- Dividend up 8,3%.
- South African portfolio still performing positively despite tough economy.
- SEE portfolio remains strong and benefiting from recent acquisitions.
Hyprop has reported solid growth in distributions of 8.3% for the six months to December 2017. The growth has been attributed to a stable performance from the South African shopping centres as well as the strengthening of the company’s South-Eastern European portfolio.
Prior-year acquisitions in South-Eastern Europe proved successful with the acquisition trail continuing post period-end. Hyprop declared a dividend of 376,3 cents per share for the period (Dec 2016: 347,3 cents).
“South African shopping centres achieved positive trading results in a tough market, recent acquisitions in South-Eastern Europe boosted consistently strong trading in the portfolio and the inclusion of Ikeja Mall in Nigeria also made a small difference in the period” comments CEO, Pieter Prinsloo who says that each of Hyprop’s three core geographic portfolios contributed to the REIT’s ongoing growth in distributable income.
Retail vacancies in the South African portfolio dropped significantly, mainly due to the re-letting of a significant part of the three Stuttafords stores despite a weaker retail environment. Prinsloo points out that the benefits will be felt in the next six months as most new lettings were only income-producing from November 2017. Excluding the Stuttafords vacancies and construction work, growth in distributable income from South Africa was 5,2%. Actual distributable income growth was 2,1%.
Construction work relating to the ongoing developments and extensions negatively impacted on certain malls’ trading performances in the period. Canal Walk is now benefitting from the successful opening of two new flagship stores in November 2017 in the reconstructed La Piazza area, and a new 4 600m² H&M in the former Stuttafords store. The extensions at The Glen and Rosebank Mall are set to open from May 2018. The full development and expansion programme is estimated to total R290 million and Prinsloo says any short-term dilution will translate into an improved quality retail offering and sustainability in the medium- to long-term. He adds that the c.R20 million to be spent in the Western Cape is critical to increase independent water supply to Hyprop’s centres there.
“The year-on-year reduction in water usage at our Western Cape malls currently sits around 30%, which confirms we are on the right track.”
Hyprop enjoyed some benefit from the sub-Saharan portfolio. “Economic growth prospects in Nigeria and Ghana have improved and we have seen a general increase in trading densities in Ghana,” says Prinsloo.The promised inclusion of Ikeja City Mall in Nigeria boosted results. Manda Hill remains challenging although with the improved tenant mix, the centre is now focussed on operational progress.
In South-Eastern Europe* Hyprop continued to reap the extensive benefit of well-performing assets including recent acquisitions. All centres in the portfolio improved trading and maintained nearly-full occupancy in the period. Demand for space remains strong. Distributions benefitted from the inclusion of the Skopje City Mall in Macedonia and The Mall in Sofia in Bulgaria. Looking ahead Prinsloo says the promising retail environment in the region should continue supporting growth.
Portfolio expansion is progressing with the post period acquisitions of two more dominant regional shopping centres, this time in Zagreb, Croatia. Hyprop’s 60% share of the purchase price is c. EUR77,5 million (total purchase price EUR129,1 million).
Prinsloo explains: ”The ongoing acquisitions fit with Hyprop’s strategy to own quality, income-producing malls in South Eastern Europe,” and adds that “with Hystead’s gross asset value at over EUR740 million, the portfolio is starting to achieve sizable scale in the region”.
For the next six months to year-end Prinsloo welcomes the more positive sentiment and outlook for South Africa which should improve consumer confidence, but cautions that this will take time to translate into a turnaround in the economy. Hyprop is forecasting 8% – 10% growth (September 2017 forecast was 7% to 9%) in dividends for the full year to 30 June 2018.
Hyprop’s share closed yesterday at R109.51.
*The SEE portfolio is housed in Hystead, in which Hyprop owns a 60% stake.