Investment by Hystead Limited
The following disclosures are made for the group's 60% investment in Hystead which is accounted for as a financial asset, measured at fair value through profit or loss.
| Carrying value and net movement for the period/year | Unaudited 6 months ended 31 December 2019 R'000 |
Unaudited 6 months ended 31 December 2018 R'000 |
Audited 12 months ended 30 June 2019 R'000 |
||
|---|---|---|---|---|---|
| Balance at the beginning of the period/year | 218 444 | 152 556 | 152 556 | ||
| Net change in fair value of future cashflows | 151 548 | 23 916 | 65 888 | ||
| Loans receivable capitalised | – | 40 716 | 40 716 | ||
| New guarantees issued | – | 196 565 | 110 401 | ||
| Fair value adjustment | 151 548 | (213 365) | (85 229) | ||
| Balance at the end of the period/year | 369 992 | 176 472 | 218 444 | ||
| Movements through profit or loss | |||||
| Movement on financial asset | 43 347 | (91 635) | 613 300 | ||
| Movement on deferred gains on financial asset | 108 201 | 115 551 | (516 432) | ||
| Net movements on financial asset before guarantees | 151 548 | 23 916 | 96 868 | ||
| less capital investments | – | (40 716) | (71 696) | ||
| less new guarantees issued | – | (196 565) | (110 401) | ||
| Total fair value adjustment to financial asset | 151 548 | (213 365) | (85 229) |
Measurement of fair value
The following tables show the valuation techniques and significant unobservable inputs used in measuring the level 3 financial asset:
| Valuation technique | Unobservable inputs |
Movement in input |
Effect on estimated fair value |
|||
|
Annual growth rate | Increase | Increase | |||
| Terminal growth rate | Decrease | Decrease | ||||
| Exit cap rate | Increase | Decrease | ||||
| Discount rate | Decrease | Increase |
| Valuation assumptions Level 3 – significant unobservable inputs |
Unaudited 6 months ended to 31 December 2019 |
Unaudited 6 months ended to 31 December 2018 |
Audited 12 months ended to 30 June 2019 |
||
|---|---|---|---|---|---|
| Financial asset – Hystead | |||||
| Annual growth rate | (6.4%) to 4.1% | 0.0% | (1.1%) to 2.5% | ||
| Weighted average annual growth rate | 0.4% | 0.0% | 0.2% | ||
| Terminal growth rate | 0.0% | 1.8% to 2.3% | 1.8% to 2.3% | ||
| Weighted average terminal growth rate | 0.0% | 1.9% | 1.9% | ||
| Discount rate | 6.0% to 8.0% | 6.0% to 8.0% | 6.0% to 8.0% | ||
| Weighted average discount rate | 6.9% | 6.9% | 6.9% | ||
| Exit capitalisation rates | 5.0% to 7.3% | 5.0% to 7.3% | 5.0% to 7.3% | ||
| Weighted average exit capitalisation rate | 5.7% | 5.9% | 5.8% |
Financial instruments
Hyprop and PDI Investment Holdings Limited (PDI) have guaranteed EUR 401.3 million of loans advanced by banks to Hystead as follows:
- Hyprop EUR 361.3 million (June 2019: EUR 360.8 million)
- PDI EUR 40 million (June 2019: EUR 40 million)
PDI has provided back-to-back guarantees to Hyprop for a further EUR 46.8 million (June 2019: EUR 46.8 million) equivalent to 11.7% of the EUR 401.3 million guaranteed debt.
For the EUR 73.4 million of debt (June 2019: EUR 73.2 million) (18,3% of the EUR 401.3 million guaranteed debts) which Hyprop has guaranteed in excess of its pro rata 60% interest in Hystead, Hyprop receives 60% of the related dividends declared to PDI from Hystead, which equates to 11% (60% x 18.3%) of the dividends paid by Hystead, as a guarantee fee (the credit enhancement fee). This agreement is in place until May 2021.
There were no changes to the guarantees granted during the period.
The guarantees issued by Hyprop on behalf of Hystead are recognised as financial liabilities on the statement of financial position at the higher of the day 1 fair value or the expected credit loss value.
| Carrying value and net movement for the period/year | Unaudited 6 months ended 31 December 2019 R'000 |
Unaudited 6 months ended 31 December 2018 R'000 |
Audited 12 months ended 30 June 2019 R'000 |
||
|---|---|---|---|---|---|
| Balance at the beginning of the period/year | 110 401 | 185 686 | 185 686 | ||
| New guarantees issued | – | 196 565 | 110 401 | ||
| Derecognition of guarantees cancelled | – | (33 674) | (185 686) | ||
| Balance at the end of the period/year | 110 401 | 348 577 | 110 401 |
Measurement of fair value
The following tables show the valuation techniques and significant unobservable inputs used in measuring the level 3 financial guarantees:
| Valuation technique | Unobservable inputs |
Movement in input |
Effect on estimated fair value |
|||
|
Probability of default (PD) |
Increase | Increase | |||
| Loss given default (LGD) |
Decrease | Decrease | ||||
| Credit rating | Decrease | Increase |
| Valuation assumptions Level 3 – significant unobservable inputs |
Unaudited 6 months ended 31 December 2018 |
Audited 12 months ended 30 June 2019 |
|
| Financial guarantees | |||
| Risk Free rate | EUR IOS and USD IOS |
EUR IOS and USD IOS |
|
| Data used for probability of default (PD) | Market traded instruments |
Market traded instruments |
|
| Loss given default | 20% | 20% | |
| Credit rating | BB+ to BBB | BB+ to BBB |
Transfers between levels
There were no transfers in either direction between levels 1 and 2 during the current or prior periods, nor were there any transfers out of level 2 or 3 during the current or prior periods for the financial assets and financial liabilities.
FINANCIAL INSTRUMENTS
A. Accounting classifications and fair value hierarchy
The following table reflects the carrying amounts and fair values of financial assets and financial liabilities, including their levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not measured at fair value if the carrying amount is a reasonable approximation of the fair value.
| Carrying Amount |
Fair value and fair value hierarchy |
|||||||||
| Fair value through profit or loss R'000 |
Amortised cost R'000 |
Total R'000 |
Level 2 R'000 |
Level 3 R'000 |
Total R'000 |
|||||
|---|---|---|---|---|---|---|---|---|---|---|
| Unaudited 6 months to 31 December 2019 | ||||||||||
| Financial assets measured at fair value | ||||||||||
| Financial asset | 369 992 | – | 369 992 | – | 369 992 | 369 992 | ||||
| Derivative instruments – current | 7 905 | – | 7 905 | 7 905 | – | 7 905 | ||||
| 377 897 | – | 377 897 | 7 905 | 369 992 | 377 897 | |||||
| Financial assets not measured at fair value | ||||||||||
| Loans receivable – non-current | – | 18 422 | 18 422 | – | – | – | ||||
| Loans receivable – current | – | 584 546 | 584 546 | – | – | – | ||||
| Trade and other receivables | – | 269 772 | 269 772 | – | – | – | ||||
| (including held-for-sale)1 | ||||||||||
| Cash and cash equivalents | – | 434 476 | 434 476 | – | – | – | ||||
| (including held-for-sale) | ||||||||||
| – | 1 307 216 | 1 307 216 | – | – | – | |||||
| Financial liabilities measured at fair value | ||||||||||
| Derivative instruments – non-current | 59 303 | – | 59 303 | 59 303 | – | 59 303 | ||||
| Derivative instruments – current | 8 995 | – | 8 995 | 8 995 | – | 8 995 | ||||
| Financial guarantees – non-current | 110 401 | – | 110 401 | – | 110 401 | 110 401 | ||||
| 178 699 | – | 178 699 | 68 298 | 110 401 | 178 699 | |||||
| Financial liabilities not measured at fair value | ||||||||||
| Long-term portion of interest-bearing borrowings (including held-for-sale) | – | 5 326 782 | 5 326 782 | – | – | – | ||||
| Short-term portion of interest-bearing borrowings (including held-for-sale) | – | 1 792 521 | 1 792 521 | – | – | – | ||||
| Trade and other payables (including held-for-sale)2 | – | 367 428 | 367 428 | – | – | – | ||||
| – | 7 486 731 | 7 486 731 | – | – | – | |||||
1 The following items are excluded from this balance: prepayments, municipal deposits and sundry receivables.
2 The following items are excluded from this balance: staff provisions, municipal provisions and VAT payables.
| Carrying Amount |
Fair value and fair value hierarchy |
|||||||||
| Fair value through profit or loss R'000 |
Amortised cost R'000 |
Total R'000 |
Level 2 R'000 |
Level 3 R'000 |
Total R'000 |
|||||
|---|---|---|---|---|---|---|---|---|---|---|
| Unaudited 6 months to 31 December 2018 | ||||||||||
| Financial assets measured at fair value | ||||||||||
| Financial asset | 176 472 | – | 176 472 | – | 176 472 | 176 472 | ||||
| Derivative instruments – non-current | 4 566 | – | 4 566 | 4 566 | – | 4 566 | ||||
| Derivative instruments – current | 6 938 | – | 6 938 | 6 938 | – | 6 938 | ||||
| 187 976 | – | 187 976 | 11 504 | 176 472 | 187 976 | |||||
| Financial assets not measured at fair value | ||||||||||
| Loans receivable – non-current | 423 881 | 1 630 283 | 2 054 164 | – | – | – | ||||
| Loans receivable – current | – | 19 256 | 19 256 | – | – | – | ||||
| Trade and other receivables (including held-for-sale)1 | 7 348 | 244 898 | 252 246 | – | – | – | ||||
| Cash and cash equivalents (including held-for-sale) | 712 | 901 122 | 901 834 | – | – | – | ||||
| 431 941 | 2 795 559 | 3 227 500 | – | – | – | |||||
| Financial liabilities measured at fair value | ||||||||||
| Derivative instruments – non-current | 23 471 | – | 23 471 | 23 471 | – | 23 471 | ||||
| Derivative instruments – current | 2 545 | – | 2 545 | 2 545 | – | 2 545 | ||||
| 26 016 | – | 26 016 | 26 016 | – | 26 016 | |||||
| Financial liabilities not measured at fair value | ||||||||||
| Long-term portion of interest-bearing borrowings (including held-for-sale) | – | 5 872 230 | 5 872 230 | – | – | – | ||||
| Short-term portion of interest-bearing borrowings (including held-for-sale) | – | 2 531 009 | 2 531 009 | – | – | – | ||||
| Financial guarantees – non-current | – | 348 577 | 348 577 | – | – | – | ||||
| Trade and other payables (including held-for-sale)2 | 10 886 | 374 853 | 385 739 | – | – | – | ||||
| 10 886 | 9 126 669 | 9 137 555 | – | – | – | |||||
1 The following items are excluded from this balance: prepayments, municipal deposits and sundry receivables.
2 The following items are excluded from this balance: staff provisions, municipal provisions and VAT payables.
| Carrying Amount |
Fair value and fair value hierarchy |
|||||||||
| Fair value through profit or loss R'000 |
Amortised cost R'000 |
Total R'000 |
Level 2 R'000 |
Level 3 R'000 |
Total R'000 |
|||||
|---|---|---|---|---|---|---|---|---|---|---|
| Audited 12 months to 30 June 2019 | ||||||||||
| Financial assets measured at fair value | ||||||||||
| Financial asset | 218 444 | – | 218 444 | – | 218 444 | 218 444 | ||||
| Derivative instruments – non-current | 619 | – | 619 | 619 | – | 619 | ||||
| Derivative instruments – current | 2 691 | – | 2 691 | 2 691 | – | 2 691 | ||||
| 221 754 | – | 221 754 | 3 310 | 218 444 | 221 754 | |||||
| Financial assets not measured at fair value | ||||||||||
| Loans receivable – non-current | – | 18 847 | 18 847 | – | – | – | ||||
| Loans receivable – current | 423 139 | 909 967 | 1 333 106 | – | 423 139 | 423 139 | ||||
| Trade and other receivables (including held-for-sale)1 | – | 174 970 | 174 970 | – | – | – | ||||
| Cash and cash equivalents (including held-for-sale) | – | 1 326 849 | 1 326 849 | – | – | – | ||||
| 423 139 | 2 430 633 | 2 853 772 | – | 423 139 | 423 139 | |||||
| Financial liabilities measured at fair value | ||||||||||
| Derivative instruments – non-current | 60 224 | – | 60 224 | 60 224 | – | 60 224 | ||||
| Derivative instruments – current | 7 339 | – | 7 339 | 7 339 | – | 7 339 | ||||
| Financial guarantees – non-current | 110 401 | – | 110 401 | – | 110 401 | 110 401 | ||||
| 177 964 | – | 177 964 | 67 563 | 110 401 | 177 964 | |||||
| Financial liabilities not measured at fair value | ||||||||||
| Long-term portion of interest-bearing borrowings (including held-for-sale) | – | 7 365 864 | 7 365 864 | – | – | – | ||||
| Short-term portion of interest-bearing borrowings (including held-for-sale) | – | 1 019 499 | 1 019 499 | – | – | – | ||||
| Trade and other payables (including held-for-sale)2 | – | 373 679 | 373 679 | – | – | – | ||||
| – | 8 759 042 | 8 759 042 | – | – | – | |||||
1 The following items are excluded from this balance: prepayments, municipal deposits and sundry receivables.
2 The following items are excluded from this balance: staff provisions, municipal provisions and VAT payables.