Hyprop has reported an improvement in its distributable income for the year ended June 2024 of R1.41 billion (370.40 cents) when compared to its March 2024 guidance but a reduction of 8.6% from 405.20 cents reported for FY2023, owing to higher interest costs for longer, an increase in issued shares due to the dividend reinvestment plan, further foreign exchange losses on its Nigerian assets, and the acquisition of Table Bay Mall.
“The Group’s outlook is positive despite the difficult global economic environment and unique challenges in each of the regions in which we operate,” commented CEO Morné Wilken. “We are optimistic that the peak of inflation and interest rates is near, but the Group’s financial performance will still be negatively impacted in the short term by high interest costs and the timing of the implementation of the sale of the sub-Saharan Africa portfolio.”
During the reporting period, Hyprop acquired Table Bay Mall for R1.68 billion which continues to trade well. Since yearend, the Group has also signed binding legal documents to dispose of its sub-Saharan Africa portfolio (excluding South Africa) comprising centres in Nigeria and Ghana to Lango Real Estate Limited in exchange for Lango shares.
Over the past five years, the Group says it has taken steps to reinforce its balance sheet with its loan-to-value (LTV) ratio maintained at 36.4%, despite the debt funded acquisition of Table Bay Mall and impairment of the Sub-Saharan Africa portfolio. As at the end of June 2024, Hyprop was in a strong liquidity position with R803 million of cash and R2 billion of available bank facilities. At present, 80% of the interest rate exposure is hedged.
The Group’s nine centres (four in the Western Cape and five in Gauteng) in its South African portfolio achieved higher tenant turnover, foot count, and trading density with the overall rent reversion rate improving to a positive 5.8% compared to a negative 7% the previous year.
Canal Walk opened 20 new stores during the reporting period with Somerset Mall launching a new Checkers FreshX and an upgraded Pick n Pay Hypermarket. Somerset Mall is in the process of a two-year expansion project which will add 5 400m2 of gross lettable area (GLA).
Rosebank Mall is benefitting from an improved tenant mix, reporting a 10.9% increase in tenant turnover and 8.5% growth in foot count with Woodlands opening three new drive-thrus for Steers, Burger King, and Chicken Licken.
At Hyde Park corner, the renovation of the north office block and The Forum is progressing well. Workshop17 and The Forum will open in October 2024.
The independent valuation of its SA property portfolio was R25.4 billion in June 2024 (2023: R23.03 billion). The revaluation includes the costs of acquiring Table Bay Mall.
Its assets in its Eastern European (EE) portfolio benefited from wage escalations in Europe as well as lower inflation and electricity prices across the region. Trading density rose by 8.9% year-on-year with retail vacancies at yearend 0.1%, an improvement from 0.3% the year before.
The Mall in Bulgaria completed a new staircase link from the centre into the new food court, which should improve the performance of the food tenants. Despite new legislation in Croatia that limits trading hours, City Center one East grew tenant turnover by 10.9% and trading density by 11%. City Center one West’s tenant turnover increased by 11.4% and trading density by 12.2%. Skopje City Mall enjoyed its most successful year since opening, with tenant’s turnover up by 7.5% and trading density by 8% compared with 2023. This year, a project will be completed to centralise all the ATMs and upgrade the Cineplexx complex.
The valuation of the EE portfolio increased from €574.7 million (R11.8 billion) in June 2023 to €610 million (R11.9 billion) in June 2024.
Weak economic conditions in West Africa, particularly in Nigeria, affected the trading performance of its Sub-Saharan Africa portfolio, as did the marked depreciation of local currencies against the dollar.
Ikeja City Mall in Nigeria has welcomed four new tenants, reducing its vacancy rate to below 1% at present from 2.1% at end-June 2024. In Ghana, replacement tenants were secured for the space vacated by Game in December 2022: ten-year leases have been signed by Melcom and Decathlon in all three of the centres.
The transaction to dispose of the portfolio to Lango Real Estate is expected to be completed before the end of 2024.
“More positive sentiment is evident in businesses, consumers and retailers in South Africa as a result of the formation of the Government of National Unity and more stable electricity supply. Globally, interest rate cuts are anticipated from the US Federal Reserve, which should encourage the South African Reserve Bank to cut rates also, giving much-needed relief to consumers, in turn having a positive impact on our operations” said Wilken.
A final dividend of 280 cents per share (2023: 299.3 cents per share) was declared in line with the dividend policy being 75% of the distributable income from the SA and EE portfolios.
