HYPROP INVESTMENTS LIMITED AND ITS SUBSIDIARIES
REGISTRATION NUMBER: 1987/005284/06
CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS - AUDITED
FOR THE YEAR ENDED 30 JUNE 2022
The preparation of these Consolidated and separate financial statements has been supervised by: Brett Till CA(SA), CFO of the Group.
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Contents
Page | ||
STATUTORY REPORTS | ||
Responsibility statement on internal financial controls | 3 | |
Declaration by the company secretary | 3 | |
Report of the audit and risk committee | 4 | |
Directors' report | 9 | |
Independent auditor's report to the shareholders of | 15 | |
Hyprop Investments Ltd | ||
FACES | ||
Statements of profit or loss and other comprehensive income | 22 | |
Statements of financial position | 23 | |
Statements of changes in equity | 24 | |
Statements of cash flows | 26 |
- ACCOUNTING POLICIES AND CRITICAL JUDGEMENTS
A1 | Significant accounting policies | 27 |
A2 | Key judgements and estimations | 28 |
A3 | Changes in accounting policies and disclosures | 32 |
A4 | Standards issued but not yet effective | 33 |
A5 | Going concern | 34 |
- PERFORMANCE ANALYSES
B1 | Distributable income and dividend per share | 35 |
B2 | Earnings per share | 36 |
B3 | Net asset values | 37 |
- SEGMENTAL ANALYSIS
C1 | Overview and definitions | 38 |
C2 | Segmental analyses - Profit or loss | 39 |
C3 | Segmental analyses - Financial position | 41 |
- PROFIT AND LOSS
D1 | Revenue and minimum lease payments | 43 |
D2 | Other operating income | 43 |
D3 | Expenses | 44 |
D4 | Operating expense commitments | 46 |
D5 | Interest | 46 |
D6 | Dividend income | 46 |
D7 | Taxation | 47 |
- PROPERTY INVESTMENTS AND RELATED BALANCES
E1 | Investment property | 49 |
E2 | Property, plant and equipment | 56 |
E3 | Capital commitments | 57 |
E4 | Investments in subsidiaries | 58 |
E5 | Investments in joint arrangements and associates | 63 |
E6 | Financial asset - Hystead | 67 |
E7 | Assets and liabilities held-for-sale | 70 |
E8 | Changes in shareholding | 73 |
- OTHER ASSETS
F1 | Loans receivable | 77 |
F2 | Trade and other receivables | 80 |
F3 | Cash and cash equivalents | 80 |
F4 | Intangible assets | 81 |
Page
- EQUITY AND RESERVES
G1 | Share capital and treasury shares | 82 |
G2 | Other Reserves | 83 |
- FUNDING AND RELATED ITEMS
H1 | Borrowings | 84 |
H2 | Derivatives | 88 |
H3 | Financial guarantees | 90 |
H4 | Covenants and capital management | 93 |
- OTHER LIABILITIES
I1 | Deferred taxation | 94 |
I2 | Trade and other payables | 96 |
I3 | Provisions | 97 |
I4 | Taxation payable | 98 |
- CASH FLOW INFORMATION
J1 | Cash generated from operations | 99 | |
J2 | Other cash flow notes | 100 | |
K | |||
RELATED PARTIES | |||
K1 | Related party transactions and balances | 101 |
- REMUNERATION
L1 | Directors' remuneration | 103 |
L2 | Long-term incentives | 105 |
L3 | Retirement benefits | 107 |
- FINANCIAL INSTRUMENTS
M1 | Classification of financial instruments | 108 |
M2 | Fair value measurement methodologies | 109 |
M3 | Measurement of financial instruments | 110 |
- FINANCIAL RISK MANAGEMENT
N1 | Risk management overview | 114 |
N2 | Liquidity risk and sensitivity | 115 |
N3 | Interest rate risk and sensitivity | 120 |
N4 | Currency risk and sensitivity | 123 |
N5 | Credit risk and sensitivity | 129 |
- OTHER INFORMATION
O1 | Events after the reporting date | 134 | |
O2 | JSE Property disclosures | 135 | |
P | |||
REIT DISCLOSURES | |||
P1 | SA Reit Ratios | 137 |
- ADDITIONAL INFORMATION
Q1 | Earnings reconciliations | 143 |
Q2 | Five-year review | 144 |
Q3 | Impact of Category 1 acquisition | 145 |
Q4 | Group Structure | 146 |
- SHAREHOLDERS' INFORMATION
R1 | Shareholders' analysis | 147 |
R2 | Shareholders' Diary | 148 |
R3 | Distribution details | 148 |
R4 | Administration | 148 |
R5 | Glossary | 149 |
Basis of preparation
These consolidated and separate financial statements have been prepared in accordance with IFRS, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the requirements of the Companies Act of South Africa and the JSE Listings Requirements.
Approval of the annual financial statements
The Audited Consolidated and Separate Annual Financial Statements, set out on pages 22 to 136, were approved by the board of directors on 29 September 2022.
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Responsibility statement on internal financial controls
for the year ended 30 June 2022
The directors, whose names are stated below, hereby confirm that:
- the annual financial statements set out on pages 22 to 136, fairly present in all material respects the financial position, financial performance and cash flows of the issuer in terms of IFRS;
- to the best of our knowledge and belief, no facts have been omitted or untrue statements made that would make the annual financial statements false or misleading;
- internal financial controls have been put in place to ensure that material information relating to the issuer and its consolidated subsidiaries have been provided to effectively prepare the financial statements of the issuer;
- the internal financial controls are adequate and effective and can be relied upon in compiling the annual financial statements, having fulfilled our role and function as executive directors with primary responsibility for implementation and execution of controls;
- where we are not satisfied, we have disclosed to the audit committee and the auditors any deficiencies in design and operational effectiveness of the internal financial controls, and have taken steps to remedy the deficiencies; and
- we are not aware of any fraud involving directors.
MC Wilken | BC Till |
CEO | CFO |
Johannesburg | |
29 September 2022 |
Declaration by the company secretary
I declare that, to the best of my knowledge, the Company has lodged with the Companies and Intellectual Property Commission, for the financial year ended 30 June 2022, all such returns as are required of a public company in terms of section 88 of the Companies Act of South Africa, as amended, and that all such returns are true, correct and up to date.
F Nkosi
Company secretary
Johannesburg
29 September 2022
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Report of the audit and risk committee
for the year ended 30 June 2022
INTRODUCTION
The audit and risk committee (the ARC) is pleased to submit its report for the year ended 30 June 2022, as required by section 94(7)(f) of the Companies Act of South Africa.
Events of the past two years, including the outbreak of Covid-19 in 2020, political riots in South Africa in July 2021, Russia's invasion of Ukraine in February 2022 and the floods in KwaZulu Natal in April 2022, have re-emphasised the need for businesses to implement sound risk management practices. Monitoring and managing risk, and monitoring the integrity of financial reporting systems, internal controls and financial disclosures are at the heart of the responsibilities of the ARC.
FOCUS AREAS IN 2022
Areas of special focus included:
- Global events: Monitoring and considering the impact of Russia's invasion of Ukraine, rising energy costs, particularly in the Eastern European portfolio, and increases in inflation and interest rates on the Group's activities. The ARC continued monitoring the Group's response and risk management strategies to address the impact of the Covid-19 pandemic, noting that these risks have reduced over the financial year as the impact of Covid-19 dissipates;
- Borrowings and foreign currency exposure: Assessing and monitoring implementation of the Group's funding strategy, including steps taken to reduce the Group's Euro denominated borrowings, and the impact of the acquisition of the 4 Eastern European properties from Hystead (the Hyprop Europe transaction) on borrowing covenants;
- Corporate activity: Reviewing the accounting implications of the Hyprop Europe transaction and the changes in the accounting treatment of the Financial asset - Hystead; and
- Information technology: Monitoring the information technology risks the Group faces and overseeing ongoing improvements in information technology risk management policies and processes.
STATUTORY DUTIES
The ARC is governed by a formal charter that codifies its independent role and responsibilities in providing oversight and recommendations to the Board for consideration and final approval. These responsibilities include those recommended by the King IV Report on Corporate GovernanceTM (King IV). The primary responsibilities of the ARC are to:
- Oversee integrated reporting, including consideration of significant judgements and reporting decisions;
- Ensure that a combined assurance model is applied to provide a coordinated approach to all assurance activities;
- Review the expertise, resources and experience of the Company's finance function, and satisfy itself as to the suitability of the expertise and experience of the chief financial officer;
- Oversee internal audit, and in particular, the appointment and/or rotation of the internal audit service provider;
- Monitor compliance with the risk policy and procedures;
- Recommend the appointment of the external auditor and oversee the external audit process; and
- Make submissions to the Board on any relevant matter concerning the Company's accounting policies, financial controls, records, reporting and risk management.
FUNCTIONS
In addition to the above, the ARC covered matters relating to compliance, litigation, budgeting and forecasting, taxation and accounting policy choices, and supported the Board in the following areas:
- Advising on the accounting implications of the Hyprop Europe transaction, including reviewing the forecasts and financial effects presented in the circular to shareholders dated 22 February 2022;
- Reviewing adherence to Hyprop's systems of internal controls and, where necessary, monitoring improvements;
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Report of the audit and risk committee
- Monitoring established guidelines for the use of the external auditor for non-audit services, to maintain independence. The ARC recommended the use of KPMG as the Independent Reporting Accountant for the Hyprop Europe transaction;
- Monitoring compliance with Real Estate Investment Trust (REIT) requirements, in accordance with the JSE Listings Requirements, and confirming that the risk management policy, which prohibits the Company from entering into derivative transactions not in the ordinary course of business, has been complied with in all material respects;
- Monitoring implementation of policies and procedures to ensure compliance with the Protection of Personal Information Act (POPI) which came into force on 1 July 2021; and
- Considering financial reporting in line with the results of the JSE proactive monitoring process and the Group's own internal objectives.
COMPOSITION AND MEETINGS
Details of the ARC members and their attendance at meetings during the year are set out in the Governance section of the integrated report. All members of the ARC are independent non-executive directors, in compliance with the Companies Act of South Africa and as recommended by King IV.
Mr Tipper stepped down as a member of the ARC at the annual general meeting held on 26 November 2021, in line with the recommendations of King IV. He continues to attend meetings of the ARC as an invited attendee.
The external and internal auditors and executive management are invited to attend ARC meetings.
SIGNIFICANT FINANCIAL STATEMENT REPORTING ISSUES
A significant part of the financial reporting process includes making estimates and exercising judgement. The ARC reviewed and evaluated the main judgements, estimates and assumptions made by management and the conclusions drawn from the available information and evidence.
The ARC ensured that these matters were covered by the work of the external auditor.
The key issues involving estimates and judgements during the year are set out below:
Key issue | Judgement in financial reporting | Audit and risk committee review | Conclusion | |
1 | Valuation of | Investment property is the Group's most | Broll Valuation and Advisory Services was | The ARC endorsed |
investment | significant asset and is measured at fair | appointed as an independent valuer in South | the independent | |
properties | value, with changes in fair value | Africa for the year ended 30 June 2022, in | valuations of the | |
recognised in profit or loss. | addition to Jones Lang LaSalle and Viking | investment | ||
Valuation. CBRE and Mills Fitchet continued to | properties and the | |||
The Group uses independent valuers to | serve as the independent valuers of the Eastern | relevant disclosures | ||
value investment properties. | European and sub-Saharan Africa portfolios | in the financial | ||
respectively. | statements. | |||
The valuation involves making significant | ||||
judgements, especially regarding the | The ARC considered the independence and | |||
current market conditions, reversionary | qualifications of the appointed independent | |||
capitalisation rates and rental levels. The | valuers, as well as the rotation of properties | |||
key assumptions and estimations used to | between the three valuers in South Africa. | |||
perform the independent investment | ||||
property valuations are determined by | The ARC reviewed the external valuations, | |||
the independent valuers. | including the discount rates and reversionary | |||
capitalisation rates applied by the independent | ||||
valuers, and the manner in which the | ||||
independent valuers took the prevailing | ||||
economic and Covid-19 circumstances into | ||||
account in performing the valuations. | ||||
The ARC also reviewed the adequacy of the | ||||
disclosures relating to investment properties | ||||
included in the financial statements. | ||||
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Hyprop Investments Limited published this content on 29 September 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 September 2022 15:13:00 UTC.