Release Date: March 13, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Hyprop Investments Ltd (JSE:HYP, Financial) successfully reduced its consolidated loan-to-value ratio from 52% in June 2020 to 36.3%, strengthening its balance sheet.
- The company increased its distributable income by 14.5% to 765 million rand, with a corresponding 14.4% increase in distributable income per share.
- Hyprop Investments Ltd (JSE:HYP) improved its tenant mix and operational performance in South Africa, with tenant turnover and trading density both increasing by 4.9%.
- The Eastern European portfolio delivered strong results, with an 8.8% increase in tenant turnover and a 7.5% positive rent reversion.
- The company declared an interim dividend of 1$0.13 per share, representing 95% of its distributable income from South Africa, up from 90% previously.
Negative Points
- Hyprop Investments Ltd (JSE:HYP) experienced a slight increase in vacancy rates in its South African portfolio to 2.4%, although still below market norms.
- Interest costs increased by 110 million rand due to the debt-funded acquisition of Table Bay Mall and higher average borrowing costs.
- The company faces challenges in selling large assets in South Africa due to their size, which limits potential buyers.
- Operating costs in the Eastern European portfolio increased by 9% due to rising wages and electricity prices.
- The fair value of the Lango shares was negatively impacted by the termination of the Lango Asset Management contract, resulting in a 105 million rand impairment.
Q & A Highlights
Q: On the payout ratio, you mentioned that you would be looking to increase it further over time. What is your target, sustainable payout ratio, and over what timeline would you expect this to materialize?
A: We haven't put that out in the market. We will review the payout ratio at the end of the financial year. Our focus is on reducing our debt in the Eastern Europe portfolio, currently at 47%. We will consider market conditions and debt levels before deciding on any increase in the payout ratio.
Q: Property operating expenses reduced sharply relative to rent over the last 2.5 years. Does this reflect lower levels of load shedding? What would the impacts of load shedding over the weekends at recent levels be in the second half of 2025?
A: It's a combination of factors. We've managed costs effectively, benefited from solar installations, and experienced no load shedding in the last six months. Current weekend load shedding levels are too small to quantify a difference for the rest of the financial year.
Q: What are the key issues regarding monthly leases not yet signed? Is there a material divergence between the tenant and the landlord?
A: Each lease has its unique circumstances. Some are under negotiation, others involve tenant relocations or store upgrades. We monitor these closely and drive teams to finalize them, but there's no single reason for month-to-month leases.
Q: Can you elaborate on the financial impact of the office development agreement at Cape Gate?
A: The deal is structured with an upfront payment and ongoing leasehold income. We generate annuity income from the transaction, ensuring control over site developments to complement the mall.
Q: There's a big increase in CapEx plans. Can you give some color on these? Will GLA change as a consequence?
A: The major GLA change is the 5,500 square meters under construction at Somerset Mall. Office developments are on a leasehold basis, providing passive income without adding GLA to our portfolio.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
