HIGHLIGHTS FY 2014
• Distribution up 11,3% to 472cpu
• Total property assets up 17,5% to R26,4 billion
• Investment in sub-Saharan Africa (excluding South Africa) increases to R2.2 billion
• NAV up 11,1%
Operating performance
CEO Pieter Prinsloo says the good performance was driven by strong distribution growth of 13,1% in the second half of the year, mainly attributable to a solid performance at the super and large regional shopping centres in Hyprop's portfolio, savings on interest costs and the acquisition of African Land in December 2013.
Distributable earnings from regional, large regional and super-regional malls (excluding Somerset Mall acquired October 2013) was up 9,5%with average growth of 11% from The Glen, Clearwater Mall and Woodlands Boulevard.
Property expenses were well controlled with a cost-to-income ratio of 34,4%. The total cost-to-income ratio increased slightly to 37,3% (30 June 2013:35,1%) due to a reduction in income from listed investments following Hyprop's disposal of its stake in Sycom Property Fund, as well as the once-off consolidation of fund management costs when Hyprop bought 87% of African Land.
Rosebank Mall continued to be impacted by the redevelopment programme, which is on track for final completion in September 2014. This saw distributable earnings decrease by R16,1 million in line with budget.
Net interest on borrowingswas 3,6% higher year-on-year as a result of proceeds from various disposals, amounting to R205 million in total, reducing short-term funding requirements.
Occupancy levels across the portfolio remain high at 97,6%% (30 June 2014: 97,3%). Retail vacancies decreased to 1,2% (30 June 2014: 2,1%) while vacancies in the office portfolio, which constitutes only 5% of the total portfolio in gross lettable area (GLA), increased to 13,8% (30 June 2013: 8,1%). Subsequent to year-end, vacancies in the office portfolio have fallen to 9,5%. In line with strategy, Hyprop continues to pursue the disposal of its stand-alone offices.
Property portfolio
Investment property increased to R25,6 billion from R19,8 billion a year ago, driven primarily by income growth and the acquisition of Somerset Mall and Manda Hill shopping centre (African Land).
Developments
Prinsloo says he is pleased with the progress made at the Rosebank Mall redevelopment. Final completion will be marked by the opening of a flagship Woolworths store in September 2014. Post year end, new store openings included among others, River Island, Edgars, Dischem and Clicks. The centre is fully let. Total capital cost remains within the budget of R932 million at an estimated yield of 7%.
Although the Rosebank Mall is Hyprop's largest redevelopment, several other initiatives including tenant relocations, improvements and refurbishments were undertaken during the year at a cost of R58,8 million. Prinsloo says, "This is in line with our strategy of maintaining our quality portfolio and improving the tenant mix."
Sub-Saharan Africa (excluding South Africa)
During the year, Hyprop received dividends of R4,8 million and R30,3 million from Atterbury Africa and African Land, respectively.
Hyprop further advanced its African strategy with the restructure of African Land, in terms of which Hyprop, through Hyprop Investment (Mauritius) will now hold 50% in Manda Hill, African Land's only asset. Atterbury Africa will hold the balance. Following the restructure, Hyprop's effective interest in Manda Hill will be 68,75%,down from 87%.
Borrowings
Net borrowings increased to R7,1 billion, mainly due to the acquisition of African Land, capital expenditure on the Rosebank Mall redevelopment and developments in Atterbury Africa.
Sustainable retail
A number of projects aimed at improving energy efficiency were successfully completed during the year. To date, these initiatives have saved 4,9 millionkWh representing cost savings of R5,9 million. In the year ahead, amongst other initiatives, Hyprop will install a 500kWp solar photovoltaic plant at Clearwater Mall at a cost of R8 million, which will be operating by November 2014.
Prospects
Hyprop expects dividend growth of between 10% and 12% for the full year to June 2015.
