidiary Translation effects on cash and cash equivalents of foreign entities (5 441) Cash reallocated to assets held-for-sale (3 117) (1 133) (562) Cash and cash equivalents at beginning of period/year Cash and cash equivalents at end of period/year

7 COMMENTARY INTRODUCTION Hyprop, Africa s leading specialist shopping centre Real Estate Investment Trust (REIT), operates a portfolio of shopping centres in major metropolitan areas across South Africa (SA), sub-saharan Africa (excluding SA) and South-Eastern Europe. Hyprop s strategy is to own dominant, quality shopping centres in emerging markets, where such assets can be acquired or developed at attractive yields. The shopping centre portfolio in South Africa includes super-regional centre Canal Walk, large regional centres Clearwater, The Glen, Woodlands, CapeGate, Somerset and Rosebank Malls, and regional centre Hyde Park Corner. The sub-saharan African portfolio (excluding SA) includes interests in Accra Mall, West Hills Mall and Achimota Retail Centre (all in Accra, Ghana), Manda Hill Centre in Lusaka, Zambia and Ikeja City Mall in Lagos, Nigeria. In early Hyprop expanded into South-Eastern Europe with the acquisition of a 60% interest in Delta City Belgrade, Serbia and Delta City Podgorica, Montenegro. In October, Hyprop acquired a 60% interest in Skopje City Mall, in Skopje, Macedonia. FINANCIAL RESULTS Hyprop has declared a dividend of 347,3 cents per share (the period), an increase of 16,6% on the corresponding period in Distributable earnings for the period benefited from the inclusion of R58,4 million (23,5 cents) from the investments in South-Eastern Europe. No income from the investments in South-Eastern Europe was included in the prior year interim period. Due to constraints on the conversion of local currency to US Dollars, net distributable earnings from Ikeja City Mall in Lagos, Nigeria, amounting to R15,6 million, was excluded from distributable earnings for the period ( 2015: R6,0 million). 5

8 COMMENTARY (continued) SOUTH AFRICAN PORTFOLIO Revenue and distributable earnings six months ended Distributable earnings six months ended 2015 Distributable earnings Business segment Revenue Revenue Shopping centres Value centres Total retail Standalone offices Investment property (excluding properties sold) Properties sold Total investment property Revenue and distributable earnings from investment property (excluding properties sold) increased by 7,7% and 6,5%, respectively. Trading density growth slowed during the period, especially among apparel retailers, who were affected by increased competition, a weaker Rand and more restrictive credit-granting regulations. Demand for space in Hyprop s shopping centres remains strong as evidenced by low vacancies and rental arrears, and supports further expansion at Rosebank Mall, Canal Walk and The Glen. Cost-to-income ratios Net basis (%) 15,5 15,0 Gross basis (%) 33,5 33,2 The cost-to-income ratios increased marginally, largely due to higher municipal costs. Tenant arrears Total arrears as a percentage of rental income were 0,5% ( : 0,5%). Vacancies Vacancy by sector % of total rentable area Retail 0,8 0,8 Office 3,9 4,5 Total 1,1 1,1 Total retail vacancies remained at 0,8%, while vacancies in the office portfolio reduced marginally, largely due to new lettings at Lakefield Office Park. Total gross lettable area in the portfolio reduced by a net m² (2,8%) due to asset sales. As a result, the reduction in office vacancies did not materially impact total vacancies. 6

9 Valuations Value attributable to Hyprop Business segment Rentable area (m 2 ) Value per rentable area (R/m 2 ) Shopping centres Value centres Total retail Total standalone offices Properties sold Investment property Investment property was valued at R28,1 billion at ( : R27,4 billion), an increase of 2,9% (excluding assets sold). Developments The installation of H&M at Somerset Mall (R15,8 million) and Checkers at Atterbury Value Mart (R31,0 million) were completed successfully. The following extensions and refurbishments are underway: Shopping centre Project Amount (Hyprop s share) Completion date Rosebank Mall Additional 4 300m 2 rentable area R127,0 million April 2018 The Glen Food court enclosure and additional 1 200m 2 rentable area R90,9 million April 2018 Canal Walk Additional retail in La Piazza area R41,6 million November 2017 During the period, R73,1 million was spent on capital projects, new equipment and tenant installations. Disposals Somerset Value Mart and Glenfield Office Park were sold for R185 million and R180 million, respectively. Somerset Value Mart was transferred in September, and Glenfield Office Park in December. Willowbridge South was sold for R460 million and was transferred in March Agreement has also been reached for the disposal of Willowbridge North for R225 million. The transaction is still subject to approval by the competition authorities as well as approval for the assignment of the leasehold rights to the purchaser. Efforts to dispose of the remaining standalone office buildings are continuing. 7

10 COMMENTARY (continued) INVESTMENTS IN SUB-SAHARAN AFRICA (EXCLUDING SA) City/Country Hyprop s effective shareholding (%) Rentable area (m 2 ) vacancy (%) vacancy (%) Ikeja City Mall Lagos, Nigeria 75, ,3 Manda Hill Lusaka, Zambia 68, ,1 4,4 Accra Mall Accra, Ghana 17, West Hills Mall Accra, Ghana 16, ,0 Achimota Mall Accra, Ghana 28, ,9 18,0 Total portfolio ,7 4,0 The exclusion of distributable earnings from Ikeja City Mall in Lagos, Nigeria, resulted in a reduction in distributable earnings from the investments in sub-saharan Africa (excluding SA) to R30,9 million ( 2015: R35,3 million). The Central Bank of Nigeria issued a statement on 20 February 2017, undertaking to clear all unfilled foreign exchange orders. Future distributable earnings from Ikeja City Mall will be included when the foreign exchange market becomes operational again. Average growth in distributable earnings from Manda Hill Centre (Lusaka, Zambia), West Hills Mall and Accra Mall (both in Accra, Ghana) was 5,4%. Despite continued challenging trading conditions in certain of the countries in which the investments are held, the centres displayed resilience and vacancies were maintained at reasonable levels. Apart from Manda Hill, the centres reported better trading numbers for December than for December Manda Hill has been affected by the opening of additional retail centres in Lusaka, however its position remains dominant and efforts are being made to improve its tenant mix. Kumasi City Mall, in Kumasi, Ghana is currently under construction and is scheduled to open in April Investments in sub-saharan Africa (excluding SA) at, primarily via shareholder loan funding to AttAfrica Limited, were R3,1 billion ( : R3,3 billion). The net reduction over the period was largely due to Rand appreciation against the US Dollar. Hyprop s share of its investment in Ikeja City Mall, in Lagos, Nigeria, reduced to R1,6 billion ( : R1,7 billion). The reduction in value was due to a reduction in the directors valuation of Ikeja City Mall, as well as due to Rand appreciation against the US Dollar. 8

11 INVESTMENTS IN SOUTH-EASTERN EUROPE City/Country Hyprop s effective shareholding (%) Rentable area (m 2 ) vacancy (%) vacancy (%) Delta City Belgrade Belgrade, Serbia 60, Delta City Podgorica Podgorica, Montenegro 60, Skopje City Mall Skopje, Macedonia 60, ,7 Total portfolio ,7 Delta City Podgorica (Montenegro) was purchased in February, and Delta City Belgrade (Serbia) in April. The final instalment of EUR49,3 million for Delta City Belgrade was paid in September. The purchase of Skopje City Mall, in Skopje, Macedonia, for a total consideration of EUR92 million, was effective in October. All of the acquisitions in South-Eastern Europe have been funded with Euro-denominated bridge funding, supported by a guarantee from Hyprop. The bridge funding will be re-financed with term funding, which will be at a higher interest rate than the bridge funding and will be implemented in tranches during It is anticipated that once the re-financing is complete, the weighted average interest rate for the Euro funding will be between 3% and 4%. Trading conditions continue to be positive, with like-for-like foot count growth as well as turnover growth in excess of the Eurostat inflation rate. Demand for additional rentable area remains strong from the fashion anchor tenants and further extensions to the centres are planned. The accounting treatment of the investments in South-Eastern Europe require them to be accounted for as an investment in a financial asset. Accordingly, the investments do not currently appear on the consolidated statement of financial position. NET ASSET VALUE The net asset value (NAV) per share at increased by 4,2% to R98,47 ( : R94,50). The increase was due to an increase in the value of the investment property portfolio, as well as the issue of new shares at a premium to NAV per share, in July. At, the closing share price of R117,31 represented a premium of 19,1% to the NAV per share. 9

12 COMMENTARY (continued) BORROWINGS Rm Rm Bank debt South Africa USD (Rand equivalent) EUR (Rand equivalent) Debt capital market funding (South Africa only) Corporate bonds Commercial paper 440 Cash and cash equivalents (743) (239) Net borrowings Loan-to-value (%) 29,7 30,8 Debt at fixed rates (%) South African debt (%) 100,5 89,6 USD debt (%) 70,9 72,4 Maturity of fixes (years) South African debt (years) 4,4 4,9 USD debt (years) 3,2 3,7 Cost of funding (%) South African debt (%) 8,9 8,9 USD debt (%) 4,6 4,6 EUR debt (%) 1,7 1,7 Debt capital market (DCM) % of total debt The USD debt includes 75% of the in-country debt relating to Ikeja City Mall (Lagos, Nigeria) 2 The Euro debt, which relates to Hyprop s effective 60% interest in the South-Eastern European shopping malls, is not consolidated on the Hyprop statement of financial position During the period, a maturing South African bank loan amounting to R1,2 billion was refinanced with DCM funding (three, four and five-year corporate bonds). As a consequence, the ratio of DCM funding to total debt increased to 20%. All DCM funding is unsecured. The Rand equivalent of the US Dollar-denominated bank debt reduced during the period, largely due to Rand appreciation against the US Dollar. Euro-denominated debt increased during the period, due to the final payment of EUR49,3 million in September in respect of Delta City Belgrade, as well as EUR92 million in October for Skopje City Mall in Macedonia. The Euro debt is short-term bridge funding and the interest rate has not been fixed. The increase in cash is largely due to cash inflows from the issue of new shares in July (R700 million) and the sale of Somerset Value Mart and Glenfield Office Park in September and December, respectively. 10

13 DISTRIBUTABLE EARNINGS STATEMENT AND RECONCILIATION TO DIVIDEND DECLARED Distributable earnings six months 2015 South African property portfolio Investments in sub-saharan Africa (excluding SA) Investments in South-Eastern Europe Fund management expenses (32 826) (31 559) Net interest ( ) ( ) Other income Total distributable earnings Total shares in issue at period end Treasury shares in issue ( ) ( ) Shares in issue for distributable earnings Dividend per share (cents) 347,3 297,8 Dividend per share growth (%) 16,6 13,4 Other income, amounting to R17,5 million, comprises a credit enhancement fee received for the funding guarantee provided by Hyprop in respect of the South-Eastern European investments. Net interest costs of R180,7 million ( 2015: R195,1 million) reduced due to non-core asset sales of R365 million (Somerset Value Mart and Glenfield Office Park), and a cash inflow of R700 million in July from the issue of new shares. The proceeds from non-core asset sales and the issue of new shares were applied in part to the reduction of debt and to capital expenditure in the South African portfolio. PROSPECTS Hyprop expects dividend growth of approximately 12% for the full year to This guidance is based on the following key assumptions: Forecast investment property income is based on contractual rental escalations and market-related renewals; Appropriate allowances for vacancies have been incorporated into the forecast; No major corporate and tenant failures will occur; Earnings from offshore investments will not be materially impacted by exchange rate volatility. Exchange rates have been assumed at R12,75 and R13,80 to the US Dollar and Euro, respectively; and No income from Ikeja City Mall (Lagos, Nigeria) has been included in the forecast. The forecast has not been reviewed or reported on by the company s auditors. 11

14 COMMENTARY (continued) PAYMENT OF DIVIDEND All rental income earned by the company, less property expenses and interest on debt, is distributed to shareholders semi annually. A dividend of 347,3 cents per share will be paid to shareholders as follows: Last day to trade cum dividend Shares trade ex dividend Record date Payment date 2017 Tuesday, 28 March Wednesday, 29 March Friday, 31 March Monday, 3 April Shareholders may not dematerialise or rematerialise their shares between Wednesday, 29 March 2017 and Friday, 31 March 2017, both days inclusive. The dividend will be transferred to dematerialised shareholders CSDP accounts/ broker accounts and paid to certificated shareholders bank accounts on Monday, 3 April An announcement relating to the tax treatment of the dividend will be released separately on SENS. BASIS OF PREPARATION The condensed consolidated interim financial statements were prepared in accordance with International Financial Reporting Standards, IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the Companies Act of South Africa. All amendments to standards that are applicable to Hyprop for its financial year beginning 1 July have been considered. Based on management s assessment, the amendments do not have a material impact on the group s condensed consolidated interim financial statements. All accounting policies applied in the preparation of the condensed consolidated interim financial statements are consistent with those applied by Hyprop in its consolidated group annual financial statements for the prior financial year. These condensed consolidated interim financial statements have not been reviewed or audited by Hyprop s independent external auditors. Preparation of the interim financial information was supervised by Laurence Cohen CA(SA) in his capacity as Financial Director. On behalf of the board GR Tipper Chairman PG Prinsloo CEO 3 March

15 CORPORATE INFORMATION Directors GR Tipper * (Chairman) PG Prinsloo (CEO) LR Cohen (FD) KM Ellerine * L Engelbrecht * MJ Lewin * TV Mokgatlha * L Norval * S Shaw-Taylor * * Non-executive Independent Independent non-executive director Ethan Dube resigned from the board on 1 December. Registered office 2nd Floor, Cradock Heights, 21 Cradock Avenue, Rosebank (PO Box 52509, Saxonwold, 2132) Transfer secretaries Computershare Investor Services Proprietary Limited Rosebank Towers 15 Biermann Avenue Rosebank (PO Box 61051, Marshalltown, 2107) Company secretary CIS Company Secretaries Proprietary Limited Sponsor Java Capital Investor relations Viki-Jane Watson (Telephone: ) investorrelations@hyprop.co.za or viki@hyprop.co.za 13

16 Hyprop Investments Limited 2nd Floor, Cradock Heights, 21 Cradock Avenue, Rosebank 2196 PO Box 52509, Saxonwold, 2132 Tel: Fax: