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Preliminary summarised audited consolidated financial statements for the year ended 28 February 2018
Equites Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2013/080877/06)
JSE share code: EQU ISIN: ZAE000188843
(Approved as a REIT by the JSE)
("Equites" or "the group" or "the company")
Preliminary summarised audited consolidated financial statements for the year ended 28 February 2018
Highlights
- Growth in distributions per share of 12.2% over the comparative period
to a total of 123.86 cents per share for the year ended 28 February
2018
- NAV per share growth of 8.8% from R14.12 to R15.36 for the year
- 30% growth in fair value of property portfolio from R6.2 billion to
R8.1 billion (including assets held for sale at year end)
- R1.015 billion capital raised through an accelerated book-build in
August 2017
- Further expansion into the UK through the acquisition of a completed
warehouse in Coventry and entering into two development funding
agreements for the construction of warehouses in Reading and
Peterborough
- Significant increase in acquisition and development pipeline to
R1.8 billion at year end
- Introduction of Dividend Re-investment Programme
1. Nature of the business
Equites Property Fund remains the only pure-play logistics property
company listed the JSE. The company is a Real Estate Investment Trust
("REIT") and substantially all property and asset management functions
are performed internally. Equites' value proposition has always been a
focus on the top-end of the logistics property market in key logistics
nodes which generate sustainable returns. The strong base portfolio of
high quality assets is complemented by Equites' proven ability to
develop A-grade logistics buildings internally and unlock key logistics
nodes.
2. Commentary on results
This fourth set of financial results since listing cements a track-
record of strong distribution and net asset value growth. Equites'
focus on high quality logistics assets has rewarded its shareholders
with a total return well in excess of the sector average for each of
the past three financial years.
The current year has seen a massive shift in the South African ("SA")
macroeconomic environment; the first half of the year was dominated by
political instability, the aftermath of credit rating downgrades and
flailing investor confidence while the second half was buoyed by the
election of a new president of the republic which appeared to usher
in an improved state of stability for the economy. Globally, the
past year has presented strong economic activity driven by trade
growth, favourable monetary policies and positive investor confidence.
Despite the uncertainty in the South African market, the group
remained insulated from many of the shocks to the economy as a result
of its continued focus on strong property fundamentals which resulted
in no tenant defaults across the portfolio and very low vacancies at
year end. The group also used the prime conditions in global markets to
further expand its international business in a continued effort to
diversify from the emerging market risks and capitalise on
opportunities to build a high-quality logistics portfolio in one of the
most sophisticated markets in the world.
While focussed on building a strong portfolio of high quality logistics
assets in both SA and the United Kingdom ("UK") which is well
positioned for long-term sustainable returns, the group remains
mindful of short-term returns to shareholders. For the year under
review, the group delivered 12.2% growth in total distributions per
share from the prior reporting date. The growth in distribution per
share for the year was primarily attributable to the following:
- Like-for-like rental growth remained strong, contributing 9% to
overall distribution per share ("DPS") growth and financial leverage
contributing 1.9% growth;
- The disposal of four commercial properties during the current year
contributed 0.6% to DPS growth as these offices would otherwise have
generated negative growth; and
- Raising capital at a premium to net asset value created a
differential between the marginal cost of debt and the effective
yield of the equity price achieved which added 0.9% to DPS growth.
Equites understands the importance of delivering strong financial
results, but this does not detract from the core focus of building
a portfolio of high-quality logistics assets which is well positioned
to deliver long-term shareholder value. The strong property
fundamentals across the portfolio are testament to the quality of the
assets. 89% of revenue is derived from blue chip tenants on long
leases, with 76.1% of leases expiring more than 4 years into the
future. Following the disposal of the four commercial properties during
the current year, the portfolio comprises 99% industrial properties.
The company continues to see strong demand for modern distribution
centres in the major logistics nodes in both SA and the UK. This growth
is driven by the evolution of the retail supply chain, which places
emphasis on modern logistics facilities driving efficiencies in the
process and the accelerating impact of e-commerce. Equites has
positioned itself as a logistics asset provider of choice in
South Africa as it has demonstrated the ability to meet major tenants'
requirements when upgrading to modern facilities with high
specification levels, which improve the efficiency of their operations.
Equites has a committed development and acquisition pipeline of R930
million in South Africa and R855 million in the UK which demonstrates
the deal making ability of management.
3. Distributable earnings
The board declared a final dividend of 62.88 cents per share on 7
May 2018 further to total interim dividends of 60.98 cents per share.
This brings the total distributions for the year ended 28 February 2018
to 123.86 cents per share, which is a 12.2% growth over the prior year
total distributions of 110.37 cents per share. The total distributions
slightly exceed the previous guidance of 12%.
Dividends declared
(cents per share) % change Feb 18 Feb 17
Interim dividends 12.0 60.98 54.44
Final dividend 12.4 62.88 55.93
Total distributions for the period 12.2 123.86 110.37
The net asset value of the company was 1 536 cents per share at
28 February 2018. This amounts to an 8.8% growth on the prior year
closing net asset value of 1 412 cents per share. The UK portfolio
supported this growth as a result of significant yield compression in
UK logistics assets.
4. Material transactions and acquisitions
4.1. Disposal of commercial properties
Equites disposed of three of its multi-let commercial properties and
one single-let commercial property during the year under review. All of
these properties were situated in Cape Town. Three of these properties
were classified as held for sale at 28 February 2017. The decision to
dispose of its commercial properties is in line with the group's
strategic decision to focus on high quality logistics assets and
contributes to the group's stated intention of providing investors with
pure exposure to the buoyant logistics sector, both in SA and the UK.
4.2. Completion of DSV distribution centre acquisition, Stoke-On-Trent, UK
Equites concluded its third acquisition in the UK in terms of which
Equites International Ltd, a subsidiary of Equites, acquired a 19
511 square meter distribution centre let to DSV Solutions Ltd ("DSV")
situated at Prologis Park, Sideway, Stoke-on-Trent, England. The
purchase consideration was GBP18.1 million and the transaction was
concluded off-market. Following the fulfilment of all the conditions
precedent, the DSV transaction was completed on 29 June 2017.
4.3. Acquisition of Kuehne + Nagel distribution centre, Coventry, UK
Equites concluded an agreement with Travis Perkins Properties Ltd to
acquire a recently developed, 19 881 square meter cross-docking
distribution centre situated in Coventry, England for a consideration
of GBP41.0 million. The property is let on a 15-year lease to Kuehne
+ Nagel Ltd and Equites completed the acquisition on 1 December 2017.
This property is situated in one of the most coveted logistics nodes
in the UK and represents an excellent addition to the Equites
International portfolio.
4.4. Acquisition of DHL distribution centre in Reading, UK
Equites entered into a development funding agreement to develop a
distribution centre to be let to DHL International (UK) situated
in Reading, England on a 15-year lease. The agreement consisted of
the acquisition of 7.96 acres of vacant land for GBP 9.7 million and
a development funding agreement in terms of which Equites will fund the
development of a 9 325 square metre 'last mile' distribution warehouse
to the value of GBP 15.9 million. The expected completion for this
warehouse is December 2018.
4.5. Acquisition of DSV distribution centre in Peterborough, UK
Equites entered into a development funding agreement to develop
a distribution centre to be let to DSV Solutions Ltd, situated in
Peterborough, UK, on a 10-year lease. The agreement consisted of
the acquisition of 13.26 acres of vacant land for GBP 4.7 million and
a development funding agreement in terms of which Equites will fund the
development of a 27 871 square metre distribution warehouse to the
value of GBP 25.3 million. The expected completion date for this
warehouse is August 2018.
4.6. Rohlig-Grindrod distribution centre completion
Equites completed construction of a 28 527 square metre state-of-
art distribution centre and offices for Rohlig-Grindrod (Pty) Ltd,
which is an associate company of Grindrod Ltd ("Grindrod"). The
warehouse was to be owned in equal shares by Equites and a subsidiary
of Grindrod, with each party owning an undivided half share of the
developed property. An agreement was subsequently concluded whereby
Equites settled the difference between the cost and the mutually
agreed fair value of 50% of the property and retained the entire
property. Equites subsequently concluded an agreement with Ilanga
Lakusasa (Pty) Ltd ("Ilanga"), a subsidiary of the Michel Lanfrachi
Foundation NPC ("the Foundation"), which is a broad-based ownership
scheme established for the advancement of educational and social
ventures, whereby Equites disposed of a 50% undivided half-share of the
property to Ilanga. Equites funded this transaction by advancing a loan
to Ilanga equal to the purchase price. The rationale for the sale is to
allow the Foundation to generate a sustainable source of income which
will be applied to charitable causes in line with a clearly defined
mandate.
4.7. Federal Mogul development
Equites concluded a development agreement with Federal Mogul of South
Africa (Pty) Ltd, a global supplier of quality products to the
automotive industry. The warehouse will have a gross lettable area
("GLA") of 9 313 square meter and a capital value of R95 million. The
development lease includes an option to extend the warehouse by a
further 5 000 square meter at the option of the tenant. The warehouse
and office will serve as the SA headquarters of the global business and
estimated completion is February 2019.
4.8. Land available for development
Equites has acquired additional land holdings in extent of 9.6 hectares
in Meadowview, Gauteng and 12.1 hectares in Lords View, Gauteng with
a strong conviction that these will continue to be strong logistics
nodes. Following these acquisitions, the group has 49.5 hectares of
prime, serviced industrially zoned land available for development
between Cape Town and Gauteng. Equites is pursuing a number of
opportunities for distribution centres on these parcels of land which
will continue to contribute to a healthy development pipeline.
4.9. Other
The group is in the advance stages of completing the new premier FMCG
building at Lord's View. The building is expected to be completed in
July 2018 and will have a capital value of R165 million. The group
commenced construction on three speculative units at Equites Park
Atlantic Hills, Cape Town, and one at Lords View in Gauteng. As at
year end, one of the speculative units in Atlantic Hills has been let
to an existing tenant, JF Hillebrand South Africa (Pty) Ltd, who
currently occupies the adjacent property. The remaining speculative
builds are being actively marketed and we have received a number of
enquiries from prospective tenants.
5. Funding
The group targets a conservative loan-to-value ("LTV") of between 25%
and 35%, which balances financial gearing with a robust balance sheet.
In order to fund its growing development and acquisition pipeline, the
company raised R1.015 billion in a heavily oversubscribed accelerated
book-build in August 2017. Consequently, the LTV at 23.5% was slightly
below the target range at year end.
100% of the SA and UK interest-bearing debt was hedged at an average
effective all-in rate of 9.03% and 2.86% respectively. The current LTV
levels also provide an opportunity to exploit lower interest rates in
SA. The marginal cost of debt funding has decreased by 27 basis points
over the past 12 months and over 50 basis points if you include the
recent 25 basis points decrease in the repurchase rate announced
on 28 March 2018. Current JIBAR swap yield curves have also provided an
opportunity to lock-in these relatively low interest rates over the
next 3-5 years.
The group has improved its liquidity risk management by extending the
debt maturity profile and augmenting borrowing facilities to complement
its growth plan. Current undrawn borrowing facilities at year-end
increased to R1.05 billion, representing 35% of the group's total
borrowing facilities. The group has continued to phase the maturity
of its debt in line with the duration of the weighted average lease
expiry ("WALE") of its base portfolio considering the refinancing risk
on an asset-specific basis.
6. Vacancies
For the first time in our trading history, we have an industrial
vacancy at Tower Road situated in the Cape Town Airport Industrial
precinct. This industrial space of 9 098 square metre underwent a full
refurbishment during the year to uplift the property to modern
logistics standards. At year end, the property remains vacant and is
currently being marketed to several interested tenants. This vacancy
brings the total vacancy to 2% across the portfolio. For the year
ending February 2019, 7 leases are due for renewal and as at the date
of this report, all of these have been renewed. On aggregate, these
renewals were negotiated at 6% above the exit rentals, which reflects
the company's ability to sustain rental growth with well located, high-
specification logistics properties.
7. Prospects
The company aims to continue providing investors with pure exposure to
modern logistics properties, an asset class which has proven its
resilience and is growing exponentially globally. The company continues
to focus on exceptional property fundamentals in an attempt to build a
world-class logistics portfolio. This uncompromising approach may,
in the short-term, inhibit portfolio growth in South Africa as the
lack of economic growth will impact the pace at which Equites rolls out
its development pipeline. There is, however, no doubt that shareholders
will benefit from this approach in the medium to long-term.
The board expects that the company will achieve between 10-12%
distribution growth per share over the next financial year. This
guidance is based on the assumptions that a stable macro-economic
environment will prevail, no major corporate failures will occur, the
rand/pound exchange rate remains materially unchanged and tenants will
be able to absorb the recovery of rising utility costs and municipal
rates. This forecast has not been audited or reviewed by Equites'
auditors.
8. Subsequent events
The following significant subsequent events have occurred since year
end, none of which had an effect on the results in the financial
statements:
- The property "Execujet Wings" which was let to the global
international air services provider, Dnata, was presented as "held
for sale" at the reporting date. This property was transferred to
Dnata (the purchaser) on 15 March 2018. The selling price was
reflective of the fair value of the property and the sale of the
property is in line with Equites' strategy to focus on non-
specialised logistics properties with strong fundamentals
- After year-end, the group acquired two properties in South Africa
currently let to Nestle (South Africa) (Pty) Ltd and Pick n Pay
Retailers (Pty) Ltd for a combined purchase consideration of R648
million subject to Competition Commission approval. The effective
date of the acquisition is estimated to be 1 July 2018.
- The group concluded a pre-let forward funding agreement for the
development of a distribution warehouse in Peterborough, UK with a
maximum commitment of GBP13 million which will be let to Coloplast
Ltd on a new 10-year fully repairing and insuring lease. The
development is estimated to be completed in March 2019.
9. Basis of preparation
The preliminary summarised consolidated financial statements are
prepared in accordance with the JSE Listings Requirements for
preliminary reports and the requirements of the Companies Act of
South Africa. The Listings Requirements require preliminary reports 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 the Financial Reporting Standards Council.
Except for the adoption of revised and new standards that became
effective during the year, all accounting policies applied in the
preparation of these summarised consolidated financial statements are
in terms of IFRS and are consistent with those applied in the previous
consolidated financial statements. There was no material impact on the
annual financial statements as a result of the adoption of these
standards.
The auditors, PricewaterhouseCoopers Inc., have issued their opinion
on the group's annual financial statements for the year ended 28
February 2018. The audit was conducted in accordance with International
Standards on Auditing. They have issued an unmodified audit opinion.
These preliminary summarised consolidated financial statements have
been derived from the group annual financial statements and are
consistent, in all material respects, with the group annual financial
statements. The directors take full responsibility for the preparation
of the preliminary summarised audited consolidated financial statements
and for ensuring that the financial information has been correctly
extracted from the underlying audited annual financial statements.
A copy of their audit report is available for inspection at the
Equites' registered address. The auditor's report does not necessarily
report on all of the information contained 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 that report together with the accompanying annual
financial information from Equites' registered address.
Bram Goossens (CA) SA, in his capacity as Financial Director, was
responsible for the preparation of these summarised consolidated
financial results.
10. Declaration of a cash dividend with the election to reinvest the cash
dividend in return for Equites shares
Notice is hereby given of the declaration of the final dividend number
9 of 62.88143 cents per share.
Shareholders will be entitled, in respect of all or part of their
shareholdings, to elect to reinvest the cash dividend in return for
Equites shares ("the share reinvestment alternative"). Those
shareholders who elect not to reinvest will receive a gross cash
dividend of 62.88143 cents per share. The entitlement for shareholders
to receive the share reinvestment alternative is subject to the board
agreeing on the pricing and terms of the share reinvestment
alternative. The board in its discretion may withdraw the share
reinvestment alternative should market conditions warrant such actions
and such withdrawal will be communicated to shareholders prior to the
finalisation announcement to be published by 11:00 on Tuesday, 22 May
2018.
A circular providing further information in respect of the cash
dividend and share reinvestment alternative (the circular) will be
posted to shareholders on Friday, 11 May 2018. Shareholders who
have dematerialised their shares through a Central Securities
Depository Participant ("CSDP") or broker should instruct their CSDP
or broker with regard to their election in terms of the custody
agreement entered into between them and their CSDP or broker. The
distribution of the circular and/or accompanying documents and the
right to elect shares in jurisdictions other than the Republic of
South Africa (SA) may be restricted by law and any failure to comply
with any of these restrictions may constitute a violation of the
securities laws of any such jurisdictions. Shareholders' rights to
elect shares are not being offered, directly or indirectly, in the
United Kingdom (UK), European Economic Area (EEA), Canada, United
States of America (USA), Japan or Australia unless certain exemptions
from the requirements of those jurisdictions are applicable
Tax implications
In accordance with Equities' status as a REIT, shareholders are advised
that the cash dividend meets the requirements of a "qualifying
distribution" for the purposes of section 25BB of the Income Tax Act,
No. 58 of 1962 ("Income Tax Act"). The dividend will be deemed to be
a dividend for South African tax purposes, in terms of section 25BB of
the Income Tax Act.
The dividend received by or accrued to South African tax residents
must be included in the gross income of such shareholders and will not
be exempt from income tax (in terms of the exclusion to the general
dividend exemption, contained in paragraph (aa) of section 10(1)(k)
(i) of the Income Tax Act) because it is a dividend distributed by a
REIT. This dividend is, however, exempt from dividend withholding tax
in the hands of South African tax resident shareholders, provided
that the South African resident shareholders, provided the following
forms to their CSDP or broker, as the case may be, in respect of
uncertificated shares, or the company, in respect of certificated
shares:
a) a declaration that the dividend is exempt from dividends tax; and
b) a written undertaking to inform the CSDP, broker or the company, as
the case may be, should the circumstances affecting the exemption
change or the beneficial owner cease to be the beneficial owner,
both in the form prescribed by the Commissioner for the South African
Revenue Service. Shareholders are advised to contact their CSDP, broker
or the company, as the case may be, to arrange for the abovementioned
documents to be submitted prior to payment of the dividend, if such
documents have not already been submitted.
Dividends received by non-resident shareholders will not be taxable
as income and instead will be treated as an ordinary dividend which is
exempt from income tax in terms of the general dividend exemption
in section 10(1)(k)(i) of the Income Tax Act. On 22 February 2017,
the dividends withholding tax rate was increased from 15% to 20%
and accordingly, any distribution received by a non-resident from a
REIT will be subject to dividend withholding tax at 20%, unless the
rate is reduced in terms of any applicable agreement for the avoidance
of double taxation ("DTA") between South Africa and the country of
residence of the shareholder. Assuming dividend withholding tax will
be withheld at a rate of 20%, the net dividend amount due to non-
resident shareholders is 50.30515 cents per share. A reduced dividend
withholding rate in terms of the applicable DTA, may only be relied
upon if the non-resident shareholder has provided the following forms
to their CSDP or broker, as the case may be, in respect of
uncertificated shares, or the company, in respect of certificated
shares:
a) a declaration that the dividend is subject to a reduced rate as a
result of the application of a DTA; and
b) a written undertaking to inform their CSDP, broker or the company,
as the case may be, should the circumstances affecting the reduced
rate change or the beneficial owner cease to be the beneficial
owner,
both in the form prescribed by the Commissioner for the South African
Revenue Service. Non-resident shareholders are advised to contact
their CSDP, broker or the company, as the case may be, to arrange
for the abovementioned documents to be submitted prior to payment
of the dividend if such documents have not already been submitted, if
applicable.
The following salient dates and times apply in respect of the cash
dividend and the share reinvestment alternative:
ITEM(1) DATE 2018
Last day to trade in order to participate in the
election to receive shares in terms of the share
reinvestment alternative or to receive a cash
dividend Tuesday, 29 May
Shares trade ex-dividend(2) Wednesday, 30 May
Record date for the election to receive shares
in terms of the share reinvestment alternative or
to receive a cash dividend Friday, 1 June
Announcement of results of cash dividend and share
reinvestment alternative released on SENS Monday, 4 June
Cash dividend cheques posted to certificated
shareholders on or about Monday, 4 June
Accounts credited by CSDP or broker to
dematerialised shareholders with the cash
dividend payment Monday, 4 June
1 The above dates and times are subject to change. Any changes will be
released on SENS and published in the press.
2 Share certificates may not be dematerialised or rematerialised
between commencement of trade on Wednesday, 30 May 2018 and close of
trade on Friday, 1 June 2018.
Shares in issue at the date of declaration of dividend: 409 973 331
Equites' income tax reference number: 9275393180.
By order of the Board
Equites Property Fund Limited
7 May 2018
Consolidated statement of financial position
Equites Property Fund Limited and its subsidiaries at 28 February 2018
Audited Audited
28 February 28 February
2018 2017
R'000 R'000
ASSETS
Non-current assets
Investment property 7 899 697 5 853 590
Straight-lining lease income accrual 171 352 137 803
Fair value of Investment property 8 071 049 5 991 393
Derivative financial assets 132 732 134 632
Deferred tax asset 32 639 -
Property, plant and equipment 7 529 9 186
8 243 949 6 135 211
Current assets
Investment property held-for-sale 28 000 234 381
Trade and other receivables 58 202 134 778
Derivative financial assets 135 532 -
Financial assets held at fair value 900 3 353
Cash and cash equivalents 17 813 11 042
240 447 383 554
TOTAL ASSETS 8 484 396 6 518 765
EQUITY AND LIABILITIES
Equity and reserves
Stated capital 5 203 773 4 193 749
Accumulated profit 1 339 846 919 099
Foreign currency translation reserve (312 423) (173 374)
Share-based payment reserve 67 578 7 881
Total attributable to owners 6 298 774 4 947 355
Non-controlling interest 109 410 93 535
TOTAL EQUITY AND RESERVES 6 408 184 5 040 890
Liabilities
Non-current liabilities
Derivative financial liabilities 18 542 11 208
Loans and borrowings 1 887 730 1 086 097
1 906 272 1 097 305
Current liabilities
Loans and borrowings 54 939 285 983
Derivative financial liabilities 613 -
Current tax liability 92 -
Trade and other payables 114 296 94 587
169 940 380 570
TOTAL LIABILITIES 2 076 212 1 477 875
TOTAL EQUITY AND LIABILITIES 8 484 396 6 518 765
Consolidated statement of comprehensive income
Equites Property Fund Limited and its subsidiaries for the year ended
28 February 2018
Restated
Audited Audited
year ended year ended
28 February 28 February
2018 2017
R'000 R'000
Property revenue and tenant recoveries 540 150 458 209
Straight-lining of leases adjustment 33 548 44 222
Gross property revenue 573 698 502 431
Property operating and management expenses (87 957) (77 408)
Other operating income 208 343 175 442
Administrative expenses (33 055) (27 726)
Fair value adjustments - investment property 239 546 309 138
Operating profit before financing activities 900 575 881 877
Finance costs (68 765) (79 106)
Finance income 24 990 3 292
Net profit before tax 856 800 806 063
Tax expense 34 313 -
Profit for the period 891 113 806 063
OTHER COMPREHENSIVE INCOME
Items that may subsequently be reclassified
to profit or loss:
Translation of foreign operations (139 049) (173 374)
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 752 064 632 689
PROFIT ATTRIBUTABLE TO:
Owners of the parent 870 188 784 746
Non-controlling interest 20 925 21 317
891 113 806 063
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent 731 139 611 372
Non-controlling interest 20 925 21 317
752 064 632 689
Basic earnings per share (cents) 226,1 264,4
Diluted earnings per share (cents) 225,4 263,3
Consolidated statement of cash flows
Equites Property Fund Limited and its subsidiaries for the year ended
28 February 2018
Restated
Audited Audited
year ended year ended
28 February 28 February
2018 2017
R'000 R'000
Cash flows from operating activities
Profit before tax 856 800 806 063
Adjusted for:
Finance costs 68 765 79 106
Finance income (24 990) (3 292)
Profit on disposal of investment property (2 498) -
Loss on disposal of property, plant and equipment 16 -
Straight-lining of leases adjustment (33 548) (44 222)
Fair value adjustments - investment property (239 546) (309 138)
Fair value adjustments - cross currency swaps (106 184) (134 632)
Foreign exchange differences - 28 974
Depreciation 941 483
Share based payment charge 6 514 6 515
Working capital movements:
Decrease / (increase) in trade and other receivables 42 977 (70 242)
Increase in accrued operating income (23 130) -
Increase in trade and other payables 3 107 15 993
Cash generated from operations 549 224 375 608
Finance costs paid (127 679) (127 812)
Finance income received 24 990 3 292
Dividends paid (454 491) (305 134)
Net cash flows generated (utilised) from
operating activities (7 956) (54 046)
Cash flows from investing activities
Acquisition of investment properties (1 477 496) (1 356 594)
Development of investment properties (345 257) (341 130)
Proceeds from disposal of investment properties 254 166 232 746
Purchases of current financial assets (1 260 000) -
Proceeds on divestment of current financial assets 1 262 453 -
Proceeds on disposal of property,
plant and equipment 215 -
Purchase and development of property,
plant and equipment (257) (6 231)
Net cash flows utilised by investing activities (1 566 176) (1 471 209)
Cash flows from financing activities
Proceeds from share issue (net of costs) 1 006 911 992 502
Proceeds from bank loans 1 016 876 2 297 660
Repayment of bank loans (443 180) (1 797 837)
Proceeds from financial assets held at fair value - 43 747
Disposal of financial asset held at fair value - (3 737)
Net cash flows raised from financing activities 1 580 607 1 532 335
Net increase in cash and cash equivalents 6 475 7 080
Effect of exchange rate movements on cash
and cash equivalents 296 -
Cash and cash equivalents at the beginning
of the year 11 042 3 962
Cash and cash equivalents at the end of the year 17 813 11 042
Consolidated statement of changes in equity
Equites Property Fund Limited and its subsidiaries for the year ended
28 February 2018
Foreign
currency
Stated Accumulated translation
capital profit reserve
Audited R'000 R'000 R'000
February 2017
Balance at 1 March 2016 3 180 784 438 689 -
Profit for the year - 784 746 -
Other comprehensive income - - (173 374)
Shares issued for cash 1 000 000 - -
Shares issued for property and
subsidiary acquisitions 20 463 - -
Equity-settled share-based
payment charge - - -
Acquisition of EA Waterfall
Logistics JV (Pty) Ltd - - -
Dividends distributed to shareholders - (304 336) -
Share issue costs (7 498) - -
Balance at 28 February 2017 4 193 749 919 099 (173 374)
February 2018
Balance at 1 March 2017 4 193 749 919 099 (173 374)
Profit for the year - 870 188 -
Other comprehensive income - - (139 049)
Shares issued for cash 1 015 157 - -
Shares issued in terms of
Conditional share plan 3 113 - -
Equity-settled share based payment
for the acquisition of land - - -
Equity-settled share-based payment charge - - -
Dividends distributed to shareholders - (449 441) -
Share issue costs (8 246) - -
Balance at 28 February 2018 5 203 773 1 339 846 (312 423)
Consolidated statement of changes in equity (continued)
Equites Property Fund Limited and its subsidiaries for the year ended
28 February 2018
Share-based Total Non-
payment attributable controlling
reserve to parent interest Total
Audited R'000 R'000 R'000 R'000
February 2017
Balance at 1 March 2016 1 366 3 620 839 - 3 620 839
Profit for the year - 784 746 21 317 806 063
Other comprehensive income - (173 374) - (173 374)
Shares issued for cash - 1 000 000 - 1 000 000
Shares issued for property
and subsidiary acquisitions - 20 463 - 20 463
Equity-settled share-based
payment charge 6 515 6 515 - 6 515
Acquisition of EA Waterfall
Logistics JV (Pty) Ltd - - 73 016 73 016
Dividends distributed
to shareholders - (304 336) (798) (305 134)
Share issue costs - (7 498) - (7 498)
Balance at
28 February 2017 881 4 947 355 93 535 5 040 890
February 2018
Balance at 1 March 2017 7 881 4 947 355 93 535 5 040 890
Profit for the year - 870 188 20 925 891 113
Other comprehensive income - (139 049) - (139 049)
Shares issued for cash - 1 015 157 - 1 015 157
Shares issued in terms of
Conditional share plan (3 113) - - -
Equity-settled share
based payment for the
acquisition of land 56 296 56 296 - 56 296
Equity-settled share-
based payment charge 6 514 6 514 - 6 514
Dividends distributed
to shareholders - (449 441) (5 050) (454 491)
Share issue costs - (8 246) - (8 246)
Balance at
28 February 2018 67 578 6 298 774 109 410 6 408 184
Summarised operating segment information
Equites Property Fund Limited and its subsidiaries for the year ended
28 February 2018
Audited Audited
year ended year ended
28 February 28 February
2018 2017
R'000 R'000
Revenue
SA industrial 447 958 427 096
UK industrial 75 646 31 113
Other 16 546 -
540 150 458 209
Operating profit before financing activities
SA industrial 605 206 863 444
UK industrial 318 307 46 159
Other (22 938) (27 726)
900 575 881 877
Total assets
SA industrial 5 962 586 5 357 809
UK industrial 2 400 810 794 823
Other 121 000 366 133
8 484 396 6 518 765
Total liabilities
SA industrial 1 536 548 1 242 328
UK industrial 539 664 235 547
Other - -
2 076 212 1 477 875
Selected explanatory notes to the results
Equites Property Fund Limited and its subsidiaries for the year ended
28 February 2018
1. Earnings per share - group
This note provides the obligatory information in terms of IAS 33
Earnings per share and SAICA Circular 2/2015 for the group and
should be read in conjunction with note 2, where earnings are
reconciled to distributable earnings. Distributable earnings determine
the dividend declared to shareholders, which is a meaningful metric for
a shareholder in a REIT.
1.1 Basic earnings per share
2018 2017
Shares in issue Number Number
of shares of shares
Number of shares in issue at end of year 409 973 331 350 465 100
Weighted average number of shares in issue 384 863 958 296 765 842
Add: weighted potential dilutive impact
of conditional shares 1 267 726 1 279 089
Diluted weighted average number of
shares in issues 386 131 684 298 044 931
Basic earnings per share Cents Cents
Basic earnings per share 226.1 264.4
Diluted earnings per share 225.4 263.3
1.2 Headline earnings per share
Reconciliation between basic earnings
and headline earnings: R'000 R'000
Earnings (profit attributable to
owners of the parent) 870 188 784 746
Adjusted for:
Fair value adjustments to investment
properties (239 546) (309 138)
Less: Fair value adjustment to
investment properties (NCI)+ 5 578 14 816
Profit or loss on sale of properties (2 482) -
Headline earnings 633 738 490 424
Headline earnings per share: Cents Cents
Headline earnings per share 164.7 165.3
Diluted headline earnings per share 164.1 164.5
+ Non-controlling interest
28 February 28 February
2018 2017
R'000 R'000
2. Reconciliation between earnings and distributable earnings - group
2.1 Distributable earnings
Earnings (profit attributable to
owners of the parent) 870 188 784 746
Adjusted for:
Fair value adjustments to
investment properties (239 546) (309 138)
Less: Fair value adjustment to
investment properties (NCI)+ 5 578 14 816
Profit or loss on sale of properties (2 482) -
Headline earnings 633 738 490 424
Adjusted for:
Straight-lining of leases adjustment (33 548) (44 222)
Less: Straight-lining of leases
adjustment (NCI)+ 12 522 2 690
Fair value adjustments to derivative financial
assets and liabilities (93 729) (119 687)
Less: Fair value adjustments to derivative
financial assets and liabilities (NCI)+ (3 215) -
Equity-settled share-based payment reserve 6 514 6 515
Capital items non-distributable (12 636) (8 993)
Less: Capital items non-distributable (NCI)+ 2 345 -
Deferred taxation (34 409) -
Antecedent dividend* 30 220 21 930
Distributable earnings 507 802 348 657
* In the determination of distributable earnings, the group elects to
make an adjustment for the antecedent dividend arising as result of
the issue of shares during the period for which the company did not
have full access to the cash flow from such issue. The group issued
the majority of the shares pursuant to the accelerated bookbuild on
04 August 2017 which gave rise to antecedent dividends included
above.
+ Non-controlling interest
Number of shares in issue at period-end 409 973 331 350 465 100
2.2 Dividends declared and distribution per share
Total distribution for the year - 2018 Cents per
share R'000
Interim dividend declared on 11 October 2017
(Dividend number 8) 60.98 250 002
Final dividend declared on 7 May 2018
(Dividend number 9) 62.88 257 797
Total distribution for the year ended
28 February 2018 123.86 507 799
Total distributions for the year - 2017 Cents per
share R'000
Interim dividend declared on 15 October 2016
(Dividend number 6) 54.44 152 523
Final dividend declared on 12 May 2017
(Dividend number 7) 55.93 196 001
Total distributions for the year ended
28 February 2017 110.37 348 524
28 February 28 February
2018 2017
R'000 R'000
3. Investment property
Investment property (excluding straight-lining)
(note 3.1) 6 847 987 5 287 942
Investment property under development
(note 3.2) 534 113 188 768
Freehold land available for development
(note 3.3) 517 597 376 880
Investment property held for sale
(note 3.4) 28 000 234 381
Straight-lining lease income accrual
(note 3.5) 171 352 137 803
8 099 049 6 225 774
3.1. Reconciliation of investment property
Opening balance 5 287 942 3 524 981
Additions arising from acquisitions 1 128 970 1 818 230
Improvements and extensions 97 526 115 954
Completed projects transferred from
investment property under development 270 247 214 124
Investment property transferred to
held for sale (28 000) (234 381)
Investment property transferred from property,
plant and equipment 741 -
Investment property transferred to land (11 972) -
Disposed during the year (17 286) (232 746)
Foreign exchange movement (119 727) (227 358)
Fair value adjustment 239 546 309 138
Fair value of investment properties
(excluding straight-lining) 6 847 987 5 287 942
3.2. Investment properties under development
Opening balance 188 768 126 296
Land cost transferred 391 914 147 940
Construction and development costs 244 828 128 656
Foreign exchange movement (21 150) -
Completed projects transferred to
investment property (270 247) (214 124)
Cost of investment properties
under development 534 113 188 768
3.3. Freeheld land available for development
Opening balance 376 880 366 301
Acquisition of Land 474 963 14 033
Land transferred to property,
plant and equipment - (1 652)
Land transferred from investment property 11 972 -
Land transferred to investment property
under development (391 914) (147 940)
Development and borrowing costs 45 696 146 138
Cost of freeheld land available for development 517 597 376 880
3.4. Investment property held for sale
Opening balance 234 381 -
Transferred from investment property* 28 000 234 381
Disposed during the year (234 381) -
Fair value of investment
properties held for sale 28 000 234 381
* investment property held for sale consists of 1 (2017:3 commercial)
industrial building which was sold shortly after year-end. 4 SA
commercial buildings were sold during the current year for R254
million
28 February 28 February
2018 2017
R'000 R'000
3. Investment property (continued)
3.5. Straight-lining lease income accrual
Contractual lease receivables are as follows:
Within one year 392 764 363 010
Between one and five years 1 561 561 1 373 429
Beyond five years 694 877 661 879
2 649 202 2 398 318
Less: lease revenue on straight-line basis (2 477 850) (2 260 515)
Straight-lining lease income accrual 171 352 137 803
4. Property analysis
4.1 Tenant profile
Gross Gross
lettable lettable
area (m2) area %
A - Large nationals, large listeds
and government 393 708 88.8%
B - Smaller international and national tenants 11 061 2.4%
C - Other local tenants and sole proprietors 30 308 6.8%
Vacant 9 098 2.0%
444 175 100.0%
4.1 Tenant profile (continued)
Number of Number of
tenants tenants %
A - Large nationals, large listeds
and government 45 70.3%
B - Smaller international and national tenants 8 12.4%
C - Other local tenants and sole proprietors 11 17.3%
Vacant - 0.0%
64 100.0%
4.2 Lease expiry profile
Lease expiry profile Based on revenue Based on GLA
Vacant 0.0% 2.0%
Expiry in the year to 28 February 2019 4.3% 4.3%
Expiry in the year to 29 February 2020 4.1% 3.4%
Expiry in the year to 28 February 2021 4.1% 3.9%
Expiry in the year to 28 February 2022 11.4% 14.4%
Expiry in the year to 28 February 2023 23.6% 15.9%
Thereafter 52.5% 56.1%
100.0% 100.0%
4.4 Weighted average escalations and yield
Sector Yield Escalation
South Africa - Industrial 8.3% 7.9%
South Africa - Commercial 9.9% 8.1%
8.3% 7.9%
United Kingdom - Industrial 5.0% n/a
Average annualised portfolio 7.4%
28 February 28 February
2018 2017
R'000 R'000
5 Capital commitments
Authorised and contracted for construction
of new industrial property 922 824 303 129
Authorised and contracted for improvements
to existing property - 20 966
Authorised but not contracted 861 868 95 106
1 784 692 419 201
6 Related parties
Related party relationships exist between the company, its
subsidiaries, directors as well as their close family members, and key
management of the company.
In the ordinary course of business, the company entered into the
following other transactions with related parties:
Dividend paid to related party shareholders 115 702 55 840
Settlement in respect of Mill Street Floor
warrantee from Chiluan (Pty) Ltd and Skymax
Trust. (Andrea Taverna-Turisan is a director of
Chiluan (Pty) Ltd and Giancarlo Lanfranchi is
a trustee of Skymax Trust) - 2 018
Fees paid to BTKM (Pty) Ltd (in which Nazeem
Khan is a director) 60 4 587
Administration
Directors
A Taverna-Turisan (CEO)^, G.R. Gous (COO), B Goossens (CFO), P.L. Campher*+
(Chairman), G Lanfranchi* (Deputy Chairman), A.J. Gouws*, K Dreyer*,
N Khan*+, R.E. Benjamin-Swales*+, M.E. Brey *+, G. Mthethwa *+
* Non-executive
+ Independent
^ Italian
Equites Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2013/080877/06)
JSE share code: EQU ISIN: ZAE000188843
(Approved as a REIT by the JSE)
("Equites" or "the group" or "the company")
Registered office
14th Floor
Portside Towers
4 Bree Street
Cape Town
8000
Contact details
info@equites.co.za
Company secretary
Riaan Gous
Transfer secretary
Terbium Financial Services Proprietary Limited
Auditors
PricewaterhouseCoopers Inc.
Sponsor
Java Capital
Bankers
Nedbank Limited
Attorneys
DLA Cliffe Dekker Hofmeyr
Date of publication
10 May 2018
Date: 10/05/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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