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Hyprop Investments Limited
Integrated annual report and consolidated financial statements
2017
Chairman and CEO’s
review
continued
reducing. Considerable effort has been devoted to ensuring that the
anchors and tenant mixes in these properties are appropriate to the
shoppers to whom we are appealing, many of whom are not accustomed
to shopping malls.
South-Eastern Europe
Hyprop’s investments in South-Eastern Europe are held through a UK
company, Hystead Limited, in which Hyprop has a 60% interest. The
purchase of Skopje City Mall in Macedonia for a consideration of
EUR92 million was effective in October 2016.
Trading conditions at the European shopping centres were pleasing and
the operational metrics, including footcount and turnover growth, were
strong and improved over the period. There is significant demand for
space in the centres and progress is being made on plans to extend the
centres. There were no vacancies in the shopping centres at year-end
(30 June 2016: 0%).
The South-Eastern European portfolio contributed R101,8 million to group
distributable earnings in the current period (2016: R24,6 million).
In July 2017, Hystead reached agreement to acquire The Mall shopping
centre in Sofia, Bulgaria, for EUR155 million, with completion expected in
October 2017. The Mall is the dominant shopping centre in Sofia and has a
rentable area of 52 000m², with a weighted average rent of EUR18,30/m²
per month. This will be Hystead’s fourth South-Eastern European
acquisition, and the first in a European Union country, taking the portfolio
to a gross asset value of approximately EUR460 million.
A separate listing of Hystead in the first half of 2018 is currently under
consideration. A listing would enable Hystead to provide shareholders
with a focused South-Eastern European shopping centre fund and
enable the capital to be raised that will be required for the planned
growth of the fund.
Sustainability
We recognise the importance of a sustainable business and of integrating
sustainability into the different facets of our operations. Our commitment
to being a good corporate citizen pervades our approach to business and
we endeavour to act in a responsible, balanced and commercially sensible
manner. As such, we ensure that our business model is sustainable and
relevant to the economies in which we operate.
We are conscious of our impact on the environment and have been
measuring and mitigating this for several years. We have made meaningful
progress and our process has become increasingly sophisticated, with
demanding goals and tight accountability for outcomes.
Transformation is a priority for sustainable South African businesses.
Hyprop continues to improve in this area and, while our broad-based black
economic empowerment rating has been affected by the new codes and
their impact on the property charter, we continue to implement initiatives
that benefit our people, our business and the environments in which
we operate.
Corporate governance
Hyprop is committed to the highest standards of corporate governance.
Details of our governance structures and the extent to which we apply
relevant principles of corporate governance, including King IV, and
regulatory requirements, are provided in this integrated annual report.
Board changes
Ethan Dube resigned as a non-executive director on 1 December 2016.
On behalf of the board, we thank him for his contribution and wish him
well in his future endeavours.
Nonyameko Mandindi joined the Hyprop board on 8 May 2017.
We welcome her and look forward to a productive relationship.
Shareholding
Hyprop, based on JSE criteria, has a 100% free float. Foreign shareholders
owned 25,0% of the company at 30 June 2017, a slight decrease from
26,3% at 30 June 2016. Trading volumes slowed to 52,1% from 71,8% in 2016.
Top 10 beneficial shareholders
Rank Beneficial shareholder
% of issued
share capital
1
Government Employees Pension Fund
14,5
2
Stanlib
5,4
3
Old Mutual
4,7
4
Vanguard
3,9
5
Prudential Investment Managers
3,3
6
Eskom Pension & Provident Fund
3,0
7
MMI Holdings Ltd
2,9
8
Investment Solutions
2,7
9
Blackrock
2,7
10 Investec
2,6
Outlook
South Africa’s economic growth rate has been at very low levels for a
number of years. This has resulted in increasing pressure on the consumer
as unemployment grows, wage and salary increases fail to keep pace with
administered inflation and access to finance becomes more difficult.
Ongoing policy uncertainty and frequent economic mismanagement
by government are a deterrent to the investment required to grow the
economy and the perpetual failure to address the chronic deficiencies in
our education system mean that many of our people are ill equipped to
survive in a modern economy.
In the absence of fundamental changes to the way South Africa is
governed, and catalysts for those changes are not obvious, economic
growth is likely to remain low and the majority of South Africans will get
poorer over time.