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Hyprop Investments Limited
Integrated annual report 2016
properties to maintain their standard, and where appropriate, to
expand or enhance the offerings. The disposal of non-core properties
will continue.
The performance of the African portfolio will depend on
developments in the countries in which we own properties. Local
demand appears to be holding up and access to hard currency is
improving. New developments will remain on hold until we are more
confident of future growth.
We will work to optimise the European properties and will undertake
the expansion in Montenegro if it meets our investment criteria. We
will continue to evaluate other properties in South-Eastern Europe
with the objective of adding to our portfolio.
Certain South African property shares have performed strongly during
the last 12 months and a level of caution looking forward is appropriate.
The Hyprop portfolio is, however, well structured and relatively resilient,
and should produce satisfactory returns over the medium term.
Sustainability
We recognise the importance of a sustainable business and of
sustainability in the different facets of our business.
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 that it remains relevant to the
economies we operate in.
We are conscious of our impact on the environment and have been
measuring and mitigating that impact for a number of 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 successful South African businesses.
Hyprop has demonstrated regular improvement in this area and while
our rating will be affected by the new codes and their impact on the
property charter, we will continue to implement initiatives that yield
sensible and sustainable outcomes.
Corporate governance
Hyprop is committed to the highest standards of corporate
governance. This integrated annual report sets out details of our
governance structures and the extent to which we comply with
relevant codes of corporate governance and regulatory requirements.
Board changes
Louis van der Watt resigned from the board on 4 May 2016. On behalf
of the board I thank him for his contribution and wish him well in his
future endeavours.
Appreciation
On behalf of the board, I thank our executives, management and staff
for their efforts during the year. I also thank our stakeholders for their
support, and my fellow board members for their contributions.
Gavin Tipper
Chairman
We continue to look for opportunities to add to our domestic
portfolio. The market for the type of properties appropriate to
Hyprop is, however, limited and those properties tend to be
expensive when they become available. Where commercially justified
we will develop or extend our existing malls but this is done carefully
in the context of the oversupply of retail space in South Africa and an
economy producing little or no growth.
We disposed of a number of non-core properties during the year and
applied the proceeds to reducing debt. We will target the remaining
non-core properties in the next financial year.
The African portfolio performed reasonably well in country, despite
the economic turmoil in certain of the countries in which we own
properties. Demand for space held up and rental growth was
acceptable. We have put a number of the proposed developments
on hold until there is more clarity on progress in stabilising and
growing the underlying economies. We experienced some difficulty
in obtaining hard currency in Nigeria and Zambia, but eventually
succeeded and anticipate an improvement in the level of access
to hard currency, particularly in Nigeria.
The malls in Belgrade and Montenegro have performed in line with
expectations since we acquired ownership. Opportunities for yield
improvements have been identified and a proposal for an extension
to the Montenegro mall is being considered.
Hyprop produced a strong financial performance for the year, with
the distribution for the second half increasing by 14,9% over the
comparable period in 2015, and the annual distribution rising by 14,2%.
The like-for-like South African results were up by 7,3% in line with
expectations for our portfolio, with the overall result benefiting from
a full year of income from the Rosebank Mall, higher income from the
African portfolio due to the West Hills, Achimota and Ikeja properties,
the inclusion of income from the Montenegrin mall from February
2016, and from the Belgrade mall from April 2016, and a reduction in
interest costs due to the application of the proceeds of the sale of
non-core assets to reducing debt.
The level of foreign shareholding in the company remained relatively
constant over the prior year.
In July 2016 the company raised R700 million by way of a private
placement. The funds will be used to reduce debt and strengthen
the balance sheet in anticipation of further offshore acquisitions.
Outlook
The strength of the Rand and the local stock market are heavily
influenced by both international developments and local political
leadership issues. The election of an unfortunate presidential
candidate in the US, a failure to sensibly resolve the Brexit issues,
significant political disruption in Europe or a decision by the
US Federal Reserve to raise interest rates are likely to disrupt our
markets and affect the relative value of the Rand, as are local actions
that cast doubt on the key tenets of our governance systems.
The ongoing failure to produce meaningful economic growth locally
and the impact of that on the average South African are significant
contributors to a concerning economic outlook.
We will work hard to ensure our properties remain as destinations of
choice for the South African shopper and environments in which our
retailers can achieve their targeted growth levels. We will invest in our