summarised consolidated results - hyprop
TRANSCRIPT
Summarised consolidated resultsfor the year ended 30 June 2018
30 years of property investment excellence
STRATEGIC &
OPERATIONAL
OVERVIEW
2
Canal Walk, Cape Town, Western Cape
Strategy
Strategy & highlights
3
▪ Acquired 3 major shopping centres – EUR 439 million in EU countries (via Hystead)
▪ Successfully completed R276 million of developments in SA
▪ Issued two new long-term corporate bonds - total value R800 million
▪ Repaid debt of R1,95 billion
▪ Sold non-core asset of R230 million
▪ Equity raise of R779 million - issuing 7,5 million new shares
▪ Conservative gearing levels
▪ Invested in South-Africa, sub-Saharan Africa and South-Eastern Europe
▪ Dominant quality shopping centres in major metropolitan areas
▪ Ownership in 21 shopping centres across 9 countries
Highlights
Financial highlights
30 Jun 2018 30 Jun 2017 Change (%)
Distributable earnings (Rbn) 1,9 1,7 10,5
Distribution 756,5 cps 695,1 cps 8,8
Total investments (Rbn) 37,3 35,5 5,1
Loan-to-value (%) 28,1 28,9 (2,8)
NAV (R per share) 102,98 99,78 3,2
Cost to income ratio (SA)
- Gross (%) 33,0 33,3 (0,9)
- Net (%) 15,8 15,7 0,6
4
Distribution growth
5
Cents per share
263298
347376
280322
348380
543
620
695
757
0
100
200
300
400
500
600
700
800
2015 2016 2017 2018
1st Half 2nd Half Total % growth
13,7% 16,3%
15,0%
13,4%
14,9%
14,2%
16,6% 8,0%
12,1%
8,3% 9,3%
8,8%
CapeGate (Brackenfell, Cape Town, Western Cape)
6
OPERATING
PERFORMANCE
South African property locations
7
Super regional mall Canal Walk (80%)
Large regional malls CapeGate
Clearwater
Rosebank Mall
Somerset Mall
The Glen (75,15%)
Woodlands
Regional mall Hyde Park Corner
Value/ lifestyle centre Atterbury Value Mart
Gauteng region
Western Cape region
H Y D E P A R K
C O R N E R
8
Performance & market conditionsSouth Africa
Operating in a challenging trading and consumer environment
Distributable earnings growth of 4%
Retaining good contractual escalations
CapeGate and Somerset Mall – best performers 8,7%
- With second half growth of 6%
Rental arrears well within market norm
Completed projects – positive impact on the centres
Vacancies reduced
CapeGate (Brackenfell)
Somerset Mall (Somerset West)
Leasing activity 30 June 2018
9
Leasing
% of total
portfolio
Rentable area
(m²)
Rental growth
(%)
Contractual
escalation (%)
Contractual
lease value
(Rm)
Retail 17,2 114 272 1,5 7,7 1 836
Offices 32,5 19 175 (6,7) 7,6 104
Total 18,5 133 447 1,0 7,7 1 940
93%
EDCON Group30 Jun 2018
(m2)
30 Jun 2017
(m2)
Change
(m2)
Area occupied 67 300 70 102 (2 802)
Non-renewals in 2019 1 380 m2
Under review to find replacement tenants 8 600 m2
Further reduction of 15%
Lease expiry profile
10
Retail
Expiring area
(m²)
% Rentable area
of centre
Canal Walk 18 277 12
Somerset Mall 7 848 11
CapeGate 11 986 19
The Glen 11 547 14
Atterbury Value Centre 11 119 23
Woodlands Boulevard 7 111 10
Rosebank Mall 13 126 20
Hyde Park Corner 6 650 24
Clearwater 3 635 4
Retail 91 299 14
Offices 15 371 26
Total 106 670 15
Expiring area
(m²)
% Rentable area
of centre
23 118 16
9 880 14
30 435 48
14 952 19
6 188 13
11 034 14
15 386 23
8 745 31
32 950 38
152 688 23
7 671 13
160 359 22
2019 / 2020 2018 / 2019
Vacancies
11
Vacancies 30 Jun 2018 30 Jun 2017 30 Jun 2016
Retail (%) 1,6 1,9 0,8
Offices (%) 5,5 7,9 4,5
Total (%) 1,9 2,4 1,1
Vacancies Rentable area (m²) Change (m²)
Retail 10 713 (2 132)
Offices 3 255 (1 459)
13 968 (3 591)
Comparison to IPD Trading Density Index March 2018
12
Trading density growth Rent to turnover ratio
Hyprop IPD Hyprop IPD
Super regional
Canal Walk0,6% 0,0% 9,9% 11,0%
Regional
Clearwater, Rosebank
Mall, Somerset Mall, CapeGate,
Woodlands, Hyde Park Corner
1,4% 0,5% 8,5% 8,8%
Small regional
Atterbury Value Mart1,0% 0,8% 9,0% 8,1%
Community - (1,3%) - 5,4%
Neighbourhood - (0,6%) - 5,6%
Trading density growth Rent to turnover ratio
Hyprop Jun 2018 Jun 2017 Jun 2018 Jun 2017
Total 0,5% 1,4% 9,1% 8,6%
Trading performance
13
Primary category
Trading density growth
% of total
turnover% of area
Department stores: Clicks, Dis-Chem, Edgars, Game, Woolworths 2,6 28,1 25,8
Apparel (2,9) 18,2 20,7
Food/supermarket 0,6 11,8 10,9
Electronic/photography/music/mobile 2,8 7,5 4,3
Food service 6,1 6,4 5,9
Sporting/outdoor goods & wear (1,4) 5,5 5,8
Home furnishings (0,8) 5,1 7,6
Speciality/toys 0,0 4,1 5,0
Jewellery 1,5 2,7 0,9
Health & beauty 0,4 2,5 1,6
Shoes (0,5) 2,1 2,3
Books/cards/stationery 1,1 2,0 2,0
Eyewear 10,7 1,0 0,6
Entertainment/movies 4,8 1,0 5,0
Note: IPD/MSCI allocations
DEVELOPMENTS
14
Rosebank Mall, Johannesburg, Gauteng
Developments
15
Shopping centre Project
Hyprop
share (Rm) Completion date
Rosebank Mall Additional 4 300m2 rentable area 127,0 April 2018
The GlenFood court enclosure and
additional retail90,9 April 2018
Canal Walk Additional retail in La Piazza area 41,6 November 2017
Woodlands Nu Metro refurbishment 16,0 December 2017
TOTAL 275,5
▪ Refurbishment of the Hyde Park Corner offices (R14 million)
▪ Façade replacement of the Rosebank Mall offices (R10 million)
▪ Re-tenanting of the Stuttafords stores
Smaller
projects
completed
Planned ▪ Upgrade of food courts at Woodlands Boulevard and Canal Walk
Hyprop sustainability
16
Completed solar PV project at Clearwater Mall
Various water saving initiatives in the Western Cape
(use of borehole, capturing run off water, treatment of effluent grey water)
Use of grey and borehole water at The Glen
Installation of waterless urinals and aerators in the public bathrooms
Savings for the year
Electricity 3%
Water 19%
Recycle 80% of waste 1% improvement
INVESTMENT IN
SUB-SAHARAN
AFRICA
(excluding SA)
17
Ikeja City Mall, Lagos, Nigeria
NigeriaGhana
Zambia
Sub-Saharan Africa property locations
18
Accra, Ghana
▪ West Hills Mall 16,8%
▪ Accra Mall 17,6%
▪ Achimota Retail Centre 28,1%
Kumasi, Ghana
▪ Kumasi City Mall 28,1%
Lagos, Nigeria
▪ Ikeja City Mall 75,0%
Lusaka, Zambia
▪ Manda Hill Shopping Centre 68,8%
Hyprop ownership
Performance and market conditions Sub-Saharan Africa
Economic prospects in Ghana continue to improve, while Zambia and Nigeria are stable
Accra Mall
AttAfrica and Manda Hill portfolio
Ikeja City Mall
Achimota and West Hills
▪ Financial performance impacted by vacancies and tenant
replacements during the year
▪ Trading conditions and rent collection stable over recent
months
Manda Hill
Retain focus on further operational improvement
▪ Game will open in November 2018, which will strengthen
the tenant mix
▪ Burger King opened successfully
▪ Since year-end further progress with re-letting
▪ Impacted by re-tenanting of shops at the beginning of the
financial year
▪ Improved performance in 2nd half with further letting since
year-end
19
Income producing propertiesInvestment in Sub-Saharan Africa (excl. SA)
20
Centre City & country
Rentable
area m²
Vacancy %
rentable area
30 Jun 2018
Vacancy %
rentable area
30 Jun 2017
Ikeja City Mall Lagos, Nigeria 22 223 3,1 -
Manda Hill Lusaka, Zambia 42 002 4,1 5,4
Accra Mall Accra, Ghana 21 311 6,8 -
West Hills Mall Accra, Ghana 28 272 10,4 5,3
Achimota Retail Centre Accra, Ghana 15 534 1,9 6,1
Kumasi City Mall Kumasi, Ghana 18 604 13,0 26,5
Average vacancies 147 946 6,4 6,5
Delta City (Podgorica, Montenegro)
West Hills Mall, Accra, Ghana
INVESTMENT
IN SOUTH-
EASTERN
EUROPE
21
Hystead property locations
22
Macedonia, Skopje GLA (m²)
▪ Skopje City Mall 36 241
Serbia, Belgrade
▪ Delta City 29 850
Montenegro, Podgorica
▪ Delta City 23 718
Bulgaria, Sofia
▪ The Mall 51 211
Zagreb, Croatia
▪ City Center one - East 47 191
Zagreb, Croatia
▪ City Center one - West 42 373
Macedonia
Serbia
Montenegro
Bulgaria
Croatia
Hystead at a glance
23
A UK company, modelled on Hyprop
Six high quality dominant shopping centres in capital cities of five
countries – scale, credibility, bargaining power
Hyprop and PDI strategic shareholders – vast retail experience
Strong operational focus with a core competence in active asset
management by in-country people on site
Executive management team in Europe (CEO, CFO & COO)
European mandate, initial focus on South East Europe
Investment rationale
24
Markets catching up to Western peers in terms of
development
EU members or EU candidates (60/40 by value)
Strong macroeconomic fundamentals and favourable
retail environment
Stable currencies closely linked to Euro (or Euro itself)
Political stability and well-established property rights
Wide spread between funding costs and initial yield
(margin of safety)
Opportunity: Ownership of prime assets not dominated
by REITS or pension funds (yet)
Acquisitions
City Center one - East and West, Zagreb (Croatia)
The MallCity Center one,
East
City Center one,
West
Location Sofia, Bulgaria Zagreb, Croatia Zagreb, Croatia
Acquisition date Oct 2017 April 2018 April 2018
Price EUR 155 m EUR 283,5 m (90% share)
Yield 7,25% 7,00%
Expansion opportunities (m²) 12 000 10 000 13 600
25
Operating performance
26
Leasing 30 Jun 2018
Vacancies 0,1%
WALE 5,4 years
Euro based or linked leases 99%
Leases indexed to CPI or
fixed escalations 72%
Trading conditions and consumer spend
positive
All shopping centres growing NOI, most
showing strong growth
LFL NOI growth well in excess of inflation
All acquisitions performing in line or
better than estimated
Balance sheet
Debt maturity
profile
27
Property value
Weighted average loan tenor*
Average cost of debt*
Proportion of debt hedged*
€740 m
4,5 years
3,6%
45%
LTV* 47%
* non-recourse debt only
86%
0%
14%
0%
0%
0% 20% 40% 60% 80% 100%
4-5 years
3-4 years
2-3 years
1-2 years
< 1 year
Successfully converted bridge loan into non-recourse
term loan with EBRD/IFC (EUR 134m) in June 2018
The way forward
Execute asset management & redevelopment
initiatives
Align with Hyprop from a managerial and operational
perspective
Deliver the supermarket conversion project at The Mall
(Sofia)
Selective acquisitions to bolster scale and
diversification
28
FINANCIAL
RESULTS
29
Woodlands (Pretoria East, Gauteng)
30
30 Jun 2018
(R’000)
30 Jun 2017
(R’000)
Change
(%)
South African property portfolio 1 937 661 1 916 927 1,1
- Continuing operations 1 929 055 1 854 471 4,0
- Properties sold 8 606 62 456
Investments in sub-Saharan Africa (excl. SA) 78 368 56 972 37,6
Investments in South-Eastern Europe 187 802 101 823 84,4
Fund management expenses (65 142) (67 347) (3,3)
Net interest (280 846) (321 336) (12,6)
Other income 46 671 36 533 27,7
Distributable earnings 1 904 514 1 723 572 10,5
Distributable earnings
31
Reconciliation to dividend declared
30 Jun 2018
(R’000)
30 Jun 2017
(R’000)
Dividend for 6 months – first half 933 127 861 423
Dividend for 6 months – second half 971 387 862 149
Total dividend 1 904 514 1 723 572
Shares in issue – first half 247 995 018 248 030 619
Shares in issue – second half 255 448 256 247 899 032
Dividend per share (cents) – first half 376,3 347,3
Dividend per share (cents) – second half 380,2 347,8
Dividend per share (cents) 756,5 695,1
Dividend per share growth (%) - first half 8,3 16,6
Dividend per share growth (%) - second half 9,3 8,0
Dividend per share growth (%) 8,8 12,1
Balance sheet extracts
30 Jun 2018
(Rm)
30 Jun 2017
(Rm)
Change
(%)
Hyprop’s share
Investment property (South Africa) 28 785 27 860 3,3
Investments in sub-Saharan Africa
(excl. South Africa)4 470 4 482 (0,3)
South-Eastern Europe 3 843 2 681 43,3
Held-for-sale 199 427
Other assets (includes cash) 1 041 1 362
Total assets 38 338 36 812 4,1
Total debt 11 257 11 407 (1,3)
Net asset value per share (R) 102,98 99,78 3,2
32
78%
12%
10%
Core South Africanportfolio R29,0bn
Sub-Saharan Africa(excluding SA)
R4,5bn
South-Eastern EuropeR3,8bn
Investment profile
33
Property valuations South African portfolio
34
Category
Rentable
area
(m²)
Hyprop
share
(Rm)
% change
(from
30 Jun 2017)*
Value
(R/m2)
Cap rate
(%)
Shopping centres 653 258 27 352 3,3% 45 965 6,3 – 7,0
Value centres 48 848 1 303 4,4% 26 675 7,8
Stand-alone offices 20 354 323 3,9% 15 869 8,3 – 8,8
Total 722 460 28 978 3,3% 43 813 6,3 – 8,8
* Excludes properties sold
Property valuations
35
30 Jun 2018
(USD million)
30 Jun 2017
(USD million)
Total value 638 629
Ikeja City Mall 151 151
AttAfrica &
Manda Hill487 478
Hyprop share 283 282
Rentable
area (m²)
Value/
m²
Cap rate
(%)
147 946 USD 4 314 7,8 – 9,0
Rentable
area (m²)
Value/
m²)
Cap rate
(%)
230 584 EUR 3 347 6,7 – 9,2
30 Jun 2018
(EUR million)
30 Jun 2017
(EUR million)
Total value 740 300
Hyprop share 444 180
Sub-Saharan Africa (Excluding SA)
South-Eastern Europe
36
30 Jun 2018
(Rm)
30 Jun 2017
(Rm)
South African debt 2 950 4 114
▪ Bank debt 600 1 814
▪ Corporate bonds 2 350 2 300
USD bank debt (Rand equivalent) 4 513 4 391
EUR bank debt (Rand equivalent) 3 795 2 673
Cash and cash equivalents (715) (1 126)
Net borrowings 10 543 10 052
Loan-to-value 28,1% 28,9%
Effective debt management
2,673
4,391
2,300
1,814
3,795
4,513
2,350
600
0 1000 2000 3000 4000 5000
EUR debt(Rand equivalent)
USD debt(Rand equivalent)
DCM funding (SA)
Bank facilities (SA)
30 Jun 2018
30 Jun 2017
Sources of funding
37
R million
40%
21%
21%
16%
5%
% of total debt
24%
39%
34%
Rand denominated debtSouth African portfolio
38
Maturity profile 30 June 2018 (years) 30 Jun 2017 (years)
Fixed rates and swaps 3,8 3,9
Facilities 3,8 2,2
% of debt fixed 113,6 100,9
Average cost of funding 9,4 8,9
Rand debt Maturity date Status
R300m bond Sept 2017 Repaid
R450m bond Apr 2018 Repaid
R1,2bn bank debt Jun 2018 Repaid
New bonds
R452m bond Mar 2023
R348m bond Mar 2025
USD debtSub-Saharan Africa
39
Debt maturity profile 30 Jun 2018 (years) 30 Jun 2017 (years)
Fixed rates and swaps 2,4 2,7
Facilities 2,7 2,6
% of debt fixed 63,5 70,4
Average cost of funding 4,8 4,7
USD debt Maturity date Status
USD 40m Oct 2017 Re-financed for 3 years
as one facilityUSD 20m Nov 2018
USD 55m Dec 2017 Re-financed for 3 years
USD 17m May 2018 Re-financed for 3 years
EUR debtSouth Eastern Europe
40
30 Jun 2018 (%) 30 Jun 2017 (%)
% of debt fixed - -
Average cost of funding 1,7 2,2
EUR debt Maturity date Status
EUR 134,1m bridge loans Mar 2018Replaced with asset-backed
finance
EUR 104,5m bridge loan Oct 2018 To be refinanced with 3-year
term loans at an estimated
fixed interest of 2,1%EUR 127,2m bridge loan Sep 2018
OUTLOOK
& FOCUS
41
City Center one - East (Zagreb, Croatia)
Outlook & focus
42
▪ Very cautious outlook on the South African economy
▪ Focus on tenant retention and retaining the quality of the portfolio
South Africa
▪ Continue to focus on operational improvement
▪ Consider opportunities to reduce investment exposure
Sub-Saharan Africa (Excl. SA)
▪ Focus on asset management and expansion opportunities
▪ Consider further acquisitions
Dividend growth 5% to 7%
South-Eastern Europe
QUESTIONS
& ANSWERS
43
Delta City (Podgorica, Montenegro)
APPENDICES
44
City Center one - West (Zagreb, Croatia)
Company structure South African portfolio
100% owned
Co-owned
Held-for-sale
Somerset MallClearwater Mall Hyde Park Corner
Rosebank Mall Woodlands Boulevard CapeGate
Atterbury Value MartOffices
Cradock Heights
Canal Walk (80%) The Glen (75,15%)
Lakefield
45
SOUTH
AFRICA
Offices:
46
100% owned
AttAfrica
(Mauritius)
Manda Hill
(Zambia)
Ikeja City Mall
(Nigeria)
Accra Mall
(Ghana)
West Hills
Mall
(Ghana)
Achimota Retail
Centre
(Ghana)
Kumasi City
Mall
(Ghana)
37,5% 50% 75%
50%
Hyprop Investments Mauritius
47% 75% 75%45%
Company structure Sub–Sahara African portfolio
SUB-
SAHARAN
AFRICA
100%60%
owned
Company structure South-Eastern Europe portfolio
100%
SOUTH-
EASTERN
EUROPE90%
Delta City
Belgrade
(Serbia)
Delta City
Podgorica
(Montenegro)
Skopje City
Mall
(Macedonia)
The Mall
Sofia
(Bulgaria)
City Center
one - East,
Zagreb
(Croatia)
City Center
one - West,
Zagreb
(Croatia)
47
100% 100% 90%
Hystead Limited
(established in the UK)
Credible track record
48
17.418.7
20.2
26.428.6
33.4 33.3 34.0
12.9
17.719.0 19.3
29.4 31.6
29.0
26.2
26.2%
23.1% 22.9%26.6%
23.1%
30,8%28.9% 28.1%
0%
15%
30%
45%
60%
0
4
8
12
16
20
24
28
32
36
Jun 2011 Jun 2012 Jun 2013 Jun 2014 Jun 2015 Jun 2016 Jun 2017 Jun 2018
Investment property
Market cap
LTV %
Rbn LTV %
% Gross rent to turnover
49
11.2%
10.6%10.1%
9.0% 8.9%8.7%
8.3%
7.8%
6.6%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
11%
12%
13%
The GlenShopping Centre
Hyde Park Corner Canal Walk Atterbury ValueMart
Clearwater Mall Rosebank Mall WoodlandsBoulevard
Somerset Mall CapeGate Mall
Deterioration
Improvement
Portfolio average: +9,1% (2017: +8,6%)
3%
7%
7%10%
8%
3%7%
2%
1%
Trading density
50
Per month (R/m²)
3 990
3 4133 330
3 042
2 754 2 748
2 549
2 2632 128
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
4 500
5 000
Hyde Park Corner Canal Walk Somerset Mall Clearwater Mall CapeGate Mall Rosebank Mall WoodlandsBoulevard
Atterbury ValueMart
The GlenShopping Centre
6%
3%
0%1%
1%
Average portfolio growth: +0,5% (2017: +1,4%)
4%
3%
7% 2%
Rent ratio
51
6.9% 7.1% 7.3%
8.5%9.1%
0%
2%
4%
6%
8%
10%
Jun 2014 Jun 2015 Jun 2016 Jun 2017 Jun 2018
Rental as % of turnover
Top 8SA properties
52
Canal Walk (80% undivided share)
Clearwater
Region Johannesburg
Total rentable
area (m²)87 083
Vacancy levels 2,3%
Foot count 10,2 million
Region Cape Town
Total rentable
area (m²)158 396
Vacancy levels 0,2%
Foot count 20,1 million
Woodlands
Region Pretoria
Total rentable
area (m²)71 643
Vacancy levels 0,9%
Foot count 8,1 million
Rosebank Mall
Region Johannesburg
Total rentable
area (m²)65 886
Vacancy levels 1,1%
Foot count 11,7 million
Top 8SA properties (cont.)
53
CapeGate
Region Cape Town
Total rentable
area (m²)63 765
Vacancy levels 0,5%
Foot count 11 million
The Glen (75,15% undivided share)
Region Johannesburg
Total rentable
area (m²)80 428
Vacancy levels 5,4 %
Foot count 11,5 million
Hyde Park Corner
Region Johannesburg
Total rentable
area (m²)38 764
Vacancy levels 1,9%
Foot count 4,5 million
Somerset Mall
Region Cape Town
Total rentable
area (m²)69 054
Vacancy levels 0,1%
Foot count 10,9 million
DisclaimerForward-looking statements
▪ This document contains forward-looking statements that, unless otherwise indicated, reflect the group’s expectations as at 30 June 2018
▪ Actual results may differ materially from the group’s expectations if known and unknown risks or uncertainties affect its business, or if estimates or assumptions prove inaccurate
▪ The group cannot guarantee that any forward-looking statement will materialise and, accordingly, readers are cautioned not to place undue reliance on any forward-looking statements
▪ The group disclaims any intention and assumes no obligation to update or revise any forward-looking statement even if new information becomes available as a result of future events or for any other reason, other than as required by the JSE Listings Requirements
54