Directors' report

for the year ended 30 June 2018

The directors have pleasure in submitting their report, which forms part of the consolidated financial statements, for the year ended 30 June 2018.

Responsibility statement

The directors are responsible for the preparation and fair presentation of the consolidated financial statements of Hyprop, comprising the consolidated statement of financial position, the consolidated statement of profit or loss and other comprehensive income, changes in equity and cash flows for the year then ended, as well as the notes to the consolidated financial statements, which include a summary of significant accounting policies and other explanatory notes, in accordance with IFRS, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, and financial pronouncements as issued by the Financial Reporting Standards Council, and the requirements of the Companies Act of South Africa, and the directors' report.

The directors are also responsible for such internal control as the directors determine necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error, and for maintaining adequate accounting records and an effective system of risk management.


Hyprop is a specialist shopping centre REIT and operates a portfolio of shopping centres in South Africa (SA), sub-Saharan Africa (excluding SA) and South-Eastern Europe.

The portfolio in South Africa includes super regional centre Canal Walk, large regional centres Clearwater, The Glen, Woodlands, CapeGate, Somerset and Rosebank Mall, regional centre, Hyde Park Corner, and value centre Atterbury Value Mart.

The sub-Saharan African portfolio (excluding SA) includes interests in Accra Mall, West Hills and Achimota Retail Centre (all in Accra, Ghana), Kumasi City Mall in Kumasi, Ghana, Manda Hill Centre in Lusaka, Zambia and Ikeja City Mall in Lagos, Nigeria.

Hyprop's investments in South-Eastern Europe, held via a 60% interest in UK-based Hystead Limited (Hystead), include Delta City Belgrade, Serbia, Delta City Podgorica, Montenegro, Skopje City Mall in Skopje, Macedonia, The Mall in Sofia, Bulgaria (acquired October 2017) and a 90% interest in City Center One Zagreb East and City Center One Zagreb West, both in Zagreb, Croatia (acquired in April 2018).


Hyprop's strategy is to own dominant, quality shopping centres, where such assets can be acquired, or developed at attractive yields. Due to limited acquisition opportunities in South Africa, consideration is given to investments in other markets, where existing assets can be acquired at attractive yields and where attractive development opportunities exist.

Directors' interests

The interests of directors in the shares of the company at 30 June were:

Direct   Indirect   Indirect   Direct   Indirect   Indirect  
Gavin Tipper 4 000   4 000  
Louis Norval 3 447 855   3 500 000  
Stewart Shaw-Taylor 21 500   21 500  
Kevin Ellerine 378 000   378 000      
Nonyameko Mandindi 2 940   2 250  
Pieter Prinsloo 344 724   325 202  
Laurence Cohen 181 777   171 259  
25 500   907 441   3 447 855   25 500   876 711   3 500 000  

There were no changes to the interests of the directors between year-end and the date of approval of these consolidated financial statements.


During the year, the following disposals were completed:

Sale price   Transfer date  
Willowbridge North R225 million   September 2017  
Greenstone – vacant land R4,5 million   June 2018  
Total R229,5 million  

A conditional sale agreement has been concluded for the last remaining non-core property in the portfolio, Lakefield Office Park.

Capital structure

Hyprop is a REIT (Real Estate Investment Trust) in terms of the South African Income Tax Act (the Act) and in terms of the JSE Listings Requirements. In terms of section 25BB of the Act, the twice yearly dividend declared to Hyprop shareholders is deductible against Hyprop's taxable income. As a consequence of this deduction, South African income taxation is usually reduced to zero, and dividends received by South African Hyprop shareholders are received free of any South African income taxation at a Hyprop level.

Hyprop currently pays out 100% of distributable earnings as dividends to shareholders and therefore the company does not pay corporate income taxation. All other group entities pay in-country taxes as required. Refer to note 1.21 – Taxation.


Laurence Cohen (FD) resigned from the board, effective 31 July 2018. Brett Till has been appointed as the FD and will commence employment on 1 October 2018.

Zuleka Jasper was appointed to the board as an independent non-executive director on 5 July 2018. On the same date, Wilhelm Nauta joined the board as an executive director.

The board thanks Laurence for his valuable contribution over the last 15 years and welcomes the new directors to the board.

Directors who served during the financial year are as follows:

GR Tipper(1) MJ Lewin(1)
PG Prinsloo(3) L Norval(2)
LR Cohen(3) S Shaw-Taylor(1)
KM Ellerine(2) TV Mokgatlha(1)
L Engelbrecht(1) N Mandindi(1)
(1) Independent non-executive
(3) Non-executive
(3) Executive

Subsidiaries, joint arrangements and joint ventures

Disclosure of investments in subsidiaries, joint arrangements and joint ventures is included in notes 4 to 6 to the consolidated financial statements.

Administration and management

Property and asset management in Hyprop's South African operations are fully internalised. No property or asset management fees were paid in South Africa during the year.

Investments in sub-Saharan Africa (excluding South Africa)

Certain of the properties in the portfolio have been negatively affected by the economic conditions in recent years and are producing lower investment returns than originally anticipated and consequently the income to be received from those properties over the next few years will be lower than previously modelled. As at year-end the shareholder loans in AttAfrica and Manda Hill, which reflect Hyprop's share of the value of the underlying property investments at group level, have been impaired as appropriate.

Hyprop is investigating a reduction of its exposure to the investments in sub-Saharan Africa (excluding SA).

Investments in South-Eastern Europe

Hyprop's investments in South-Eastern Europe are held through a UK company, Hystead, in which Hyprop has a 60% interest. The portfolio consists of six high-quality, dominant shopping centres, located in five capital cities in South-Eastern Europe. In terms of the Hystead shareholder agreement (the shareholder agreement), Hyprop has joint control of Hystead.

The shareholder agreement also provides that, to the extent that Hystead receives distributions from its property investments, a contractual right by the Hystead shareholders have a contractual right to receive dividends from Hystead. This contractual right to receive dividends results in the investment in Hystead being accounted for as an investment in a financial asset (in terms of IFRS). Refer to note 7 – Financial asset.

Hystead acquired The Mall, Sofia in Bulgaria in October 2017 and City Center One East and City Center One West in Zagreb, Croatia in April 2018.

Funding in Hystead of EUR396 million has been provided through bank loans secured by shareholder guarantees, of which Hyprop's portion is EUR275 million. As per the shareholders' agreement, Hyprop guarantees 90% of the funding and PDI Investment Holdings Limited (PDI), Hystead's other shareholder, 10%. PDI provides further back-to-back guarantees to Hyprop for 11,7% of the total amount and for the remaining 18,3% of the PDI share that Hyprop guarantees. Hyprop receives 60% of the related PDI dividend as credit enhancement income. This agreement is in place until May 2021.

EUR234 million of the total funding in Hystead, provided by way of bridge loans, will be refinanced by October 2018 through three-year term loans, at an estimated average fixed interest rate of 2,10%. The balance of the funding comprises three-year term loans that expire in May 2020.

Audit and risk committee report

The audit and risk committee fulfilled its responsibilities during the year (refer to its report here for details). The committee satisfied itself as to the independence of the external auditor.


KPMG Inc. was appointed as the external auditor in accordance with part C of section 90 of the Companies Act of South Africa. The external auditor's report to the shareholders on whether the consolidated financial statements are fairly presented in accordance with the applicable financial reporting framework follows here.

Directors' interest in contracts

No material contracts in which the directors have an interest were entered into during the year, other than those detailed in note 33 – Related parties and related-party transactions, to the consolidated financial statements.

Going concern

The directors are of the opinion that the group and its subsidiaries have adequate resources to continue operating for the foreseeable future and that it was appropriate to adopt the going concern basis in preparing the consolidated financial statements.

The directors have satisfied themselves that the group and its subsidiaries are in a sound financial position and that they have access to sufficient borrowing facilities to meet their foreseeable cash requirements.

Trading statements

Hyprop uses dividend per share as the measure of financial results for trading statement purposes.

Approval of the consolidated financial statements

The consolidated financial statements of Hyprop Investments Limited, as identified in the first paragraph, were approved by the board of directors on 31 August 2018.

Company annual financial statements

The integrated report includes the audited consolidated financial statements. The audited financial statements of the company are available for review and inspection at the registered office of the company.

Gavin Tipper
  Pieter Prinsloo
Chairman Chief executive officer


31 August 2018