Hyprop Investments has reported distributable income of R1.035 billion for its financial year ended on 30 June 2021, equivalent to 336.5 cents per share (2020: 493.4cps), following a 21% increase in the number of shares in issue due to its 2020 dividend reinvestment plan and accelerated bookbuild in April 2021.
These results were also impacted by negative reversions, the effect of rental discounts granted to tenants and R119 million less income received from Hystead (its Eastern European portfolio) which reduced the company’s distributable income by R278 million or 90 cents per share. A dividend of 336.5 cents was declared and shareholders will have the option of reinvesting the net cash dividend in return for additionally Hyprop shares through a dividend reinvestment plan.
During the reporting period, Hyprop repaid more than R1 billion in debt, bringing its total debt repayments for the past two years to over R2 billion. Its loan-to-value (LTV) ratio at yearend of 37.2% was well below the LTV covenant of 50%. The R1.1 billion proceeds from the sale of Atterbury Value Mart, which was completed just shortly after yearend, will further reduce its LTV to 34.9%. The interest cover ratio was constant at 3.0 times, aided by a decrease in the net interest costs from R548 million to R522 million.
Hystead has accepted an offer to sell Delta City in Begrade for €115 million with the proceeds to be used to reduce Hystead’s euro equity debt.
While some of its significant new lettings for 2021 include Checkers FreshX stores in Rosebank Mall and Woodlands, and Starbucks stores in Canal Walk, Somerset West, and Woodlands, trading metrics for its local portfolio are still below pre-Covid-19 levels with current average monthly footfall 7.6% lower than in 2020. Tenant turnover rose by 3% and trading density was down 2.5% with total retail vacancies remaining stable at 2.4%. New leases were concluded with the buyers of the former Edcon brands with its exposure to CNA reduced from 5 stores to one through re-lettings.
“Covid-19 remains a risk, as does the underperforming local economy,” commented CEO, Morne Wilken.
“Consumer spending is expected to remain under pressure and consumer behaviour will continue to evolve. While we anticipate further negative rent reversions in South Africa in the short-term, our repositioning strategies and strong balance sheet position will enable Hyprop to successfully navigate these challenges and reset the base for growth in long-term”.
In its implementation of its non-tangible strategy, Hyprop successfully opened its SOKO District at Rosebank Mall while achieving good progress in repositioning its local portfolio by rolling out its ‘Golden Thread’.
SOKO is the world’s first platform that enables digital-first retailers’ access to flexible physical space, book the space, build a store, and sign a lease in under ten minutes online. It also provides landlords with access to a platform that allows them to manage a pipeline of digital-first retailers. Hyprop currently has a waiting list of 168 online retailers for SOKO.
The Golden Thread entails the further repositioning of the South African shopping centres around three key pillars – place, brand, and people. The company is evolving from a traditional mall structure to an omni-channel environment that offers customers excitement, personalization, and experience-led spaces. The repositioning will create a distinct personality for the malls around a ‘town square’ concept and allows all Hyprop malls to be connected through a unified set of services, offerings, and experiences. Hyprop’s overriding goal is to create safe environments and opportunities for people to connect and have authentic and meaningful experiences.
“The ongoing strategic repositioning of the South African portfolio is vital to improving footfall, tenant performance and ultimately rental income growth. With the ongoing impact of the pandemic on our centres and the environments within which we operate, we expect relatively low rental income growth for the next two years. This underlines the need for the company to continue the process of repositioning its malls to ensure that they remain relevant in an ever-changing retail landscape. We are confident that our Golden Thread initiative will assist with just that” he said.
Trading conditions in Nigeria and Ghana remained challenging, reflecting economic conditions in the region, however Ikeja Mall remains fully let and produced a good result, while the trading performance of the Ghanaian malls improved. Total vacancies in sub-Saharan Africa were 12.1%, while net property income rose 31%. Hyprop continues to pursue an exit from its sub-Saharan investments.
While over 40 new stored were opened across its Eastern European (EE) portfolio, Hystead has taken longer to recover. While most EE centres resumed normal trading from late April, some Covid-19 restrictions remain in place. Average monthly footfall was 15.6% lower than in 2020 with trading density down 7.6%. However, spend per head was 12.9% higher and retail vacancies were 0.3%, underscoring the dominance of these centres in their markets.
Wilken says the group’s strategy and key priorities remain relevant, even in the event of a prolonged Covid-19 environment. Key focus areas for the year ahead include completing negotiations on the agreement with PDI Investment Holdings to take control of the Hystead portfolio, strengthening the balance sheet, repositioning the South African portfolio for future growth, increasing the dominance of the Eastern European properties, extracting value from Africa whilst pursuing the exit strategy, and growing the non-tangible asset base.