Retailer Pick n Pay yesterday was caught in the crossfire of real estate company Hyprop explaining in a trading statement for the interim period why it can’t dish up a dividend when it reports its results today.
Hyprop for the interim period ended December 31, 2023, cited economic uncertainties from the waning fortunes of Pick n Pay, one of its bigger tenants, as part of the reasons for its decision to skip its interim dividend.
Hyprop’s shares yesterday slid 4.2% to close at R31.05, while Pick n Pay shares fell 2.13% to close at R17 as the market digested the lack of a dividend.
Hyprop also mentioned potential political upheavals from the upcoming May 2024 elections and continued devaluation of Nigeria’s naira currency for the decision to skip the interim dividend for the period to December 2023.
In September, Hyprop had cautioned that it expected a reduction in distributable income per share for the year ending June 30, 2024 of approximately 10% to 15% mainly due to higher interest costs.
Although Hyprop’s South African and eastern European portfolios delivered strong operational performances during the interim period to December.
Approached for comment, Tamra Veley, a spokesperson for Pick n Pay, said in response, “We have not notified Hyprop of any store closures. Their rent remains paid and will continue to be paid in full. We engaged with Hyprop today (Tuesday), and they confirmed their intention with the statement was not to list us as a reason for not declaring a dividend. We trust this will be effectively communicated tomorrow.”
Business Report has reported that while Pick n Pay is highly indebted, it has managed to secure a reprieve from banks it owes after renegotiating terms of its loans.
Pick n Pay announced on Friday that FirstRand had thrown Pick n Pay a lifeline, with the South Africa debt laden grocer renegotiating terms for loans it carries on its books ahead of a stated Boxer spin-off and separate initial public offering.
Market analyst Simon Brown told Business Report this week that Pick n Pay is in deeper financial troubles. “Pick n Pay is in trouble and they need cash pronto,” he said.
Other analysts said Pick n Pay could be seeking lease renegotiations with some of its landlords given the financial troubles it is facing.
Wayne McCurrie, a wealth and investments analyst with FNB, said Hyprop had exposure to troubled Pick n Pay.
“I am sure Mr Summers (Pick n Pay CEO) will be knocking on their, and other landlords, soon about lease terms,” he said.
McCurrie described Hyprop’s decision to skip a dividend for the period under review as “unusual”.
Earlier this month, Hyprop, which owns Rosebank Mall, Hyde Park and Canal Walk malls, concluded the acquisition of the Table Bay Mall in Cape Town encompassing a 100% control of the mall’s lease agreements and other commercial agreements.
Apart from South Africa, Hyprop’s African portfolio also includes shopping centres in Ghana and Nigeria which are held through Hyprop Mauritius. In Europe, Hyprop has properties in eastern European nations of Croatia, Bulgaria and North Macedonia.
Hyprop has had to undertake significant investments into solar and diesel generator solutions to contain the impact of electricity load shedding in South Africa. In 2023, the company saw the cost of running diesel generators balloon from R17 million to R104m.
“Although most of these costs can be on-charged to tenants, this increases their cost of occupancy and is not a sustainable long-term solution. There is still a lot to do to ensure energy security for the country and stimulate economic growth,” Hyprop said in September.
BUSINESS REPORT