F. OTHER ASSETS
F1 LOANS RECEIVABLE
F1.1 Accounting policy
 

Loans receivable are carried at amortised cost using the effective interest method, less any accumulated impairments. Interest earned on loans receivable is recognised on an accrual basis using the effective interest rate method, other than loans which are credit impaired (stage 3 loans) where interest is only accrued on the net balance (i.e. the outstanding balance less credit impairments).
F1.2 Key assumptions and estimations
 

The key assumptions and estimates which have an effect on the group’s loans receivable are set out below.

Recovery of loans receivable

The underlying investment properties in the group’s sub-Saharan African (excluding South Africa) portfolio have been negatively affected by the economic conditions of recent years and are producing lower investment returns than what was previously anticipated. In addition, during the year the group reviewed its strategy resulting in a revised three-year strategic plan. This led to a decision to exit the group’s sub-Saharan Africa investments within the next 12 to 18 months.

The shareholder loans to AttAfrica and Manda Hill, which reflect Hyprop’s share of the value of the underlying property investments at group level, have therefore been impaired.

Key estimates and judgements made in determining the impairments were as follows:

  • The decision to sell the underlying investments
  • The anticipated market values at which the companies/properties may be sold
  • The costs likely to be incurred in order to sell the companies/properties
  • The remaining period of the loans
  • The expected performance of the underlying investments
  • The probability of the loans being restructured/refinanced beyond the current maturity dates.

In calculating the recoverability/impairment no probability-weighted outcomes are used as the directors have assumed a 100% loss given default on the calculated shortfall.
F1.3 Changes in accounting policies and disclosures
  IFRS 9: Financial instruments    Loans receivable are affected by the group’s application of IFRS 9. This note should be read in conjunction with note A3.1 – Financial instruments.
    GROUP     COMPANY  
    30 June 2019 
R000 		 30 June 2018 
R000 		     30 June 2019 
R000 		 30 June 2018 
R000 		  
F1.4 Net carrying value              
   Non-current  18 847  2 937 445        72 450  18 723    
   USD loans receivable from Investments in sub-Saharan Africa  –  2 918 721        –  –    
   EUR loans receivable  18 847  18 724        18 847  18 723    
   ZAR loans receivable from subsidiaries  –  –        53 603  –    
   Current  1 333 106  40 716        –  84 160    
   EUR loans receivable from Hystead  –  40 716        –  40 716    
   ZAR loans receivable from subsidiaries  –  –        –  43 444    
   USD loans receivable from Investments in sub-Saharan Africa  1 333 106  –        –  –    
   Total  1 351 953  2 978 161        72 450  102 883    
   Loan balances receivable  3 007 898  3 169 979        1 557 839  102 883    
   Cumulative impairments  (1 513 433) (191 818)       (1 485 389) –    
   Cumulative fair value adjustments  (142 512) –        –  –    
   Total  1 351 953  2 978 161        72 450  102 883    
F1.5 Loan details*
 
            GROUP     COMPANY  
  Non-current 30 June 2019 
FC000 		 30 June 2018 
FC000 		     30 June 2019 
R000 		 30 June 2018 
R000 		     30 June 2019 
R000 		 30 June 2018 
R000 		  
USD denominated loans receivable  –  –        –  2 918 721        –  –    
AttAfrica  –  USD 173 350        –  2 375 009        –  –    
   Loan balance  –  USD 184 757        –  2 531 287        –  –    
   Impairment  –  (USD 11 407)       –  (156 278)       –  –    
Hyprop Mauritius  –  –        –  –        –  –    
   Loan balance  USD 1 770  –        –  –        25 052  –    
   Impairment  (USD 1 770) –        –  –        (25 052) –    
   The loan is unsecured, bears interest at an agreed rate of 4,5% and is repayable on 12 months written notice.                                  
Manda Hill Mauritius  –  USD 39 685        –  543 712        –  –    
   Loan balance  –  USD 42 279        –  579 252        –  –    
   Impairment  –  (USD 2 594)       –  (35 540)       –  –    
EUR denominated loans receivable  –  –        18 847  18 724        18 847  18 723    
Vondelvlag Holding                                  
   Loan balance  EUR 1 040  EUR 1 020        16 431  16 324        16 431  16 323    
   The loan is unsecured, bears interest at 3,15% per annum, payable quarterly, and is repayable in April 2021.                                  
Vondelvlag Stichting                                  
   Loan balance  EUR 150  EUR 150        2 416  2 400        2 416  2 400    
   The loan is unsecured, bears interest at 3,15% per annum, payable quarterly, and is repayable in April 2021.                                  
ZAR denominated loans receivable                          53 603  –    
Hyprop Mauritius                          –  –    
   Loan balance                          1 460 337  –    
   Impairment                          (1 460 337) –    
   The loan is unsecured, bears interest at 3-month JIBAR plus 1,65% and is repayable on 12 months written notice.                                  
Hyprop share scheme                          53 603  –    
   The loan is unsecured and bears interest at variable rates agreed from time to time. The loan has no fixed repayment terms. The loan is repaid at each vesting date primarily through the transfer of Hyprop shares held by Hyprop share scheme to Hyprop for delivery to employees under the conditional unit plan (CUP). Hyprop has subordinated a portion of the loan in favour of the other creditors of Hyprop share scheme and has agreed not to call for the repayment of the loan for at least 12 months.                                  
   Total non-current loans receivable              18 847  2 937 445        72 450  18 723    
* The loan terms detailed above apply to both financial years.
            GROUP     COMPANY  
  Current 30 June 2019 
FC000 		 30 June 2018 
FC000 		     30 June 2019 
R000 		 30 June 2018 
R000 		     30 June 2019 
R000 		 30 June 2018 
R000 		  
USD denominated loans receivable  –  –        1 333 106  –        –  –    
AttAfrica  USD 64 315  –        909 967  –        –  –    
   Loan balance  USD 171 281  –        2 423 400  –        –  –    
   Impairment  (USD 106 966) –        (1 513 433) –        –  –    
   The loan is unsecured and bears interest at an initial rate of 8% per annum, escalating at 4% per annum. Hyprop Mauritius has a preferential right to receive payment of the interest on the loan to AttAfrica. The loan is repayable in June 2020.                                  
Manda Hill Mauritius  USD 29 907  –        423 139  –        –  –    
   Loan balance  USD 39 979  –        565 651  –        –  –    
   Fair value adjustment  (USD 10 072) –        (142 512) –        –  –    
   The loan is unsecured, and bears interest at a variable rate which equates to Hyprop Mauritius 50% share of distributable income from Manda Hill Mauritius. Subsequent to 30 June 2019 the group sold its interest in Manda Hill. The loan will be settled from the sale proceeds.                                  
ZAR denominated loans receivable                                  
Hyprop share scheme                                  
   The loan is unsecured and bears interest at variable rates agreed from time to time. The loan has no fixed repayment terms. The loan is repaid at each vesting date primarily through the transfer of Hyprop shares held by Hyprop share scheme to Hyprop for delivery to employees under the conditional unit plan (CUP).              –  –        –  43 444    
EUR denominated loans receivable                                  
Hystead              –  40 716        –  40 716    
   The loan was unsecured and interest free. The loan was converted to equity in Hystead in July 2018.                                  
   Total current loans receivable              1 333 106  40 716        –  84 160    
   Total loans receivable              1 351 953  2 978 161        72 450  102 883    
    GROUP     COMPANY  
    30 June 2019 
R000 		 30 June 2018 
R000 		     30 June 2019 
R000 		 30 June 2018 
R000 		  
F1.6 Movement for the year              
  Balance at the beginning of the year  2 978 161  3 013 152        102 883  17 434    
   Advances during the year  –  99 777        17 582  84 160    
   Advances of shareholder loans receivable  –  –        1 486 633  –    
   Repayments during the year  (224 517) (157 934)       –  –    
   Amounts capitalised  (40 716) –        (48 139) –    
   Net interest accrued/(received) –  43 884        (53) (341)   
   Net movement in interest received in advance  –  (2 786)       –  –    
   Foreign currency translation  95 561  148 509        (1 067) 1 631    
   Fair value adjustments  (105 809) –        –  –    
   Impairments of loans  (1 350 727) (166 441)       (1 485 389) –    
   Balance at the end of the year  1 351 953  2 978 161        72 450  102 883    
F2 TRADE AND OTHER RECEIVABLES
F2.1 Accounting policy
  Trade and other receivables are carried at amortised cost less any accumulated impairments. Short-term receivables are measured at original invoice amount when the effect of discounting is immaterial.
F2.2 Key estimates and assumptions
 

Trade receivables have been assessed for impairment based on lifetime expected credit losses using the simplified approach under IFRS 9. An estimate is made of credit losses based on a review of all outstanding amounts at year end.

Evidence of impairment is considered on a tenant-by-tenant basis and a review of trade receivables where there is evidence of default. Based on discussions with tenants and expected payments, an assessment is made of the probability of default, and an allowance for impairment (expected credit loss allowance) is raised on the outstanding balance. The impairment is taken to profit or loss.

F2.3 Changes in accounting policies and disclosures
 
IFRS 9: Financial instruments Trade and other receivable are affected by the group’s application of IFRS 9. This note should be read in conjunction with note A3.1 – Financial instruments and note M5 – Credit risk and sensitivity.
F2.4 Net carrying value
 
  GROUP     COMPANY  
  30 June 2019
R000		 30 June 2018
R000		     30 June 2019
R000		 30 June 2018
R000		  
Rent and deposits receivable 37 442 112 856     37 442 25 940  
Allowance for expected credit losses (26 795) (49 624)     (26 795) (8 933)  
Municipal recoveries 56 629 60 211     56 629 55 266  
Dividend receivable 16 278 76 484     16 278 76 484  
Withholding taxes receivable – 13 482     – –  
Credit enhancement fee receivable 2 984 17 789     2 984 17 789  
Prepayments 6 168 13 535     6 168 6 151  
Municipal deposits 3 010 2 996     3 010 2 996  
Receivables relating to related parties 922 922     922 922  
Other receivables 8 987 9 420     7 896 10 875  
Total 105 625 258 071     104 534 187 490  
Gross trade and other receivables 132 420 307 695     131 329 196 423  
Cumulative impairments (26 795) (49 624)     (26 795) (8 933)  
Total 105 625 258 071     104 534 187 490  
F3 CASH AND CASH EQUIVALENTS
F3.1 Accounting policy
  Cash and cash equivalents are short term, highly liquid investments that are readily convertible to known amounts of cash and are subject to an insignificant risk of changes in value. Cash and cash equivalents are measured at amortised cost. Interest earned on cash invested at financial institutions is recognised on an accrual basis using the effective interest method.
F3.2 Carrying value
 
  GROUP     COMPANY  
  30 June 2019
R000		 30 June 2018
R000		     30 June 2019
R000		 30 June 2018
R000		  
Cash held in call accounts as security for bank guarantees in favour of municipalities 13 599 12 757     13 599 12 757  
Bank balances and cash 1 271 738 702 736     1 048 813 643 032  
Total 1 285 337 715 493     1 062 412 655 789  
F4 OTHER INVESTMENTS
F4.1 Profile
 

As part of Edcon’s restructuring, Edcon approached its top 31 landlords in November 2018 and offered the landlords an opportunity to subscribe for an equity interest in Edcon, or, as an alternative, requested a 40,9% reduction in rentals for a 24-month period commencing on 1 April 2019 (the Edcon rent reduction).

Hyprop agreed to assist Edcon by subscribing for equity in Edcon on a monthly basis for an amount equivalent to the monthly Edcon rent reduction (a total of R12 million from 1 April 2019 to 30 June 2019) (the Edcon subscription).

At 30 June 2019 the equity which Hyprop had received in Edcon comprised 616 369 class A ordinary shares in K2019216440 (South Africa) Limited (the holding company of the Edcon Group) (the Edcon Group) and R2,083 million of indirectly secured guaranteed tranche C mandatorily convertible instruments (collectively the Edcon equity).

The Edcon restructuring was only implemented in June 2019. As a result, it is too early to assess the progress being made by Edcon’s management team to restore Edcon’s financial performance. The directors consider it prudent to adjust the fair value of the group’s investment in the Edcon Group to zero until there is tangible evidence of such an improvement.

Accordingly, the investment in Edcon has been fully impaired at 30 June 2019. Distributable income for the year has also been reduced by R12 million, as a consequence of the reduction in net cash flow received from Edcon pursuant to the Edcon rent reduction/Edcon subscription.

F4.2 Carrying value
 
  GROUP     COMPANY  
  30 June 2019
R000		 30 June 2018
R000		     30 June 2019
R000		 30 June 2018
R000		  
Cost of Edcon equity 12 705 –     12 705 –  
Accumulated fair value adjustments (12 705) –     (12 705) –  
Total – –     – –