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, and regional centre Hyde Park Corner.

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 interests in Delta City Belgrade, Serbia, Delta City Podgorica, Montenegro, Skopje City Mall in Skopje, Macedonia and The Mall in Sofia, Bulgaria (acquired October 2017).

In February 2018, Hystead agreed to acquire a 90% interest in City Centre One Zagreb East and City Centre One Zagreb West, both in Zagreb, Croatia.

FINANCIAL RESULTS

Hyprop has declared a dividend of 376,3 cents per share for the six months ended 31 December 2017 (the period), an increase of 8,3% on the corresponding period in 2016.

DISTRIBUTABLE EARNINGS STATEMENT AND RECONCILIATION TO DIVIDEND DECLARED

   Distributable earnings    
Operating segment  Six months 
31 December 
2017 
R000
 
   Six months 
31 December 
2016 
R000 
  
South African property portfolio  952 345     968 198    
Continuing operations  944 034     924 877    
Properties sold  8 311     43 321    
Investments in sub-Saharan Africa (excluding SA) 40 025     30 884    
Investments in South-Eastern Europe  91 615     58 351    
Fund management expenses  (29 900)    (32 826)   
Net interest  (148 373)    (180 688)   
Other income  27 415     17 505    
Total dividend  933 127     861 424    
Total shares in issue at period-end  248 441 278     248 441 278    
Treasury shares in issue  (446 260)    (410 659)   
Shares in issue for distributable earnings  247 995 018     248 030 619    
Dividend per share (cents) 376,3     347,3    
Dividend per share growth (%) 8,3     16,6    

Distributable earnings for the period benefited from income received from the investments in South-Eastern Europe, particularly the new acquisitions in Skopje, Macedonia (November 2016) and in Sofia, Bulgaria (October 2017). The inclusion of distributable earnings from Ikeja City Mall in Lagos, Nigeria also contributed to the growth in distributable earnings for the period.

Net interest costs of R148,4 million (31 December 2016: R180,7 million) reduced due to non-core asset sales of R867 million during the 2017 financial year and the sale of Willowbridge North for R225 million in September 2017.

The proceeds from non-core asset sales were applied in part to the reduction of debt and in part to capital expenditure in the South African portfolio. The remaining cash was placed on deposit.

Fund management expenses reduced during the period, partly due to asset management fees received from Hystead amounting to R7,4 million (31 December 2016: R6,8 million), and a reduction in the share-based payment expense relating to the staff share incentive scheme.

Included in other income are credit enhancement fees of R25,2 million (31 December 2016: R17,5 million) received for the funding guarantee provided by Hyprop in respect of the South-Eastern European investments.

RECONCILIATION FROM HEADLINE EARNINGS TO DISTRIBUTABLE EARNINGS

   Unaudited 
six months 
31 December 
2017 
R000
 
   Unaudited 
six months 
31 December 
2016 
R000 
   Audited 
12 months 
30 June 
2017 
R000 
  
Headline earnings  895 127     977 705     1 594 423    
Distributable earnings adjustments  38 000     (116 281)    148 798    
  Change in fair value: Derivative instruments  6 943     (50 602)    5 074    
                                  Financial guarantee  29 409         163 855    
  Investments in:          Sub-Saharan Africa (excluding SA)1  (26 024)    (48 487)    (29 928)   
                                  South African subsidiaries1  (364)    1 118     1 212    
                                  South-Eastern Europe  11 389     (24 572)    (24 572)   
  Impairment of loan (AttAfrica) 8 539         25 377    
  Capital items  3 697     5 286     6 154    
  Deferred taxation  4 411     976     1 626    
Distributable earnings  933 127     861 424     1 743 221    

1 Net effect of converting IFRS earnings to distributable earnings

SOUTH AFRICAN PORTFOLIO

Revenue and distributable earnings

   Unaudited six months ended
31 December 2017
 
   Unaudited six months ended
31 December 2016
  
Business segment  Revenue 
R000
 
   Distributable 
earnings 
R000
 
   Revenue 
R000 
   Distributable 
earnings 
R000 
  
Shopping centres  1 318 591      877 306      1 287 100     860 789    
Value centres  74 816      51 232      68 473     50 298    
Total retail  1 393 407      928 538      1 355 573     911 087    
Total standalone offices1  24 138      15 496      22 841     13 790    
Investment property (excluding properties sold) 1 417 545      944 034      1 378 414     924 877    
Properties sold2  10 494      8 311      74 173     43 488    
Total investment property  1 428 039      952 345      1 452 587     968 365    

1 Consists of Lakefield Office Park (held-for-sale) and Cradock Heights

2 Willowbridge North was sold during the period. Properties sold in the prior year include Somerset Value Mart, Willowbridge South, Glenfield and Glenwood office parks

Despite the difficult economic and political conditions in South Africa during the period, which had a negative effect on consumer confidence, the shopping centres achieved positive trading results.

Like-for-like growth in distributable earnings (excluding properties sold) for the period was 2,1%. Income was negatively affected by construction work at
The Glen, Rosebank Mall and Canal Walk and vacancies as a consequence of Stuttafords vacating Clearwater Mall, Rosebank Mall and Canal Walk in May 2017.

Excluding the effects of the construction work and the Stuttafords vacancies, growth in distributable earnings from shopping centres was 5,2%.

Somerset Mall and CapeGate performed well during the period, with distributable earnings growth of 7,5% and 6,9% respectively.

Excluding The Glen, trading density growth for the period was 2,1% (31 December 2016: 3,5%). Trading density growth for the period including The Glen was 1,4% (31 December 2016: 2,7%). Good trading density growth was recorded at CapeGate (8,7%), Rosebank Mall (5,4%) and Clearwater Mall (4,0%).

While the decline in trading density growth is largely a function of the economic constraints faced by consumers, we continue to invest in and manage our properties in order to ensure that they remain relevant and attractive to customers.

Cost-to-income ratio

  31 December
2017
  30 June
2017
 
Net basis (%) 16,3   15,7  
Gross basis (%) 33,3   33,3  

The net cost-to-income ratio increased marginally, mainly due to increases in municipal rates as a consequence of increases in council valuations.

Tenant arrears

Total arrears as a percentage of rental income were 0,8% (30 June 2017: 0,4%). The provision for bad debts increased to R12,1 million (30 June 2017: R6,5 million).

Although tenant arrears increased during the period, the arrears are still a relatively small percentage of rental income and are within market norms.

Vacancies

               % of total rentable area    
Sector  Rentable 
area (m2)
31 December 
2017 
   Change in 
vacancy during 
the period 
(m2)
   31 December 
2017
 
   30 June 
2017 
  
Retail  5 818     (7 028)    0,9     1,9    
Office  5 851     1 137     9,9     7,9    
Total  11 669     (5 891)    1,6     2,4    

Retail vacancies reduced significantly, largely due to the successful letting of most of the former Stuttafords stores and the former HiFi Corporation store at CapeGate. The reintroduction of Nu Metro at Woodlands Boulevard also contributed to the reduction in the retail vacancy. Most of the new lettings were only income producing from November 2017 and will impact positively on rental income in the second half of the financial year.

The increase in office vacancies is primarily due to the relocation of Standard Bank from Cradock Heights to the Rosebank Mall (1 359m2) and lease expiries at Lakefield Office Park (919m2). These increases were partially offset by new lettings at Canal Walk and Hyde Park offices.

Valuations

           Value attributable to Hyprop      Value per 
rentable area
 
  
  Business segment  Rentable 
area 
(m2)
   31 December 
2017 
R000
 
   30 June 
2017 
R000 
   31 December 
2017 
(R/m2)
  
  Shopping centres  643 611     27 158 792     26 490 589     46 340    
  Value centres  48 848     1 277 000     1 248 000     26 143    
  Total retail  692 459     28 435 792     27 738 589     44 915    
  Total standalone offices1  20 328     307 775     310 798     15 141    
  Total (excluding properties sold) 712 787     28 743 567     28 049 387     44 066    
  Properties sold2              225 000          
  Investment property   712 787     28 743 567     28 274 387     44 066    

1 Consists of Lakefield Office Park (held-for-sale) and Cradock Heights

2Willowbridge North was sold during the period

Investment property was valued at R28,7 billion at 31 December 2017 (30 June 2017: R28,0 billion), an increase of 2,5% (excluding assets sold). The weighted average capitalisation rate of the portfolio is 6,6%. (30 June 2017: 6,6%).

Capital expenditure

The Canal Walk La Piazza project (Hyprop share: R41,6 million) and the third phase of the solar photovoltaic plant at Clearwater Mall (R14,5 million) were successfully completed during the period.

The following extensions and refurbishments are underway:

Shopping centre Project Amount (Hyprop's share) Completion date
Rosebank Mall Additional 4 300m2 rentable area R127,0 million April 2018
The Glen Food court enclosure and additional 1 200m2 rentable area R90,9 million April 2018
Woodlands Mall Food court upgrade and Nu Metro refurbishment R30,3 million July 2018

The extension of Rosebank Mall will accommodate H&M, Sportsmans Warehouse and other key tenants. The refurbishments at The Glen and Woodlands will strengthen the retail offering at those centres. The estimated average forward yield on the capital projects is 7%.

Hyprop is focused on improving the quality and sustainability of its shopping centres and during the period R51,9 million (31 December 2016: R73,1 million) was spent on refurbishments, new equipment, tenant installations and technology.

Various water-saving initiatives are underway at the shopping centres in the Western Cape region. Alternative water supply will be obtained through new boreholes, the use of grey water and the implementation of water treatment plants. Additional back-up water tanks are being installed to cater for water disruptions during trading hours. With the support of tenants, the reduction in water consumption at the Western Cape malls year-on-year is between 20%
and 34%.

The total capital spend of approximately R20 million will result in an increase in the independent water supply to the shopping centres in the future.

Disposals

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

Efforts to dispose of Lakefield Office Park, the last remaining non-core property in the portfolio, continue.

INVESTMENTS OUTSIDE SOUTH AFRICA

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

The relevant exchange rates used to convert to Rand at the respective dates were as follows:

  31 December 2017     30 June 2017   
   Average rate 
(R)
   Period-end 
spot rate 
(R)
   Average rate 
(R)
   Period-end 
spot rate 
(R)
  
US Dollar  13,74      12,36      13,63     13,04    
Euro  15,25      14,80      14,53     14,9    

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 period-end spot rate is the rate used to translate balance sheet items at period-end.

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

INVESTMENTS IN SUB-SAHARAN AFRICA (EXCLUDING SA)

   Hyprop's share of
distributable earnings
 
  
   31 December 
2017 
R000
 
   31 December 
2016 
R000 
  
Distributions received  139 294      81 510    
Interest and expenses  (99 269)    (50 626)   
Net  40 025      30 884    

Distributable earnings from the investments in sub-Saharan Africa (excluding SA) increased to R40,0 million (31 December 2016: R30,8 million), due to the inclusion of distributable earnings from Ikeja City Mall, Lagos, Nigeria of R11,7 million (31 December 2016: Rnil). Income from Manda Hill shopping centre (Lusaka, Zambia) reduced due to vacancies and new lettings at lower rentals.

Vacancies     City/Country  Hyprop's 
effective 
shareholding 
(%)
   Rentable 
area 
(m2)
   31 December 
2017 
vacancy 
(%)
   30 June 
2017 
vacancy 
(%)
  
Ikeja City Mall     Lagos, Nigeria  75,0     22 223     1,5         
Manda Hill     Lusaka, Zambia  68,8     40 561     5,3      5,4    
Accra Mall     Accra, Ghana  17,6     21 349     5,5         
West Hills Mall     Accra, Ghana  16,8     27 560     12,3      5,3    
Achimota Mall     Accra, Ghana  28,1     15 006     3,6      6,1    
Kumasi City Mall     Kumasi, Ghana  28,1     17 948     11,2      26,5    
Total portfolio              144 647     6,6      6,5    

Economic growth prospects in Ghana and Nigeria have improved and we have seen a general increase in trading densities in Ghana. However, the local currencies remain weak and the financial performance of the centres has been negatively affected by increases in vacancies and slow rent collections. Vacancies in Accra Mall and West Hills increased mainly due to the withdrawal of Truworths and Identity from Ghana and the downsizing of fashion tenants.

At Achimota and West Hills, the current second food anchor will be replaced by Game in the coming months, which will strengthen the tenant mix in the centres. Kumasi has reduced its vacancy since opening in April 2017. At Manda Hill significant new lettings during the period included Home Essentials (3 277m2), Ster-Kinekor (1 700m2), both of which opened in September 2017, and Ackermans (805m2), which opened in December 2017.

Hyprop share of shareholder loans/investment property

At 31 December 2017 the Hyprop share of the US Dollar value of the AttAfrica portfolio, Manda Hill and Ikeja City Mall was USD281,8 million (30 June 2017: USD281,8 million) at a weighted average capitalisation rate of 8,4% (30 June 2017: 8,4%).

Hyprop's share
  31 December
2017
R000
  30 June
2017
R000
 
AttAfrica and Manda Hill 2 656 209   3 005 821  
Ikeja City Mall, Lagos, Nigeria (75%) 1 402 447   1 476 553  
Investments in sub-Saharan Africa 4 058 656   4 482 374  

The Rand equivalent value of the investments in sub-Saharan Africa (excluding SA) at 31 December 2017 was R4,1 billion (30 June 2017: R4,5 billion). The net reduction over the period was largely due to a reduction of the Hyprop Mauritius shareholder loan to AttAfrica in December 2017 and Rand appreciation against the US Dollar.

Hyprop is considering a reduction of its exposure to investments in sub-Saharan Africa (excluding SA) over the next few years.

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.

  Hyprop's share of distributable
earnings
 
 
   31 December 
2017 
R000
 
   31 December 
2016 
R000 
  
Distributions received  130 087     76 296    
Interest and expenses  (38 472)    (17 945)   
Net  91 615     58 351    

The significant increase in net distributable earnings is due to the inclusion of income from Skopje City Mall in Skopje, Macedonia (acquired November 2016) and The Mall in Sofia, Bulgaria (acquired October 2017).

Vacancies     City/Country  Hyprop's 
effective 
shareholding 
(%)
   Rentable 
area (m2)
   31 December 
2017 
vacancy 
(%)
   30 June 
2017 
vacancy 
(%)
  
Delta City Belgrade     Belgrade, Serbia  60,0     27 691              
Delta City Podgorica     Podgorica, Montenegro  60,0     23 718                
Skopje City Mall     Skopje, Macedonia  60,0     36 241              
The Mall, Sofia     Sofia, Bulgaria  60,0     51 211     0,78     n/a    
Total portfolio              138 861     0,29          

At 31 December 2017, apart from a small vacancy at The Mall in Sofia, the Hystead portfolio was fully let.

Trading conditions in the South-Eastern European shopping centres remain positive, and all the centres reported improved trading during the period. Demand for space remains strong and plans to extend the centres are progressing.

Hyprop share of investment property

At 31 December 2017 the Hyprop share of the Euro value of the Hystead portfolio was EUR275,9 million (30 June 2017: EUR179,9 million) at a weighted average capitalisation rate of 8,2% (30 June 2017: 8,7%).

Hyprop's share
  31 December
2017
R000
  30 June
2017
R000
 
Delta City Belgrade, Belgrade, Serbia (60%) 1 154 365   1 162 200  
Delta City Podgorica, Podgorica, Montenegro (60%) 682 851   685 698  
Skopje City Mall, Skopje, Macedonia (60%) 827 591   833 208  
The Mall, Sofia, Bulgaria (60%) 1 418 093      
Investments in South-Eastern Europe 4 082 900   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. The Rand equivalent value of the Delta City Centres and Skopje City Mall reduced marginally due to the appreciation of the Rand against the Euro.

The investments in South-Eastern Europe are accounted for as investments in financial assets with the gains on initial recognition of the financial assets being deferred. Accordingly, the investments do not appear on the consolidated statement of financial position.

Acquisition

Post-period-end (February 2018), it was announced that Hystead had reached agreement to acquire a 90% interest in companies that own two shopping centres situated in Zagreb, Croatia (City Centre One Zagreb West and City Centre One Zagreb East). Completion of the acquisition remains subject to receipt of approval from the Competition Agency of Croatia. It is anticipated that the transaction will be effective from April 2018.

The purchase consideration, net of EUR154,4 million asset-based finance, is EUR129,1 million (7,0% yield), of which Hyprop's 60% effective share is approximately EUR77,5 million (R1,16 billion).

Hystead has entered into a joint venture agreement with WKB3 (who will retain a 10% interest), an Austrian-based company that developed and has been the property and asset manager of the two shopping centres. The asset management of the shopping centres will be undertaken jointly by Hystead's European-based executive management team and by CC Real, the operating company of WKB3.

CC Real will continue with the property management for an initial period of 18 months, providing for a continuation of management at the centres.

The acquisition is in line with Hyprop's strategy to own high-quality, income producing shopping centres in South-Eastern Europe. The acquisition will grow Hystead's portfolio of prime, dominant regional shopping centres in South-Eastern Europe to six centres, with Hystead's share of gross asset value in excess of EUR740 million.

Hystead listing

Consideration is being given to a possible listing of Hystead in the next six months.

NET ASSET VALUE

The net asset value (NAV) per share at 31 December 2017 increased by 2,5% to R102,22 (30 June 2017: R99,78). The increase was due to an increase in the independent valuation of the South African investment property portfolio, offset by the impact of a stronger Rand on the sub-Saharan Africa portfolio.

The NAV per share does not take into account the investments in South-Eastern Europe, which are not consolidated on the statement of financial position.

BORROWINGS

   31 December 
2017 
Rm  
   30 June 
2017 
Rm  
  
South African debt  3 814      4 114     
   Bank debt  1 814      1 814     
   Corporate bonds  2 000      2 300     
USD bank debt (Rand equivalent) 4 144      4 391     
EUR bank debt (Rand equivalent) 3 552      2 673     
Cash and cash equivalents  (1 094)     (1 126)    
Net borrowings  10 416      10 052     
Loan-to-value (%) 28,5      28,9     
Debt at fixed rates (%)        
   South African debt (%) 100,9      100,9     
   USD debt (%) 67,1      70,4     
Maturity of fixes (years) 3,3     3,4     
   South African debt (years) 3,7     3,9     
   USD debt (years) 2,8     2,7     
Cost of funding (%) 5,3      5,7     
   South African debt (%) 9,0      8,9     
   USD debt (%) 4,6      4,7     
   EUR debt (%) 2,1      2,2     
Debt capital market (DCM) % of total debt  17      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, a maturing five-year corporate bond of R300 million was repaid with the proceeds from non-core asset sales. The ratio of DCM funding to total debt consequently reduced to 17%.

Maturing debt of R1,65 billion will be refinanced in the coming months. A portion of this funding may be refinanced with corporate bonds, which will increase the ratio of unsecured debt.

US Dollar-denominated debt
The Rand equivalent of the US Dollar-denominated bank debt reduced during the period, largely due to Rand appreciation 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.

In-country debt relating to Ikeja City Mall (Lagos, Nigeria) of USD56,5 million (Hyprop share: USD42,4 million) was refinanced for three years (effective from January 2018) and converted to an interest only loan.

Euro-denominated debt
All acquisitions in South-Eastern Europe have been funded with Euro-denominated bridge and term loans, supported by guarantees from Hyprop, with back-to-back security provided by the other shareholder in Hystead. The funding support results in the recognition of a financial guarantee on the Hyprop statement of financial position. Hyprop receives credit enhancement fees for the funding support provided to the other Hystead shareholder.

The Euro debt is not consolidated on the Hyprop statement of financial position. For the purposes of the above analysis (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).

The first three acquisitions (Serbia, Montenegro and Macedonia) were debt funded (total debt EUR 294.6 million) with no in-country asset-backed finance on acquisition. Asset-backed finance of EUR 134.1 million for these acquisitions has been obtained and will be implemented in March 2018. The asset-backed finance will be secured against the properties with no recourse to Hyprop and will result in a proportionate reduction in the guarantees provided by Hyprop.

Euro-denominated debt increased during the period due to the acquisition of The Mall in Sofia, Bulgaria in October 2017. The corporate level debt for this acquisition (EUR 104.5 million) was raised by way of a 12-month bridge loan. The Mall was acquired with an existing asset-backed loan of EUR 58.3 million, with no recourse to Hyprop.

The interest rates on EUR denominated debt are not yet fixed and will be fixed once the asset-backed finance in Serbia, Montenegro and Macedonia has been implemented. The asset-backed finance (excluding the Croatia shopping centres but including The Mall, Sofia) is for periods of three to five years at an average interest rate of 4.36%.

Should the Hystead listing proceed, all of the remaining guarantees provided by Hyprop will be released.

PROSPECTS

Hyprop expects dividend growth of between 8% and 10% for the year to 30 June 2018. This is an upward revision to the guidance provided in September 2017 of 7% to 9%.

The 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. Exchange rates have been assumed at R11,50 and R14,30 to the US Dollar and Euro, respectively; and
Loss of income from developments in the South African portfolio of R11,5 million.

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

PAYMENT OF DIVIDEND

All rental income earned by the company, less property expenses and interest on debt, is distributed to shareholders bi-annually.

A dividend of 376,3 cents per share for the six months ended 31 December 2017 will be paid to shareholders as follows:

  2018
Last day to trade cum dividend Monday, 26 March
Shares trade ex dividend Tuesday, 27 March
Record date Thursday, 29 March
Payment date Tuesday, 3 April

Shareholders may not dematerialise or rematerialise their shares between Tuesday, 27 March 2018 and Thursday, 29 March 2018, both days inclusive.

Payment of the dividend will be made to shareholders on Tuesday, 3 April 2018. In respect of dematerialised shareholders, the dividend will be transferred to the CSDP accounts/broker accounts on Tuesday, 3 April 2018. Certificated shareholders' dividend payments will be deposited on or about Tuesday, 3 April 2018.

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

BASIS OF PREPARATION

The condensed consolidated interim financial statements for the six months ended 31 December 2017 were prepared in accordance with International Financial Reporting Standards, IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the Companies Act of South Africa.

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 do not have a material impact on the group's condensed consolidated interim financial statements.

All accounting policies applied in the preparation of the condensed consolidated interim financial statements are consistent with those applied by Hyprop in its consolidated group annual financial statements for the prior financial year.

These condensed consolidated interim financial statements have not been reviewed or audited by Hyprop's independent external auditors. Preparation of the interim financial information was supervised by Laurence Cohen CA(SA) in his capacity as Financial Director.

On behalf of the board

GR Tipper PG Prinsloo
Chairman CEO

2 March 2018