| The group’s financial instruments consist mainly of deposits with banks, loans from banks, loan and trade receivables, interest rate
swaps, listed property securities, debentures, payables and a foreign currency investment. In respect of the above-mentioned
financial instruments, book values approximate fair value. Exposure to interest rate, credit, liquidity, market, price and currency risks
occur in the normal course of business.
Interest rate risk
The group is exposed to interest rate risk due to material interest-bearing borrowings. The risk is managed by maintaining an
appropriate mix between fixed and floating rate borrowings and by the use of interest rate swaps.
Interest rate sensitivity analysis
The sensitivity analysis includes the exposure to interest rates for both derivatives and non-derivative instruments at the end of the
financial year.
For floating rate liabilities it is assumed that the liability outstanding at the end of the year was outstanding for the whole year. A 150 basis point increase or decrease in interest rates was used in the analysis.
If interest rates had increased/decreased by 150 basis points and all other variables were held constant, the group’s profit for the year
ended 30 June 2014 would increase/decrease by R31 million (based on year-end floating debt) and the company’s profit for the
year ended 30 June 2014 would increase/decrease by R22 million (based on year-end floating debt).
The group’s sensitivity to interest rates has increased during the current year due to a decrease in the proportion of fixed debt to 71%
of total debt (30 June 2013: 87%).
Fixed-rate agreements and interest swaps
Refer to note 18 for further detail in respect of fixed-rate agreements and interest rate swaps.
The group’s exposure to interest rate risk and interest rates on financial instruments at the reporting date was as follows:
Liquidity and interest rate risk
| Group |
Weighted
average
effective
interest rate
% |
|
One year
or less
R000 |
|
One to
five years
R000 |
|
More than
five years
R000 |
|
Total
R000 |
|
| Year ended 30 June 2014 |
|
|
|
|
|
|
|
|
|
|
| Financial assets |
|
|
|
|
|
|
|
|
|
|
| Derivative instruments |
|
|
|
|
32 978 |
|
|
|
32 978 |
|
| Loans receivable |
|
|
47 486 |
|
812 459 |
|
|
|
859 945 |
|
| Receivables |
|
|
103 686 |
|
|
|
|
|
103 686 |
|
| Cash and cash equivalents |
|
|
77 353 |
|
|
|
|
|
77 353 |
|
| Total financial assets |
|
|
228 525 |
|
845 437 |
|
|
|
1 073 962 |
|
| Financial liabilities |
|
|
|
|
|
|
|
|
|
|
| Debenture capital(1) |
Variable |
|
|
|
|
|
5 719 119 |
|
5 719 119 |
|
| Interest-bearing borrowings |
7,50% |
|
2 013 031 |
|
5 185 822 |
|
|
|
7 198 853 |
|
| Payables |
|
|
367 686 |
|
|
|
|
|
367 686 |
|
| Combined unitholders for distribution |
Variable |
|
585 877 |
|
|
|
|
|
585 877 |
|
| Derivative instruments |
|
|
|
|
41 829 |
|
|
|
41 829 |
|
| Total financial liabilities |
|
|
2 966 594 |
|
5 227 651 |
|
5 719 119 |
|
13 913 364 |
|
| (1) Transferred to stated capital (converted to equity) post-year-end. Refer to note 38 |
| Company |
Weighted
average
effective
interest rate
% |
|
One year
or less
R000 |
|
One to
five years
R000 |
|
More than
five years
R000 |
|
Total
R000 |
|
| Year ended 30 June 2014 |
|
|
|
|
|
|
|
|
|
|
| Financial assets |
|
|
|
|
|
|
|
|
|
|
| Derivative instruments |
|
|
|
|
32 978 |
|
|
|
32 978 |
|
| Loans receivable |
|
|
47 674 |
|
|
|
|
|
47 674 |
|
| Receivables |
|
|
102 629 |
|
|
|
|
|
102 629 |
|
| Cash and cash equivalents |
|
|
61 257 |
|
|
|
|
|
61 257 |
|
| Total financial assets |
|
|
211 560 |
|
32 978 |
|
|
|
244 538 |
|
| Financial liabilities |
|
|
|
|
|
|
|
|
|
|
| Debenture capital(1) |
Variable |
|
|
|
|
|
5 730 187 |
|
5 730 187 |
|
| Interest-bearing borrowings |
8,20% |
|
2 013 031 |
|
3 792 566 |
|
|
|
5 805 597 |
|
| Payables |
|
|
335 626 |
|
|
|
|
|
335 626 |
|
| Combined unitholders for distribution |
Variable |
|
585 877 |
|
|
|
|
|
585 877 |
|
| Derivative instruments |
|
|
|
|
39 811 |
|
|
|
39 811 |
|
| Total financial liabilities |
|
|
2 934 534 |
|
3 832 377 |
|
5 730 187 |
|
12 497 098 |
|
| (1) Transferred to stated capital (converted to equity) post-year-end. |
| Group |
Weighted
average
effective
interest rate
% |
|
One year
or less
R000 |
|
One to
five years
R000 |
|
More than
five years
R000 |
|
Total
R000 |
|
| Year ended 30 June 2013 |
|
|
|
|
|
|
|
|
|
|
| Financial assets |
|
|
|
|
|
|
|
|
|
|
| Listed property securities — held for sale |
|
|
2 279 253 |
|
|
|
|
|
2 279 253 |
|
| Derivative instruments |
|
|
|
|
39 857 |
|
|
|
39 857 |
|
| Receivables |
|
|
224 175 |
|
|
|
|
|
224 175 |
|
| Cash and cash equivalents |
|
|
74 821 |
|
|
|
|
|
74 821 |
|
| Total financial assets |
|
|
2 578 249 |
|
39 857 |
|
|
|
2 618 106 |
|
| Financial liabilities |
|
|
|
|
|
|
|
|
|
|
| Debenture capital |
Variable |
|
|
|
|
|
5 822 497 |
|
5 822 497 |
|
| Interest-bearing borrowings |
8,10% |
|
948 000 |
|
4 436 486 |
|
|
|
5 384 486 |
|
| Payables |
|
|
353 802 |
|
|
|
|
|
353 802 |
|
| Combined unitholders for distribution |
Variable |
|
517 831 |
|
|
|
|
|
517 831 |
|
| Derivative instruments |
|
|
|
|
52 984 |
|
|
|
52 984 |
|
| Total financial liabilities |
|
|
1 819 633 |
|
4 489 470 |
|
5 822 497 |
|
12 131 600 |
|
| Company |
Weighted
average
effective
interest rate
% |
|
One year
or less
R000 |
|
One to
five years
R000 |
|
More than
five years
R000 |
|
Total
R000 |
|
| Year ended 30 June 2013 |
|
|
|
|
|
|
|
|
|
|
| Financial assets |
|
|
|
|
|
|
|
|
|
|
| Listed property securities — held for sale |
|
|
2 279 253 |
|
|
|
|
|
2 279 253 |
|
| Derivative instruments |
|
|
|
|
39 857 |
|
|
|
39 857 |
|
| Receivables |
|
|
219 293 |
|
|
|
|
|
219 293 |
|
| Cash and cash equivalents |
|
|
70 625 |
|
|
|
|
|
70 625 |
|
| Total financial assets |
|
|
2 569 171 |
|
39 857 |
|
|
|
2 609 028 |
|
| Financial liabilities |
|
|
|
|
|
|
|
|
|
|
| Debenture capital |
Variable |
|
|
|
|
|
5 822 497 |
|
5 822 497 |
|
| Interest-bearing borrowings |
8,10% |
|
948 000 |
|
4 103 914 |
|
|
|
5 051 914 |
|
| Payables |
|
|
345 669 |
|
|
|
|
|
345 669 |
|
| Combined unitholders for distribution |
Variable |
|
517 831 |
|
|
|
|
|
517 831 |
|
| Derivative instruments |
|
|
|
|
52 984 |
|
|
|
52 984 |
|
| Total financial liabilities |
|
|
1 811 500 |
|
4 156 898 |
|
5 822 497 |
|
11 790 895 |
|
Interest rates are monitored and appropriate steps taken to ensure that Hyprop’s exposure to interest rate fluctuations is limited. Interest rates have been fixed for periods ranging from 2015 to 2020 with an average maturity of 4,2 years. The average maturity of
the fixed interest rate agreements and interest rate swaps is disclosed in note 18. The average rate of interest at year-end (applicable
to total debt) was 7,5% (2013: 8,1%).
Credit risk
Credit risk arises from the risk that a counterparty may default or not meet its obligations timeously. Credit risk is limited to the
carrying amount of financial assets at the reporting date.
Receivables
Trade receivables consist of a large, widespread tenant base. The financial position of tenants is monitored on an ongoing basis. An
allowance is made for all specific doubtful debts at year-end. Management does not consider there to be any material credit risk
exposure that is not already covered by a doubtful debt allowance. The carrying value of receivables is considered to be a reasonable
approximation of fair value.
Cash and cash equivalents
It is group policy to deposit short-term cash investments with reputable financial institutions.
Liquidity risk
Liquidity risk is the risk that the group will be unable to meet financial commitments. This risk is minimised by holding cash balances
and by a floating loan facility. In addition, the company monitors liquidity risk by regularly monitoring forecast cash flows and by
matching the maturity profiles of financial assets and liabilities.
Price risk
The group was exposed to price risk due to its investment in listed property securities. These investments were held for strategic
purposes and the group does not actively trade these instruments.
The exposure to price risk as at the end of the period is as follows:
| |
June 2014
R000 |
|
June 2013
R000 |
|
| Sycom Property Fund |
|
|
2 279 253 |
|
The last units held in Sycom were sold in January 2014.
Foreign exchange risk
The group operates beyond South African borders and is exposed to foreign exchange risk arising from an exposure to the US dollar.
Foreign exchange risk arises from recognised assets and liabilities and net investments in foreign operations. Currently this exposure
arises through Hyprop’s 37,5% interest in Atterbury Africa, via its wholly owned subsidiary, Hyprop Investments (Mauritius) Limited and
87% interest in African Land Investments Limited, which is invested in 100% of Manda Hill Centre, in Lusaka, Zambia. The group hedges
100% of US dollar funding raised to finance investments in sub-Saharan Africa (excluding SA). Income earned from foreign operations
is currently not hedged.
Foreign currency exposure at the end of the reporting period
| |
June 2014
R000 |
|
June 2013
R000 |
|
| Non-current assets |
|
|
|
|
| Loan to Atterbury Africa USD76 803 544 (2013: USD34 143 276) |
812 459 |
|
336 909 |
|
| Current assets |
|
|
|
|
| Receivables USD2 384 (2013: USD2 095) |
25 |
|
21 |
|
| Cash and cash equivalents USD1 160 (2013: USD706) |
12 |
|
7 |
|
| Liabilities |
|
|
|
|
| Interest-bearing debt USD74 680 258 (2013: USD33 703 739) |
789 998 |
|
332 572 |
|
| Derivative instrument USD190 837 (2013: nil) |
2 019 |
|
|
|
| Payables USD99 388 (2013: USD155 659) |
3 336 |
|
1 536 |
|
| Exchange rates used for conversion of foreign amounts were: |
|
|
|
|
| USD |
10,58 |
|
9,87 |
|
If the R/USD exchange rate had changed by 1% for the year ended 30 June 2014 (2013: 1%), the group’s total consolidated profit for the
year ended 30 June 2014 would have increased/decreased by
R0,5 million (2013: R0,03 million). |