2019 Integrated annual report

and consolidated and separate financial statements

Sustainability

Achieving sustainability requires a balanced approach in terms of which the use of resources, the direction of investments, the orientation of technological development and the consequent institutional responses are all applied with the intention of creating value over the long term. Sustainability covers all elements of business – people, environment, community, financial and capital.

Hyprop is committed to corporate sustainability and actively considers its social, economic and environmental responsibilities, implements ethical practices and good governance and understands its impact on the natural environment. We endeavour to concentrate our efforts to integrate sustainability considerations into every aspect of the business environment. Initiatives cover improving recycling initiatives, reducing waste and managing assets to be more energy and water efficient and reducing carbon emissions in line with national targets. We are also cognisant of the need to preserve and develop our human capital resources and to manage our financial resources in a prudent and responsible manner.

Reporting on our sustainability initiatives covers the holding company and our South African properties.

People

Human resources

Our human resources structure is designed to address the operational demands of our business in delivering our strategy. The head office is situated in Rosebank and management teams are deployed at our shopping centres ensuring efficient management, leasing and maintenance of our assets.

The company complies with employment laws and is committed to protecting human rights. Our code of ethics and disciplinary code are communicated to all employees.

We encourage our people to live by our core values and employee code that support a work culture that is transparent, respectful, non-exploitative, fair (especially with regard to compensation and benefits), dynamic, promotes open and constructive dialogue with management, involvement in decision-making, working conditions that are safe and an appropriate work-life balance.

Intellectual capital

Our business success is underpinned by the intellectual capital maintained in our human resources. This expertise is centred in the following areas:

Company culture

Core values and employee code

Our employee code focuses on creating a work culture that is transparent, respectful, fair, non-exploitative (especially with regard to compensation and benefits), dynamic, promotes open and constructive dialogue with management, involvement in decision-making and provides working conditions that are safe and encourages a work-life balance.

Employee relations

The national human resources manager is responsible for employee relations. An employee, disciplinary and grievance policy governs these relations and is available on request, in hard copy at each management office, and on the website www.hyprop.co.za.

Hyprop has no unionised employees and there was no impact on the business due to industrial or labour unrest during the year.

There were nine disciplinary cases during the year, primarily for misconduct, which resulted in five terminations of employment.

 

Harassment

The company is committed to creating and maintaining a climate where all employees and stakeholders are treated with dignity and respect. Harassment in the workplace is not tolerated under any circumstances and perpetrators are severely disciplined. Grievances raised in respect of harassment will be dealt with timeously, sensitively and confidentially and no person who raises a grievance about harassment will be victimised.

No grievances relating to harassment were reported during the year.

Non-discrimination

We do not tolerate discrimination. Reported instances are immediately and appropriately dealt with under our code of ethics and conduct, and related disciplinary procedures. Policies are reviewed annually and distributed to employees.

No incidents of discrimination were reported during the year.

Engagement

Regular interaction with our employees is critical in creating an engaged workforce. We engage with our employees through several channels which enable communication from leadership, and forums through which our employees can provide feedback.

 

Employee forums

Staff meetings are management team specific, driving collaboration across members of the management teams and the departments that operate at shopping centres.

Human resource site meetings are presented by human resource management and include employment equity forum meetings. These meetings provide opportunities for employees to provide feedback and ask questions of leadership. Two human resource meetings per management office were held during the year.

Employee self-service system (ESS)

The employee self-service system is used to communicate all payslip, IRP5 and employee payroll information. The system integrates with the payroll and is used for performance reviews, leave applications and approvals.

Company employee newsletter

The newsletter encompasses information and input from all our management teams, highlighting achievements and company values. It is a valuable tool for communicating events to various management teams, communicating staff wellness matters, policy updates and staff information notices, and contains information about changes, challenges and staff appointments.

Employee events

Annual year-end functions that include long service and service excellence awards are held.

Thirty long service awards were awarded during the year, including two awards for 30 years’ service with the group. Six Hyprop excellence awards were issued to teams or individuals who worked in an exceptional manner to complete an assigned task or that independently took on an improvement initiative supported by the company.

Employee surveys

Annual surveys ensure we identify and address any issues concerning employee morale, productivity and turnover. Two surveys were conducted during the year focusing on fair labour practices.

Our fair practice survey indicated that 94,4% (target 90%) of employees currently feel that the company’s benefits, processes and policies are implemented fairly and in a non-discriminatory manner. The survey covered our recruitment and disciplinary process, employee policy implementation and HIV and Aids education.

Our employee satisfaction survey indicated that 96,7% of our employees were satisfied with remuneration, company benefits as well as the work environment and facilities.

The outcome of the survey confirmed that our employees value working within a team where there is mutual respect, trust and solid values that promote a diverse and talented workforce. We believe in leading by example and value the input we receive from our employees. Suggestions to improve value were discussed with the executive team and include optimising our tenant mix, improving communication and office facilities.

Hyprop ethics line

The company values its reputation and recognises that over and above any financial damage suffered, fraud may reflect adversely on our reputation.

Our aim therefore is to limit company exposure to fraud by taking firm and vigorous action against any individual or group perpetrating fraud against the company. We encourage our employees to be vigilant and to report any suspicion of fraud, providing them with suitable confidential channels of communication and ensuring sensitive information is treated appropriately. The company always expects employees to act with integrity, comply with financial regulations and to report concerns as soon as any impropriety is suspected.

The Hyprop Ethics Line, our anonymous tip-off line, is working well in conjunction with an external service provider, Whistle Blowers Proprietary Limited, and reports to the audit and risk committee. All employees are made aware of this facility and reporting is on an anonymous basis with feedback provided and action taken to remedy the matters raised.

During the year two calls were reported, investigated, and feedback given. Neither of the calls was of a serious nature.

Performance management meetings

The performance appraisal process is an opportunity for each manager and employee to reflect on an employee’s performance over a period, review whether previously discussed performance expectations and goals have been met, to discuss professional development opportunities and to identify opportunities to develop additional skills and knowledge to foster performance improvement and career growth. Additionally, the appraisal provides appropriate documentation to support any recommended merit increases and/or other performance-based awards.

Work days and leave
  June 2019   June 2018  
Total working days 66 462   68 649  
Total number of working days lost due to absenteeism (sick, family responsibility and maternity leave) 1 129   1 235  
Percentage of total days lost due to absenteeism (%) 1,7   1,8  
Total number of days lost due to industrial action (%)    
Percentage of total days lost due to industrial action    
Employee development and training

Training

Our training and development programme is based on the operational requirements of the business, and takes into account skills shortages in our industry and transformation imperatives.

Training needs are identified during employee reviews, while the group’s skills base is assessed to identify focus areas for training in the year ahead.

Our training strategy aims to:

During the year, a combination of internal and outsourced training sessions covered the following key areas:

Training spend (R) June 2019
R
  June 2018
R
 
Leadership 792 011   797 310  
Strategy 748 246    
Business operations 362 660   193 036  
Degree/diploma programmes 143 450   96 144  
Green building principles 95 850   116 635  
Leasing 14 900   83 769  
Learnerships 117 000    
Trade qualifications 253 600   29 100  
Health and safety 17 788   45 103  
HIV and Aids 56 812   52 549  
Total training 2 602 317   1 413 646  

A strategy workshop was held following the appointment of the new executive team. The workshop included a detailed analysis of the corporate culture, values, team dynamics, a group SWOT analysis and development of the revised group strategy. Participants in this workshop included members of the investment committee, executive directors and senior executives in the group.

During the year we continued to promote and grow our graduate and trade qualification programme which has become a key element in implementing our employment equity plan. Twenty-two (2018: 18) employees are currently enrolled in various degree and trade qualification programmes. Green building and management principles focused on water and energy efficiency training and national lease training was presented in all regions.

Training spend by race profile and gender (R) June 2019   June 2018  
Training by race        
African 729 020   374 101  
Coloured 139 431   116 076  
Indian 173 682   66 488  
White 1 560 184   856 981  
Non-South African    
  2 602 317   1 413 646  
Training by gender        
Male 1 686 986   614 981  
Female 915 331   798 665  
  2 602 317   1 413 646  

Succession planning

Succession planning forms part of the group’s risk management process, as well as being integral to the growth and development of our staff. Our primary objective is to identify key positions and ensure we have the necessary staff to cover these roles should the need arise unexpectedly; as well as to groom staff, including those from designated groups, for promotion. This is done by mentoring staff members and providing training focused on the requirements of specific positions, leadership training and development for senior management, technical and people skills training for management and junior management, and structured training for support staff.

This has proved effective with three out of the four internal placements from designated groups.

Transformation and diversity

Employment equity

Hyprop is committed to promoting equal opportunities for, and fair treatment of, all employees, regardless of gender, race, sexual orientation, religion, language and age. Our employment equity plan focuses on eliminating discrimination and implementing internal measures to redress disadvantages and remove systemic barriers faced by designated groups, in order to ensure their equitable representation in all occupational categories.

Hyprop’s current employment equity plan is for a five-year period (January 2017 to December 2021). The key objective of the plan is to ensure equal opportunities and fair treatment in employment, and that employees ultimately represent the economically active profile of the South African population demographic.

We are committed to:

For more information, please view the full employment equity policy and plan on our website www.hyprop.co.za.

Total number of employees (including employees with disabilities).
Reported in terms of the Employment Equity Act.

June 2019
  Male Female Foreign nationals Total    
Occupational levels A C I W   A C I W   Male Female   A C I W   Total  
Top management(1) 1 0 0 8   1 0 0 1   0 0   2 0 0 9   11  
Senior management 2 0 1 9   1 0 1 12   0 0   3 0 2 21   26  
Professionally qualified and experienced specialists and mid-management 6 1 2 14   3 6 2 15   0 0   9 7 4 29   49  
Skilled technical and academically qualified workers, junior management, supervisors, foremen, and superintendents 7 3 2 5   17 12 6 19   1 1   24 15 8 26   73  
Semi-skilled and discretionary decision making 24 8 1 2   17 9 1 5   1 0   41 17 2 8   68  
Unskilled and defined decision-making 4 0 0 0   1 0 0 0   0 0   5 0 0 0   5  
Total permanent 44 12 6 38   40 27 10 52   2 1   84 39 16 93   232  
Temporary employees 1 2 0 5   15 10 0 6   0 0   16 12 0 11   39  
Grand total 45 14 6 43   55 37 10 58   2 1   100 51 16 104   271  

A – African; C – Coloured; I – Indian; W – White; M – Male; F – Female; B – Black (Black includes African, Coloured and Indian).

(1) Top management includes non-executive directors.

Health and safety

Our policy is to create a safe and healthy working environment, with procedures to manage occupational incidents and compensation claims, in line with legislation.

Scott Safe, who provides safety consultancy services to Hyprop, carries out a health and safety audit twice a year, in May and November.

We aim to:

Each management team is responsible for executing this policy on-site through its operations manager. At group level, the national facilities manager is responsible for biannual audit reports, drawing on submissions from each centre.

Construction projects have health and safety consultants appointed to represent Hyprop and monitor activities on-site. On large and complex projects, the contractor has its own health and safety officer managing contractor teams and subcontractors.

There were no serious casualties or injuries during the year at any of our properties or projects.

Injuries on duty June 2019   June 2018  
Workmen’s compensation claims submitted 3   5  
Serious occupational injury nil   nil  
Health and safety training and awareness

The company is focused on informing and training employees on health and safety. Various initiatives were arranged during the year, including:

Initiative HIV/Aids First aid Fire- fighting Stress management Cancer Healthy lifestyle Injury on duty Trauma counselling
Training by external suppliers X X X X     X  
Health day consultations X     X   X    
Information distributed via newsletters X       X X X  
Employee awareness days X       X      
Voluntary testing and counselling X     X   X   X
HIV/Aids

HIV/Aids is a concern that could affect the wellbeing of our employees, leading to emotional distress, absenteeism, employee turnover and lower productivity. A formal risk assessment determined that the likely impact of HIV/Aids on the group is negligible. Hyprop does not have targets for addressing the direct impact of HIV/Aids, nor does it have strategies for addressing indirect business risks (e.g. effect on customer base/supply chain) as this risk is considered to be very low.

Our HIV/Aids policy provides guidelines on creating a non-discriminatory workplace, dealing with HIV testing, confidentiality and disclosure, providing equitable employee benefits, dealing with dismissals and managing grievance procedures. It ensures affected employees’ rights to confidentiality. Where employees willingly disclose their status, that is kept confidential. Hyprop offers counselling, acceptance and support.

Every year, HIV/Aids awareness days are conducted by professional nurses at each management office, with an external service provider providing voluntary counselling and testing. Employees are offered the opportunity to test for HIV, cholesterol, sugar and stress levels.

ENVIRONMENTAL SUSTAINABILITY HIGHLIGHTS
81% of total waste by volume recycled
Cost savings of
R12,7 million
due to implementation of LED lighting in common areas
Sixth submission
to CDP on carbon emissions
Sixth successive
participation in GRESB
Second WDP submission
(water disclosure project)
 
2019 MILESTONE PROJECTS
The undercover parking lights were changed from T8 fluorescent tubes to energy efficient LED tubes. The energy usage was reduced by 50% and light output was increased by 10%.
Domestic and fire water pumps and associated piping were installed to provide back-up domestic and fire water in the event of water cuts from the council due to water rationing.
Domestic and fire water pumps and associated piping were installed to provide back-up domestic and fire water in the event of water cuts from the council due to water rationing. A reverse osmosis plant was installed and commissioned and will commence operating when the water extraction licence is granted.
Domestic and fire water pumps and associated piping were installed to provide back-up domestic and fire water in the event of water cuts from the council due to water rationing. Two boreholes were drilled and a reverse osmosis plant was installed and commissioned and will commence operating when the water extraction licence is granted. The mall now has the ability to go off the water grid.

Environment

Although our business has a low environmental impact, we aim to continually reduce our impact on the environment during our daily operations. A key focus is on reducing consumption of natural resources where possible.

Management regularly monitor the execution, reporting and review of our environmental policy, culminating in an annual review by the social and ethics committee.

Hyprop’s environmental strategy aims to practically address the key environmental impacts of its operations, namely water, energy and waste. Our approach is informed by best practice, proven methods, ease of implementation, and the benefit-to-cost ratio of retrofitting green-design principles to existing buildings.

International benchmarking

Hyprop voluntarily participates in global environmental benchmarking programmes, and works to meet challenging targets. These include:

Hyprop incurred no fines for non-compliance with environmental laws and regulations during the year.

Hyprop environmental scorecard FY19 (baseline June 2013) Target
June 2019
  Achieved
June 2019
  Target
June 2020
 
Energy (kWh) 233 926 214   235 336 930   230 630 192  
Water consumption (kℓ) 749 048   857 014   850 000  
Waste recycling (volume) (%) 80   81   82  
Scope 2 carbon emissions (tCO2e) 24 657   26 706   26 171  
Energy

Of Hyprop’s total annual operational spend, a large portion is on electricity (mostly consumed by tenants), making energy efficiency a financial imperative. We continue to implement a range of energy efficient solutions to better manage costs for the group and for our tenants, improve our environmental performance and reach our targets in this regard.

Total electrical consumption Target
June 2019
  Achieved
June 2019
  June 2017  
Direct non-renewable energy consumption (GJ) from diesel burnt 88 050   79 430   86 560  
Direct renewable energy consumption (GJ) from solar PV 15 880   13 801   8 444  
Direct energy consumption (GJ) from electricity consumed but not recovered 98 968   99 859   106 312  
Indirect energy sold (GJ), i.e. electricity recovered from tenants 748 245   760 191   857 872  
Electricity consumption (megawatt hours or MWh) 235 336   238 700   267 828  
Energy consumption (GJ) – calculated 847 213   859 321   964 184  

GJ = Gigajoules

To monitor the effectiveness of these initiatives and year on year consumption patterns, we calculate our energy use intensity, as follows:

  June 2019   2019/2018
% change
  June 2018   June 2017  
Energy use intensity (GJ/m2) 1,20   (1,63)   1,22   1,27  
Kilowatt hours per occupied space (kWh/m2)                
Retail 332   (0,6)   334   345  
Office 151   (21)   191   275  
Planned projects

We are investigating installing solar PV plants on six of our Gauteng mall rooftops in the new financial year. The return on investment is attractive and will allow us to mitigate some of the steep escalations in electricity costs.

Rosebank Mall – A project has been budgeted to replace the fluorescent lighting in the coves on level 2 with LED lighting. This will be more energy efficient due to the longevity of the LED lamps and will reduce the cost of maintenance.

Carbon emissions

For an accurate baseline, we determined the group’s scope 1 and 2 carbon footprint using the UK Department for Environment, Food and Rural Affairs (DEFRA) voluntary reporting guidelines and the revised reporting standard of the Greenhouse Gas Protocol, the accepted international tool for government and business leaders to understand, quantify and manage greenhouse gas (GHG) emissions.

Hyprop again participated in the CDP, submitting our audited carbon footprint for the year to June 2019, and achieved a B+ score. This is still considered above average and is above our peers (B- rating on average).

Hyprop’s carbon emissions

Total carbon emissions (tonnes of carbon dioxide equivalents (tCO2e) – calculated June 2019   June 2018
 
June 2017  
Total carbon emissions broken down as: 268 658   261 323
 
280 990  
Scope 1(1) 29 249   15 302
 
17 912  
Scope 2(2) 26 706   25 160
 
27 942  
Scope 3(3) 212 703   220 861
 
235 136  
Average volume of carbon emissions (scope 1 and 2) per hour worked (tCO2e/h) 0,130   0,065
 
0,076  

(1) Scope 1: all direct GHG emissions from diesel and fugitive refrigerant gas leaks.

(2) Scope 2: indirect GHG emissions from consuming purchased electricity in the common area.

(3) Scope 3: indirect GHG emissions from electricity that is resold to the tenants.

Carbon tax

Based on current advice, Hyprop will not be liable for any direct carbon tax under the proposed Carbon Tax law. Implementation of the proposed tax has been placed on hold.

Water

We continue to investigate viable opportunities to reduce water consumption, especially in drought-affected areas such as the Western Cape. These initiatives include installing water-efficient equipment throughout our properties, while improving our measurement and monitoring standards.

We rely on close cooperation from tenants and shoppers to reduce water consumption. We actively engaged with high water usage tenants in the Western Cape region on a weekly basis to ensure compliance with local authority water saving targets. For new developments, renovations and upgrades, water efficiency is one of the criteria in choosing technical equipment such as toilets, taps and dry condenser systems.

Two sites in the Western Cape now have access to borehole water. The quality of the water is being tested and the applications for extraction licences is under way. At The Glen, greywater systems have been installed to reduce consumption of municipal water.

Hyprop monitors bulk water consumption daily at centres to identify unusual patterns that might indicate leaks.

  June 2019   2019/2018
% change
  June 2018   June 2017  
Water measures                
Total consumption (kilolitres (kℓ)) 857 014   13,2   756 615   1 028 094  
Average volume consumed per hour worked (ℓ/h) 1 948   6,6   1 828   2 236  
Target for consumption, or reduction, against specific                
denominator (ℓ/h) 2 300   (1,2)   2 327   2 350  
Water use intensity                
Retail: kℓ per occupied space (m2) 1,2   14,1   1,1   1,4  
Office: kℓ per occupied space (m2) 0,9   50,1   0,6   1,0  
Total: kℓ per occupied space (m2) 1,2   15,2   1,1   1,4  
Water-efficiency initiatives
  Initiative     Objective     Current activities     Progress  
  Smart metering     Improve consumption measuring and monitoring; identify leaks from unusual flow patterns     Bulk check meters have been installed at all sites except Canal Walk     Canal Walk is currently evaluating various smart metering systems  
  Fire system water consumption     Identify leaks and illegal use of water     Save water and avoid abuse of infrastructure     South African and Nigerian buildings monitored  
  Waterless urinals     Reduce water usage     Waterless urinals were installed at the food court at Woodlands Boulevard in the current year     Waterless urinals to be installed in the planned toilet upgrades at Canal Walk  
  Low volume aerators     Reduce water usage at hand wash basins     Aerators fitted at all sites     Complete  
Waste

Recycling

In 2018, China announced that it would restrict imports of certain recyclables, including mixed paper – magazines, office paper, junk mail – and most plastics going forward. It is expected that this may have an effect on recycling in South Africa. Hyprop will consider alternative methods of recycling should the need arise.

Our approach to waste management aims to maximise recycling, minimise disposal to landfill sites and comply with legislation. Waste is collected from tenants and separated at a waste yard. All centres have suitable waste-segregation facilities. On-site waste management system information is regularly reiterated to tenants, and Canal Walk and Clearwater Mall have public recycling stations.

Hyprop is also looking into ways to compost large amounts of wet food waste. Two sites, one in the Western Cape and one in Gauteng, have started taking their wet waste to farms where it is used to grow protein. In addition, Canal Walk is piloting an on-site, in vessel composter which treats organic waste avoiding CO2 emissions and improves recycling statistics.

Waste generated by construction is disposed of in line with responsible management plans. For development projects, we adhere to applicable regulations and consider best practice to optimise the environmental quality of our construction sites.

In 2019, Hyprop recycled 80% (by volume) of total waste, down from 83% in 2018. While lower in percentage terms, lower group volumes reflect greater individual recycling efforts from our tenants. The target of 75% has been exceeded. According to our waste service provider, current market conditions dictate that a higher recycling target would involve an increasing cost and would therefore be less economically viable.

Areas of improvement during the year included improved source segregation from tenants, particularly for food waste, to prevent contamination of recyclables. Audits were conducted of tenant back of house waste source segregation at Canal Walk and this programme will be extended to other centres.

Total waste recycled (m3)

Paper Plastic General
waste
Scrap
metal
Glass Tetrapack Organic
waste
Haz
liquid
Haz dry Total  
69 664 28 476 25 970 2 951 2 017 1 268 1 133 125 10 131 614  

 

  June 2019   June 2018   June 2017  
Total non-hazardous waste disposed (t) 3 705   2 725   3 963  
Total hazardous waste disposed (t) 43   32   51  
Total waste sent for recycling (t) 2 692   3 683   2 851  
Waste sent for recycling (%) 42   57   41  
Recycling            
Number of loads ordered 4 061   5 133   7 689  
Quantity of units collected (t) 55 101   68 503   64 769  
Recycled (volume) (%) 81   83   79  
Recycled (m3) 19 040   57 537   55 692  
Climate change

We have formally assessed the risks and opportunities presented by climate change as part of our annual submission to CDP and our group risk management process.

Key direct risks include:

Environmental sensitivity

Canal Walk is in a biodiversity-rich area and is part of the greater Century City precinct, in a national wetland conservation area, Intaka Island. Intaka is an award-winning 16-hectare conservation area, rich in birdlife and indigenous plants. The precinct has an environmental management plan to which Canal Walk adheres: no sewerage, fertilisers, herbicides or chemicals are discharged into canals that run through the precinct; only biodegradable cleaning products are used for parking decks, walkways and walls to minimise water pollution. In addition, Hyprop contributes financially to the environmental management plan.

Hyprop will be participating for the first time in the newly launched South African Bio Diversity Project (BDP).

Our communities

Hyprop believes in engaging our society and contributing to sustainable projects within the communities that surround our properties. The Hyprop Foundation was established in 2013 to focus the company’s CSI programme on addressing identified needs in those communities affected by our business operations.

The foundation’s long-term vision is to ignite a culture of participation by our people and all stakeholders through sustainable initiatives that create value in the short, medium and long term by focusing on four key areas:

The foundation’s budgets and projects are approved and monitored by the social and ethics committee. In line with the objective of involvement, funding is generated through a system of Hyprop employees and relevant stakeholders (e.g. retail tenants) contributing their time and resources to identified initiatives, with the value of involvement converted to a Rand value. Funding contributed by Hyprop for the year was R1,9 million (2018: R1,9 million).

All potential beneficiary partners are screened by the foundation’s management committee and Hyprop remains involved in each initiative past the point of inception. To identify meaningful projects and beneficiaries, it considers the measurable impact prior to resources being allocated. Employee engagement is encouraged at this stage of the process and employees are entitled to nominate projects and beneficiaries, which will be reviewed by the foundation management committee. The decision to proceed is based on the proposal’s alignment to our core business and the foundation’s stated objectives.

As in prior years, the foundation’s key challenge remains the overwhelming need for assistance and the resulting volume of applications, with the aid requested often exceeding available funding.

Foundation beneficiaries
Foundation top 10 beneficiaries
MES community services
Employee school education scheme
LEAP Science and Maths Schools
Tertiary education bursary in fashion industry
Smile Foundation
Umtholops Primary School
Arbour Day Mvelledzo Primary School
SPCA
Rays of Hope
SAPS Widows and orphans

Financial and capital

Details of how we have managed our financial capital to achieve sustainable long-term financial returns are provided in the Leadership Review and audited financial statements.