Hyprop presented a solid set of operating results for FY24, slightly ahead of guidance. HYP’s past conservative distribution policy, reflected in negative historic share price movements, has left it with a reasonable LTV and the ability to grow. While the DIPS contribution from Table Bay was negative, Table Bay performed in line with our expectations and has shown higher growth than the rest of HYP’s retail portfolio.
Cost control during the year was very good, with cost increases of 3.5% and 5.8% for SA and EE, respectively, well below rental growth. The drag on DIPS was from the increase in interest expense, which rose 19.1% and 77.5% for SA and EE, respectively. We expect interest costs to increase slightly into FY25, as refinanced debt and hedges rolled off in FY24 take full effect. However, we expect this to be offset by strong operational performance. HYP has benefited from less loadshedding, which has improved solar yields and reduced operating costs.
With the strong operating performance and positive FV adjustments in SA and EE, as well as lower EE equity debt, HYP’s LTV is 37.7%. The sale of SSA will allow management to focus on the core segments and decrease LTV by 1.2%. HYP has made significant progress in reducing its EE equity debt to just €90m (from €403m) and is now well placed for possible expansion.
HYP’s cash ICR, while low, was better than expected at 2.4x, and this should improve in FY25. We show that HYP’s distributable income approximates its operating profit and cash flow, and this is sustainable. Management has hinted at possible acquisitions in EE; as with Table Bay, we would expect these to be initially DIPS-destructive.