HYPROP INVESTMENTS LIMITED - Summarised consolidated results for the year ended 30 June 2018

Release Date: 31/08/2018 08:00
Code(s): HYP
 
Wrap Text
Summarised consolidated results for the year ended 30 June 2018

HYPROP INVESTMENTS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1987/005284/06)
JSE share code: HYP
ISIN: ZAE000190724
(Approved as a REIT by the JSE)
("Hyprop" or "the company" or "the group")

PROPERTY INVESTMENT EXCELLENCE

Summarised consolidated results for the year ended 30 June 2018

Highlights

- Distributable earnings up 10,5%                                           
- Total dividend per share for the year up 8,8%                             
- Concluded acquisitions of EUR439 million in EU countries (via Hystead)    
- Completion of R276 million of capital projects in SA                      

Hyprop is a leading specialist shopping centre Real Estate Investment Trust (REIT). We operate a 
portfolio of shopping centres in major metropolitan areas across South Africa, sub-Saharan Africa 
and South-Eastern Europe. 

Summarised consolidated statement of comprehensive income
                                                                         12 months         12 months    
                                                                      30 June 2018      30 June 2017    
                                                                              R000              R000    
Revenue                                                                  3 113 713         3 167 649    
 Investment property income                                              3 117 560         3 128 062    
 Straight-line rental income accrual                                        (3 847)           39 587    
Property expenses                                                       (1 049 892)       (1 073 877)    
Net property income                                                      2 063 821         2 093 772    
Other operating expenses                                                   (55 778)          (78 232)    
Operating income                                                         2 008 043         2 015 540    
Net interest                                                              (282 273)         (336 502)    
 Received                                                                  312 550           294 177    
 Paid                                                                     (594 823)         (630 679)    
                                                                                                        
Net operating income                                                     1 725 770         1 679 038    
Other income                                                                46 671            36 931    
Dividends                                                                  182 778           146 350    
Change in fair value                                                       767 052           973 270    
 Investment property                                                       646 359         1 181 786    
 Straight-line rental income accrual                                         3 847           (39 587)    
 Financial asset - right to receive dividends                               87 761          (163 855)    
 Derivative instruments                                                     29 085            (5 074)    
Profit/(loss) on disposal                                                    2 697              (526)    
 Investment in subsidiary                                                                     (2 557)    
 Investment property                                                         2 697             2 031    
Impairment of loan from joint ventures                                    (166 441)          (25 377)    
Impairment of goodwill                                                                       (18 134)    
(Impairment)/reversal of impairment of joint venture                       (10 102)           10 102    
Derecognition of financial guarantee                                        11 984                      
Net income before equity-accounted investments                           2 560 409         2 801 654    
Share of loss from joint ventures                                                            (50 380)   
Profit before taxation                                                   2 560 409         2 751 274    
Taxation                                                                   (39 486)           (4 340)    
Profit for the year                                                      2 520 923         2 746 934    
Other comprehensive income                                                                              
Items that may be reclassified subsequently to profit            
or loss (net of taxation)                                        
Exchange differences on translation of foreign operations                   15 471           (27 623)    
Total comprehensive income for the year                                  2 536 394         2 719 311    
Total profit for the year attributable to:                                                              
Shareholders of the company                                              2 529 466         2 767 652    
Non-controlling interests                                                   (8 543)          (20 718)    
Profit for the year                                                      2 520 923         2 746 934    
Total comprehensive income attributable to:                                                             
Shareholders of the company                                              2 540 374         2 755 272    
Non-controlling interests                                                   (3 980)          (35 961)    
Total comprehensive income for the year                                  2 536 394         2 719 311    


Summarised reconciliation - headline earnings             
                                                                         12 months         12 months    
                                                                      30 June 2018      30 June 2017    
                                                                              R000              R000    
Profit for the year                                                      2 529 466         2 767 652    
Earnings                                                                 2 529 466         2 767 652    
Headline earnings adjustments                                             (638 616)       (1 173 229)    
Change in fair value of:   Investment property                            (646 359)       (1 181 786)    
Loss/(profit) on disposal: Investment in subsidiary                                            2 556    
                           Investment property                              (2 697)           (2 031)    
Impairment/(reversal of impairment) of joint venture                        10 102          (10 102)    
Impairment of goodwill                                                                        18 134    
Non-controlling interest                                                       338                      
                                                                                                        
Headline earnings                                                        1 890 850         1 594 423    
Total shares in issue                                                  255 894 516       248 441 278    
Weighted average shares in issue                                       249 024 221       247 441 400    
Diluted weighted average shares in issue                               249 207 302       247 720 531    
Total shares in issue for dividend per share (excludes                                
treasury shares)                                                       255 448 256       247 899 032    
Basic earnings per share (cents)                                           1 015,8           1 118,5    
Headline earnings per share (cents)                                          759,3             644,4    
Diluted earnings per share (cents)                                         1 015,0           1 110,8    
Diluted headline earnings per share (cents)                                  758,7             637,1    
                                                                                      
                                                                                      
Summarised consolidated statement of financial position        
                                                               
                                                                      30 June 2018      30 June 2017          
                                                                              R000              R000          
Assets                                                                                                        
Non-current assets                                                      33 951 124        32 854 166          
 Investment property                                                    30 691 210        29 681 596          
  South African portfolio                                               28 621 856        27 711 853          
  Ikeja City Mall (Lagos, Nigeria)                                       2 069 354         1 969 743          
 Building appurtenances and tenant installations                           163 068           148 530          
 Investments in sub-Saharan Africa (excluding SA                                      
 and Ikeja City Mall)                                                    2 918 721         3 005 821          
 Financial asset - right to receive dividends                              152 556                            
 Loans receivable                                                           18 723            17 434          
 Derivative instruments                                                      6 846               785          
Current assets                                                           1 015 095         1 366 021          
 Receivables                                                               258 071           230 741          
 Loans receivable                                                           40 716                            
 Derivative instruments                                                        815             9 530          
 Cash and cash equivalents                                                 715 493         1 125 750          
Non-current assets held-for-sale                                           199 257           426 681          
Total assets                                                            35 165 476        34 646 868          
Equity                                                                  26 395 237        24 882 553          
 Stated capital and reserves                                            26 304 917        24 788 254          
 Non-controlling interest                                                   90 320            94 299          
Liabilities                                                                                                   
Non-current liabilities                                                  8 203 399         5 428 316          
 Interest-bearing liabilities                                            7 815 651         5 068 332          
 Financial guarantee                                                       185 686           163 855          
 Derivative instruments                                                     24 060            56 530          
 Deferred taxation                                                         178 002           139 599          
Current liabilities                                                        558 683         4 322 925          
 Payables                                                                  487 341           489 681          
 Interest-bearing liabilities                                               69 343         3 832 306          
 Derivative instruments                                                      1 999               938          
Liabilities directly associated with non-current                                      
assets held-for-sale                                                         8 157            13 074          
Total liabilities                                                        8 770 239         9 764 315          
Total equity and liabilities                                            35 165 476        34 646 868          
Net asset value per share (R)                                               102,98             99,78          
                                                                                      

Summarised consolidated statement of changes in equity
                                                                      30 June 2018      30 June 2017    
                                                                              R000              R000    
Balance at beginning of year                                            24 882 553        23 118 856    
Total profit for the year attributable to Hyprop shareholders            2 529 467         2 767 652    
Non-controlling interest                                                    (3 980)          (35 961)    
Loss on vesting of shares                                                   (2 542)                      
Issue of shares                                                            778 676           695 656    
Treasury shares                                                             (7 990)            3 422    
Dividends                                                               (1 795 398)       (1 660 316)    
Share-based payment reserve                                                  3 542             5 624    
Foreign currency translation reserve                                        10 909           (12 380)    
Balance at end of year                                                  26 395 237        24 882 553    
Distribution details                                                                                    
Total distribution for the year (cents)                                      756,5             695,1    
 Six months ended 30 June (cents)                                            380,2             347,8    
 Six months ended 31 December (cents)                                        376,3             347,3    
                                                                                                           

Summarised consolidated statement of cash flows                       
                                                                      30 June 2018      30 June 2017    
                                                                              R000              R000    
Cash flows from operating activities                                        37 689           319 908    
 Cash generated from operations                                          2 133 136         2 159 602    
 Interest received                                                         283 289           266 423    
 Interest paid and capitalised                                            (580 208)         (441 049)    
 Taxation paid                                                              (3 130)           (4 751)    
 Dividends paid                                                         (1 795 398)       (1 660 317)    
Cash flows from investing activities                                       104 745           669 846    
 Acquisition of and additions to investment property                      (263 640)         (123 721)    
 Additions to building appurtenances and tenant installations              (52 104)          (57 064)    
 Proceeds on disposal of assets classified as held-for-sale                229 759           874 233    
 Increase in investment in South-Eastern Europe                            (30 979)                      
 Advances of loans receivable from joint ventures                          (59 061)         (109 506)    
 Repayment of loans receivable from joint ventures                         157 934                      
 Dividends received                                                        163 551            89 093    
 Increases in loans receivable                                             (40 715)           (3 189)    
Cash flows applied to financing activities                                (510 777)          (44 833)    
 Interest-bearing liabilities repaid                                    (3 871 791)       (2 011 393)    
 Issue of shares                                                           778 676           695 655    
 Interest-bearing liabilities raised                                     2 600 502         1 279 879    
 Purchase of Hyprop shares (long-term staff incentive scheme)              (18 164)           (8 974)    
                                                                                                         
Net (decrease)/increase in cash and cash equivalents                      (368 343)          944 921    
Cash disposed with subsidiary                                                                 (4 006)    
Translation effects on cash and cash equivalents of foreign entities       (41 914)          (12 336)    
Cash reallocated to assets held-for-sale                                                      (1 786)    
Cash and cash equivalents at beginning of year                           1 125 750           198 957    
Cash and cash equivalents at end of year                                   715 493         1 125 750    


Commentary
Introduction
Hyprop is a specialist shopping centre Real Estate Investment Trust (REIT), which operates a portfolio 
of shopping centres in South Africa (SA), sub-Saharan Africa (excluding SA) and South-Eastern Europe.

Hyprop's strategy is to own dominant, quality shopping centres in major metropolitan areas, where such
assets can be acquired or developed at attractive yields.

The shopping centre portfolio in South Africa includes super-regional centre Canal Walk, large regional
centres Clearwater, The Glen, Woodlands, CapeGate, Somerset and Rosebank malls, 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 Mall 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 Sofia, Bulgaria (acquired October 2017) and a 90% interest in City 
Centre One East and City Centre One West, both in Zagreb, Croatia (acquired in April 2018).

Financial results
Dividend
Hyprop has declared a dividend of 380,24450 cents per share for the six months ended 30 June 2018, 
an increase of 9,3% on the corresponding period in 2017. The total dividend for the year of 756,5 cents 
per share is an increase of 8,8% on the prior year, reporting a strong performance in difficult market 
conditions.

In May 2018, Hyprop completed a bookbuild, raising R778,7 million by way of an issue of 7,5 million new
shares. The dividend per share for the six months ended 30 June 2018 included the new shares and was not 
increased by an antecedent dividend (to compensate for the dilution resulting from the additional shares 
in issue). 

Total investments
Total investments of R37,3 billion (30 June 2017: R35,5 billion) consist of direct property investments 
in South Africa of R29,0 billion (30 June 2017: R28,3 billion), investments in sub-Saharan Africa (excluding 
SA) of R4,5 billion (30 June 2017: R4,5 billion) and investments in South-Eastern Europe of R3,8 billion 
(30 June 2017: R2,7 billion).

The investments in South-Eastern Europe, held via Hystead, are accounted for as an investment in a financial
asset with the gains on the initial recognition of the financial asset being deferred and changes in fair
value recognised through profit and loss. Accordingly, the investment does not appear on the consolidated
statement of financial position, except for the change in the fair value of the financial asset and equity
contributions totalling R152,6 million. 

Net asset value
The net asset value per share at 30 June 2018 increased by 3,2% to R102,98 (30 June 2017: R99,78). 
The increase was mainly due to an increase in the independent valuation of the South African investment 
property portfolio, as well as the increase in the Hystead financial asset, offset by an impairment of 
the AttAfrica and Manda Hill shareholder loans.

Distributable earnings statement and reconciliation to dividend declared
                                                                     Distributable earnings 12 months
                                                                      30 June 2018      30 June 2017    
                                                                              R000              R000    
South African property portfolio                                         1 937 661         1 916 927    
 - Continuing operations                                                 1 929 055         1 854 471    
 - Properties sold                                                           8 606            62 456    
Investments in sub-Saharan Africa (excluding SA)                            78 368            56 972    
Investments in South-Eastern Europe                                        187 802           101 823    
Fund management expenses                                                   (65 142)          (67 347)    
Net interest                                                              (280 846)         (321 337)    
Other income                                                                46 671            36 533    
Distributable earnings                                                   1 904 514         1 723 572    
Dividend for six months - first half                                       933 127           861 423    
Dividend for six months - second half                                      971 387           862 149    
Total dividend                                                           1 904 514         1 723 572    
Total shares in issue - first half                                     248 441 278       248 441 278    
Treasury shares in issue - first half                                     (446 260)         (410 659)    
Shares in issue for distributable earnings - first half                247 995 018       248 030 619    
Additional treasury shares - second half                                                    (131 587)    
Shares issued - May 2018                                                 7 453 238                      
Shares in issue for distributable earnings - second half               255 448 256       247 899 032    
Dividend per share (cents) - first half                                      376,3             347,3    
Dividend per share (cents) - second half                                     380,2             347,8    
Dividend per share (cents)                                                   756,5             695,1    
Dividend per share growth (%) - first half                                     8,3              16,6    
Dividend per share growth (%) - second half                                    9,3               8,0    
Dividend per share growth (%)                                                  8,8              12,1    
                                                                                     

Total distributable earnings for the year grew by 10,5% (30 June 2017: 13,2%), largely due to income 
from the investments in South-Eastern Europe, particularly the new acquisitions in Skopje, Macedonia 
(November 2016), Sofia, Bulgaria (October 2017) and the two malls in Zagreb, Croatia (April 2018). 
The inclusion of distributable earnings from Ikeja City Mall in Lagos, Nigeria, which were excluded 
in the prior year due to US Dollar availability constraints, also contributed to the growth for the 
year. Hyprop's international investments contributed 16,4% (30 June 2017: 11,3%) to distributable 
earnings.

The net interest cost of R280,8 million (30 June 2017: R321,3 million) was lower compared with the previous
year due to the application of cash from non-core asset sales of R867 million in 2017 and R230 million in
2018, as well as the proceeds of the new share issue in May 2018 of R778,2 million, to the reduction of 
debt and to capital expenditure in the South African portfolio. The remaining cash was placed on deposit. 

Fund management expenses reduced during the year due mainly to asset management fees received from Hystead
of R17,3 million (2017: R13,6 million).

Other income includes credit enhancement income of R46,7 million (2017: R36,5 million) for the funding
guarantee provided by Hyprop in respect of a portion of the South-Eastern European investments.

Treasury shares are held in respect of an equity settled staff incentive scheme.

Reconciliation from headline earnings to distributable earnings
                                                                         12 months         12 months    
                                                                      30 June 2018      30 June 2017    
                                                                              R000              R000    
Headline earnings                                                        1 890 850         1 594 423    
Distributable earnings adjustments                                          13 664           129 149    
Change in fair value: Derivative instruments                               (29 085)            5 074    
Derecognition of financial guarantee                                       (11 984)                      
Financial asset - right to receive dividends                               (87 761)          163 855    
Investments in sub-Saharan Africa (excluding SA)1                          (57 602)          (29 928)    
South African subsidiaries1                                                 (2 190)            1 212    
South-Eastern Europe                                                                         (44 221)    
Impairment of loans from joint ventures                                    166 441            25 377    
Capital items and other items                                               (3 641)            6 154    
Deferred and normal taxation                                                39 486             1 626    
Distributable earnings                                                   1 904 514         1 723 572    
1 Net effect of converting IFRS earnings to distributable earnings.

South African portfolio
Revenue and distributable earnings
                                            12 months                          12 months
                                          30 June 2018                        30 June 2017
                                                  Distributable                        Distributable     
                                    Revenue            earnings          Revenue            earnings    
Business segment                       R000                R000             R000                R000    
Shopping centres                  2 684 578           1 792 727        2 580 200           1 723 648    
Value centres                       151 214             106 796          139 857             102 490    
Total retail                      2 835 792           1 899 523        2 720 057           1 826 138    
Total standalone offices1            47 166              29 532           46 908              28 332    
Investment property               2 882 958           1 929 055        2 766 965           1 854 470    
(excluding properties sold)                                                                             
Properties sold2                     10 797               8 606          108 637              62 457    
Total investment property         2 893 755           1 937 661        2 875 602           1 916 927    
1 Consists of Lakefield Office Park (held-for-sale) and Cradock Heights.
2 Willowbridge North was sold during the year. Properties sold in the prior year included Somerset Value 
  Mart, Willowbridge South, Glenfield and Glenwood office parks.

Growth in distributable earnings (excluding properties sold) for the year was 4,0%. The growth in
distributable earnings in the second half of the year (excluding properties sold) was 6,0% compared 
with 2,1% in the first half. Construction work at Rosebank Mall and The Glen, and the Stuttafords 
vacancies at Canal Walk, Clearwater Mall and Rosebank Mall, reduced the growth in distributable 
earnings, primarily in the first half of the year.
 
CapeGate and Somerset Mall were the best performers in the portfolio with both recording growth in
distributable earnings of 8,7%. Despite being negatively affected by the Stuttafords vacancy and 
construction work in the La Piazza area, Canal Walk recorded distributable earnings growth of 5,4%.
 
Due to the impact of the weak economic conditions on consumer spend, growth in trading density reduced 
to 0,5% (30 June 2017: 1,4%). Good trading density growth was recorded at CapeGate (6,8%) and 
Clearwater Mall (4,4%). 
 
Cost-to-income ratios
                                                                      30 June 2018      30 June 2017    
Net basis (%)                                                                 15,8              15,7    
Gross basis (%)                                                               33,0              33,3    

The net cost-to-income ratio increased marginally, mainly due to increases in municipal rates in the
Pretoria portfolio from July 2017 and a slight reduction in recoveries across the portfolio. The 
improvement in the gross cost-to-income ratio is due to additional income from completed developments. 

Tenant arrears
Tenant arrears were R18,9 million (excluding outstanding deposits) at year-end (30 June 2017: R13,7 million)
or 0,6% of rental income (30 June 2017: 0,4%). Bad debts of R10,3 million (30 June 2017: R8,9 million) were
written off during the year. The provision for bad debts increased to R8,9 million (30 June 2017: R6,5 million).
 
Although tenant arrears increased during the period, the arrears are a relatively small percentage of rental
income and are within market norms.

Vacancies                                                                               
                                   Rentable           Change in          % of total rentable area
                                  area (m2)      vacancy during                                         
Sector                         30 June 2018     the period (m2)       30 June 2018      30 June 2017
Retail                               10 713              (2 132)               1,6               1,9    
Office                                3 255              (1 459)               5,5               7,9    
Total                                13 968              (3 591)               1,9               2,4    

Despite the tough trading environment for retailers, vacancies in the portfolio reduced from 2,4% to 1,9%.
Canal Walk, Woodlands Boulevard and CapeGate had vacancies of less than 1%. The largest vacancies in the 
retail portfolio were at The Glen (4 378m2), Clearwater Mall (1 988m2) and Atterbury Value Mart (1 751m2).
The Glen vacancy included vacancies resulting from the food court development of 1 100m2. Since the 
opening in April 2018, positive interest from retailers has been received for this area.

The decrease in office vacancies from 7,9% to 5,5% is mainly due to lettings at the Rosebank Mall and Canal
Walk offices. 

Lettings
New leases and renewals of 133 400m2 (18,5% of the total rentable area) with a contract value of 
R1,9 billion, were concluded during the year, at a net rental growth of 1,0% (30 June 2017: 4,0%) and 
an average escalation of 7,7% (30 June 2017: 7,9%).

Leases of approximately 106 000m2 (15% of total rentable area) will expire in the 2019 financial year. 
As at 30 June 2018, the Edcon Group occupied 67 300m2 (30 June 2017: 70 102m2) in Hyprop's shopping centres. 
In the 2019 financial year approximately 1 380m2 of the space will not be renewed, while a further 8 600m2 
is under review with the objective of finding replacement tenants. We will continue to work with the Edcon 
Group to address their space requirements, to the extent possible, as their business develops.

Valuations                                                                                               
                                                      Value attributable to                Value per        
                                                              Hyprop                   rentable area    
                                 Rentable area      30 June 2018      30 June 2017      30 June 2018    
Business segment                          (m2)              R000              R000            (R/m2)   
Shopping centres                       653 258        27 351 847        26 490 589            45 965    
Value centres                           48 848         1 303 000         1 248 000            26 675    
Total retail                           702 106        28 654 847        27 738 589            44 623    
Total standalone offices1               20 354           323 000           310 798            15 869    
Total (excluding properties sold)      722 460        28 977 847        28 049 387            43 813    
Properties sold2                                                           225 000                      
Investment property                    722 460        28 977 847        28 274 387            43 813    
1 Consists of Lakefield Office Park (held-for-sale) and Cradock Heights.
2 Willowbridge North was sold during the year.

Investment property was independently valued by external valuers at 30 June 2018 resulting in a net increase
in value of R646,9 million (30 June 2017: R1 263,8 million). The weighted average capitalisation rate of the
portfolio is 6,6%. (30 June 2017: 6,6%). All discount and capitalisation rates remained largely the same as
the previous year. The sharp increase in municipal rates from July 2018 had a negative impact on the 
valuation of the Johannesburg shopping centres. Hyprop has objected to the increase.

In terms of IAS 40 and IFRS 13, investment properties are measured at fair value through profit or loss
using valuation inputs which are categorised as level 3 on the fair value hierarchy. There were no 
transfers between levels 1, 2 and 3 during the year. 

Capital expenditure
The following major projects were successfully completed during the year:

Shopping centre    Project                                       Hyprop's share      Completion date    
Rosebank Mall      Additional 4 300m2 rentable area              R127,0 million           April 2018    
The Glen           Food court enclosure and additional retail     R90,9 million           April 2018    
Canal Walk         Additional retail in La Piazza area            R41,6 million        November 2017    
Woodlands Mall     Nu Metro refurbishment                         R16,0 million        December 2017    

The projects were completed on schedule and below budgeted cost. Since the completion, a positive trend 
in the number of visitors to the centres has been recorded. 

With a focus on improving quality and sustainability in the shopping centres a total of R66,9 million 
(30 June 2017: R177,9 million) was spent on refurbishments, new equipment, tenant installations and 
sustainable technology.

Smaller projects completed during the year include the refurbishment of the Hyde Park Corner offices 
(R14 million) and the facade replacement of the Rosebank Mall offices (R10 million). Opportunities are 
currently being explored on the rightsizing of various stores, and creating space for tenants who are not 
yet in all of the shopping centres. Also, an upgrade of the food courts at Woodlands Boulevard and 
Canal Walk are in planning stage.

The various water-saving initiatives in the Western Cape region (the use of borehole water, capturing of
run-off water, the treatment of effluent grey water) are all in the final stages of commissioning. As a 
result of these initiatives, together with the installation of back-up water storage, the exposure of 
the Western Cape shopping centres to water outages has been significantly reduced. Other ongoing 
water-saving initiatives in the portfolio included the use of grey and borehole water at The Glen, 
and the installation of waterless urinals and aerators in the public bathrooms across the portfolio. 

Disposals
Willowbridge North was sold during the year for R225 million. Transfer took place in September 2017.

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

Investments outside South Africa
The functional and reporting currencies for the investments in sub-Saharan Africa (excluding SA) and
South-Eastern Europe are US Dollar and Euro, respectively.

The exchange rates used to convert to Rand were as follows:
                                                     30 June 2018                  30 June 2017                   
                                                 Average       Year-end       Average       Year-end     
                                                    rate      spot rate          rate      spot rate    
                                                       R              R             R              R    
US Dollar                                          12,53          13,70         13,63          13,04    
Euro                                               15,27          16,00         14,53          14,90    

The average rates are a weighted average of the actual exchange rates on the dates that the foreign 
currency dividends were received in South Africa. The year-end spot rate is the rate used to translate 
balance sheet items at year-end.

Hyprop fixes the exchange rates on US Dollar and Euro income for six months in advance of receipt of
dividends.

Investments in sub-Saharan Africa (excluding SA)
                                                                             Hyprop share of
                                                                          distributable earnings
                                                                      30 June 2018      30 June 2017    
                                                                              R000              R000    
Distributions received                                                     254 639           168 241    
Interest and expenses                                                     (176 271)         (111 269)    
Net                                                                         78 368            56 972    

Distributable earnings from the investments in sub-Saharan Africa (excluding SA) increased to R78,4 million
(30 June 2017: R57,0 million), due to the inclusion of distributable earnings from Ikeja City Mall, Lagos,
Nigeria of R24,0 million (30 June 2017: Rnil).

Vacancies
                                          Hyprop's                                                         
                                         effective      Rentable      30 June 2018      30 June 2017       
                                      shareholding          area           vacancy           vacancy        
                      City/Country             (%)          (m2)               (%)               (%)    
Ikeja City Mall     Lagos, Nigeria            75,0        22 223               3,1                      
Manda Hill          Lusaka, Zambia            68,8        42 002               4,1               5,4    
Accra Mall            Accra, Ghana            17,6        21 311               6,8                      
West Hills Mall       Accra, Ghana            16,8        28 272              10,4               5,3    
Achimota Mall         Accra, Ghana            28,1        15 534               1,9               6,1    
Kumasi City Mall     Kumasi, Ghana            28,1        18 604              13,0              26,5    
Total portfolio                                          147 946               6,4               6,5    

The financial performance of the portfolio overall was negatively impacted by vacancies and tenant
replacements during the year. Vacancies in Accra Mall and West Hills Mall increased mainly due to the 
withdrawal of Truworths and Identity from Ghana, and the downsizing of fashion tenants. Income from 
Manda Hill shopping centre (Lusaka, Zambia) reduced due to re-tenanting of shops at lower rentals at 
the beginning of the financial year. Game (replacing the previous second food anchor) is due to open 
in November 2018 at Achimota and West Hills, which will strengthen the tenant mix.

The economic growth prospects in Ghana have improved and we have seen a general increase in trading
densities in recent months. Demand for shops improved at some centres and vacancies reduced at Manda 
Hill, Kumasi and Achimota. At Ikeja City Mall, trading conditions and rent collection have been stable 
over recent months while the Nigerian economy has slowly gained momentum, benefiting from higher oil 
prices and improved foreign exchange liquidity.

Hyprop share of shareholder loans/investment property
At 30 June 2018 the Hyprop share of the US Dollar value of the AttAfrica portfolio, Manda Hill and 
Ikeja City Mall was USD282,9 million (30 June 2017: USD281,8 million) at a weighted average 
capitalisation rate of 8,3% (30 June 2017: 8,4%).
       
                                                                              Hyprop share                      
                                                                      30 June 2018      30 June 2017    
                                                                              R000              R000    
AttAfrica and Manda Hill                                                 2 918 721         3 005 821    
Ikeja City Mall, Lagos, Nigeria (75%)                                    1 552 015         1 476 553    
Total effective investment in sub-Saharan Africa                         4 470 736         4 482 374    

The small net reduction in the Rand value over the period was mainly due to the repayment of a portion 
of the AttAfrica shareholder loan (R65,6 million) and an impairment of the shareholder loans to AttAfrica 
and Manda Hill (R166,4 million), offset by an increase in value due to Rand depreciation against the 
US Dollar (R146,9 million) at year-end.  

Certain of the properties in the portfolio, have been affected by the economic conditions of recent 
years and are producing lower investment returns than what was originally anticipated. As a result 
the income received from those properties over the next few years will be lower than previously modelled. 
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 therefore been impaired. Should a sale not take 
place before maturity of the shareholder loans to AttAfrica in 2020, it is likely that the structure 
will be renegotiated and extended. 

As disclosed in the interim results announcement, 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. The total rentable area of the portfolio is approximately 230 000m2 with
Hystead's share of the gross asset value being EUR740,6 million. 

                                                                        Hyprop share of Hystead's 
                                                                          distributable earnings
                                                                      30 June 2018      30 June 2017    
                                                                              R000              R000    
Distribution received                                                      276 083           147 059    
Interest and expenses                                                      (88 281)          (45 236)    
Net distributable earnings                                                 187 802           101 823    

The significant increase in net distributable earnings is mainly due to the inclusion of income from Skopje
City Mall in Skopje, Macedonia (acquired November 2016), The Mall in Sofia, Bulgaria (acquired October 2017)
and City Centre One Zagreb East and City Centre One Zagreb West in Zagreb, Croatia (acquired April 2018).
Distributable earnings also benefited from the depreciation of the Rand against the Euro. 

Vacancies
                                                 Hyprop's                                            
                                                effective    Rentable    30 June 2018   30 June 2017  
                                             shareholding        area         vacancy        vacancy  
                       City/country                   (%)        (m2)             (%)            (%)   
Delta City Belgrade    Belgrade, Serbia                60      29 850                                   
Delta City Podgorica   Podgorica, Montenegro           60      23 718                                   
Skopje City Mall       Skopje, Macedonia               60      36 241                                   
The Mall, Sofia        Sofia, Bulgaria                 60      51 211             0,4            n/a    
City Centre One East   Zagreb, Croatia                 54      47 191             0,3            n/a    
City Centre One West   Zagreb, Croatia                 54      42 373                            n/a    
Total portfolio                                               230 584             0,1                   

At 30 June 2018, apart from small vacancies at The Mall in Sofia and City Centre One East, the Hystead
portfolio was fully let.

Benefiting from strong macro-economic conditions, trading in the South-Eastern European shopping centres
remain positive with the centres reporting good trading density growth. Demand for space remains high 
and various extension plans are under consideration.

Hyprop share of investment property
At 30 June 2018 the Hyprop share of the Euro value of the Hystead portfolio was EUR444,4 million 
(30 June 2017: EUR179,9 million) at a weighted average capitalisation rate of 7,5% (30 June 2017: 8,7%).

                                                                               Hyprop share                      
                                                                      30 June 2018      30 June 2017    
                                                                              R000              R000    
Delta City Belgrade, Belgrade, Serbia (60%)                              1 248 250         1 162 200    
Delta City Podgorica, Podgorica, Montenegro (60%)                          738 388           685 698    
Skopje City Mall, Skopje, Macedonia (60%)                                  894 899           833 208    
The Mall, Sofia, Bulgaria (60%)                                          1 533 427               n/a    
City Centre One East, Zagreb, Croatia (54%)                              1 296 259               n/a    
City Centre One West, Zagreb, Croatia (54%)                              1 399 960               n/a    
Total effective investment in South-Eastern Europe                       7 111 183         2 681 106    

The total Rand equivalent value of Hyprop's share of investment property in South-Eastern Europe 
increased due to the acquisition of The Mall in Sofia, Bulgaria and the two centres in Zagreb, Croatia. 
The Rand equivalent value of the Delta City centres and Skopje City Mall increased marginally due to 
the depreciation of the Rand against the Euro.

Acquisitions 
Hystead made the following acquisitions during the year:

The Mall, Sofia, Bulgaria
The Mall shopping centre in Sofia, Bulgaria, effective 4 October 2017, for EUR155 million (7,3% yield). 
The Mall, with a rentable area of 51 200m2, is one of the dominant shopping centres in Sofia.

In June 2018, Hystead acquired the former Hypermarket premises which is currently vacant and is connected 
to The Mall. These premises will be refurbished and integrated with The Mall, at a total cost of EUR23 million,
and will introduce a supermarket of 2 450m2 as well as additional line shops of 9 550m2. The anticipated
starting date is October 2018 and the development will take approximately six months to complete, at an 
estimated initial yield of 9%.

City Centre One East and City Centre One West, Zagreb, Croatia
Hystead acquired a 90% interest in two dominant shopping centres situated in Zagreb, Croatia (City Centre
One Zagreb West and City Centre One Zagreb East) with rentable areas of 42 373m2 and 47 191m2, respectively,
effective from 20 April 2018, for EUR283,5 million (7% yield). Hystead entered into a joint venture agreement
with WKB3 (which retains a 10% interest in the centres), an Austrian-based company that developed and 
managed the centres.

During the year Hystead established a European-based executive management team, which provides management
support to the onsite property management at each of the shopping centres. The asset management of the 
Zagreb shopping centres is undertaken jointly by the Hystead management team and by CC Real, the operating 
company of WKB3.

Funding 
With effect from June 2018, all of the shopping centres are part funded with non-recourse asset-backed 
loans through offshore banks at an average loan to value ratio of 47% (EUR349,9 million). The debt has a 
weighted average interest rate of 3,6% and a loan term of 4,5 years, with 45% of the interest rates hedged 
for the full term.

Hystead listing
Consideration was given to inwardly listing Hystead separately on the JSE. Given the relatively weak 
capital market conditions in South Africa and based on feedback from potential investors, the possible 
listing was terminated and Hystead will be held in an unlisted format for the foreseeable future. 
Hystead will seek further acquisition opportunities for quality assets in the region at acceptable 
yields.

Borrowings
                                                                               30 June       30 June    
                                                                                  2018          2017    
                                                                                    Rm            Rm    
South African debt                                                               2 950         4 114    
 Bank debt                                                                         600         1 814    
 Corporate bonds                                                                 2 350         2 300    
USD bank debt (Rand equivalent)                                                  4 513         4 391    
EUR bank debt (Rand equivalent)                                                  3 795         2 673    
Cash and cash equivalents                                                         (715)       (1 126)    
Net borrowings                                                                  10 543        10 052    
Loan-to-value (%)                                                                 28,1          28,9    
Debt at fixed rates (%)                                                                                 
 South African debt (%)                                                          113,6         100,9    
 USD debt (%)                                                                     63,5          70,4    
Maturity of fixes (years)                                                          3,1           3,4    
 South African debt (years)                                                        3,8           3,9    
 USD debt (years)                                                                  2,4           2,7    
Maturity of facilities (years)                                                     3,1           2,5    
 South African debt (years)                                                        3,8           2,2    
 USD debt (years)                                                                  2,7           2,6    
Cost of funding (%)                                                                5,0           5,7    
 South African debt (%)                                                            9,4           8,9    
 USD debt (%)                                                                      4,8           4,7    
 EUR debt (%)                                                                      1,7           2,2    
Debt capital market (DCM) % of total debt                                           21            21    

South African debt
The South African bank debt is secured against South African investment property, while the DCM funding 
is unsecured.

During the period, the following maturing corporate bonds and facilities were repaid:

Type                               Amount                Date repaid       
Five-year corporate bond           R300 million          September 2017    
Five-year corporate bond           R450 million          April 2018        
Nedbank debt                       R1,2 billion          June 2018         

In March 2018, Hyprop issued two new long-term corporate bonds, a R452 million five-year bond and a 
R348 million seven-year bond, at margins of 1,6% and 1,9% respectively, which were used to repay part 
of the Nedbank debt. The cash from the equity raised of R778,7 million as well as proceeds from 
previous asset sales were utilised to reduce the South African debt.

At 30 June 2018, 113,6% of the interest rate was hedged. This will reduce in the first quarter of the 
2019 financial year with the expiry of a R100 million interest rate hedge in August 2018 and the 
potential raising of R250 million of new debt to fund capital requirements. 

The interest rate on the South African debt increased due to the increase in the maturity profile of the
corporate bonds. 

US Dollar-denominated debt
The Rand equivalent of the US Dollar-denominated bank debt increased during the year, largely due to 
Rand depreciation against the US Dollar. The US Dollar debt includes debt in Hyprop Mauritius, as well 
as 75% of the in-country debt relating to Ikeja City Mall (Lagos, Nigeria).

Two bank loans in Hyprop Mauritius of USD40 million and USD20 million were consolidated and refinanced 
with a three-year USD60 million bank facility. During the year a portion of an expiring bank facility 
of USD30 million was partly repaid and refinanced with a USD23 million facility, of which only 
USD16,7 million was utilised.

In-country debt relating to Ikeja City Mall (Lagos, Nigeria) of USD56,5 million (Hyprop share: 
USD42,4 million) was refinanced for three years and converted to an interest only loan.

Euro-denominated debt
Equity funding in Hystead of EUR396 million has been provided through bank loans secured by shareholder 
guarantees. As per the shareholders' agreement, Hyprop guarantees 90% of the equity 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 guaranteed amount and for the remaining 18,3% 
that Hyprop guarantees, Hyprop receives 60% of the applicable PDI dividend as credit enhancement 
income. This agreement is in place until May 2021.

EUR234 million of the equity funding, provided by way of bridge loans, will be refinanced by October 2018
and replaced with three-year term loans, at an estimated average fixed interest rate of 2,1%. The balance 
of the equity funding was previously financed using three-year term loans, due to expire in May 2020. 

The Euro debt is not consolidated in the Hyprop statement of financial position. For the purposes of the
above table (including calculation of the loan-to-value ratio), 60% of the debt and 60% of the corresponding
asset values have been included (in line with Hyprop's 60% interest in Hystead).

Euro-denominated debt increased during the period due to the acquisition of The Mall in Sofia, Bulgaria in
October 2017, and the two malls in Zagreb, Croatia, as well as the depreciation of the Rand against the Euro.

Board changes
Laurence Cohen (CFO) resigned from the board effective 1 August 2018. Brett Till has been appointed as the
CFO effective 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.

Prospects
Hyprop expects dividend growth of between 5% and 7% for the year to 30 June 2019. This is lower than has
been the case for a number of years but is reflective of lower growth in the South African property sector 
and the effects of the constrained consumer environment in South Africa. We will continue to invest in and 
manage our properties to ensure that they remain relevant and attractive to customers through the current 
economic cycle.

This guidance is based on the following key assumptions:
- Forecast investment property income is based on contractual rental escalations and market-related
  renewals.
- Appropriate allowances for vacancies have been incorporated into the forecast.
- No major corporate and tenant failures will occur.
- Earnings from offshore investments will not be materially impacted by exchange rate volatility or
  disruption in the financial markets. 
- Exchange rates have been assumed at R13,50 and R15,50 to the US Dollar and Euro, respectively.

The forecast has not been reviewed or reported on by the company's auditors.

Payment of dividend
A dividend of 380,24450 cents per share for the six months ended 30 June 2018 will be paid to shareholders
as follows:

                                                                                                2018    
Last day to trade cum dividend                                                 Tuesday, 25 September    
Shares trade ex dividend                                                     Wednesday, 26 September    
Record date                                                                     Friday, 28 September    
Payment date                                                                       Monday, 1 October    

Shareholders may not dematerialise or rematerialise their shares between Wednesday, 26 September 2018 and
Friday, 28 September 2018, both days inclusive. Payment of the dividend will be made to shareholders on 
Monday, 1 October 2018. In respect of dematerialised shareholders, the dividend will be transferred to 
the CSDP accounts/broker accounts on Monday, 1 October 2018. Certificated shareholders' dividend 
payments will be deposited on or about Monday, 1 October 2018.

An announcement relating to the tax treatment of the dividend will be released separately.

Basis of preparation
The summarised consolidated financial statements for the year ended 30 June 2018 were prepared in accordance
with the JSE Limited Listings Requirements for summarised consolidated results and the requirements of the
Companies Act of South Africa. The JSE Listings Requirements require summarised consolidated results to be
prepared in accordance with the framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the 
Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards 
Council, and as a minimum, contain the information required in terms of IAS 34 Interim Financial Reporting.

All amendments to standards that are applicable to Hyprop for its financial year beginning 1 July 2017 
have been considered. Based on management's assessment, the amendments did not have a material impact on 
the group's financial statements.

All accounting policies applied in the preparation of the group financial statements for the year ended 
30 June 2018 are consistent with those applied by Hyprop in its consolidated group financial statements 
for the prior financial year.

These summarised consolidated financial statements for the year ended 30 June 2018 have been extracted from
the audited group financial statements, but have not been audited. The directors take full responsibility for
the preparation of the summarised consolidated results and for ensuring that the financial information has
been correctly extracted from the underlying audited group financial statements. The auditor's report does not
necessarily report on all of the information included in this announcement. Shareholders are therefore advised
that, in order to obtain a full understanding of the nature of the auditor's engagement, they should obtain a
copy of the auditor's report, together with the underlying financial information from the registered office of
the company.

KPMG Inc. has audited the group financial statements. Their unqualified audit report is available from the
registered office of the company.

The financial information was prepared by Vasti Booysen CA(SA) and supervised by Pieter Prinsloo in his
capacity as CEO.

On behalf of the board

GR Tipper           PG Prinsloo
Chairman            CEO

31 August 2018

Corporate information
Directors
GR Tipper*† (Chairman)
PG Prinsloo (CEO)
AW Nauta
KM Ellerine*
L Engelbrecht*†
Z Jasper*†
MJ Lewin*†
N Mandindi*†
TV Mokgatlha*†
L Norval*
S Shaw-Taylor* †
*Non-executive   †Independent 

Registered office
Second Floor 
Cradock Heights 
21 Cradock Avenue 
Rosebank
(PO Box 52509, Saxonwold, 2132)

Transfer secretaries
Computershare Investor Services Proprietary Limited
Rosebank Towers
15 Biermann Avenue 
Rosebank
PO Box 61051, Marshalltown, 2107

Company secretary
CIS Company Secretaries Proprietary Limited

Sponsor
Java Capital 

Investor relations
Singular Systems IR
Telephone +27 10 003 0661  
Email: michele@singular.co.za

www.hyprop.co.za

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