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Reviewed condensed consolidated financial results and dividend declaration for the year ended 30 June 2023
HERIOT REIT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2017/167697/06)
(Approved as a REIT by the JSE)
JSE share code: HET ISIN: ZAE000246740
("Heriot" or "the Company" or the "Group")
SHORT-FORM ANNOUNCEMENT: REVIEWED CONDENSED CONSOLIDATED FINANCIAL RESULTS AND DIVIDEND DECLARATION FOR THE
YEAR ENDED 30 JUNE 2023
NATURE OF BUSINESS
At the reporting date, the property portfolio was valued at R9,258 billion (2022: R5,084 billion). This growth is
predominantly attributable to the inclusion of investment property valued at R3,720 billion owned by Safari RSA
Investments Limited ("Safari") which was consolidated into Heriot's results as at 30 June 2023. The Group's
primary objective is to grow and streamline Heriot's asset base through the acquisition of high-quality properties,
the redevelopment of existing properties and the disposal of assets identified as non-core.
KEY FINANCIAL HIGHLIGHTS
Reviewed for the Audited for the Change
year ended year ended %
30 June 2023 30 June 2022
Dividend per share (cents) 106.33 102.05 4.2
Total assets (R'm) 9,497.50 5,696.63 66.7
Net asset value per share (cents) 1,471.57 1,206.19 22.0
Gross revenue (R'm) 625.96 575.98 8.7
Net profit after taxation (R'm) 977.41 614.22 59.1
Earnings per shares (cents) 377.46 238.68 58.1
Headline earnings per shares (cents) 90.62 100.06 -9.4%
FINANCIAL RESULTS
Heriot's distributable earnings of the Group for the year ended 30 June 2023 (the "period" or "reporting period")
of R271,552 million, or 106.33 cents per share, are 4.2% ahead of distributable earnings of 102.05 cents per share
for the previous financial year. Distribution per share remains Heriot's measure of performance.
Net property operating income ("NOI") grew by 13.8%. While NOI from the specialised portfolio has grown
through normal rental escalations of 6.0% to 8.0%, the industrial portfolio has significantly improved from
reduced vacancies together with rental increases on lease renewals. The retail portfolio has achieved significant
growth predominantly related to the Siyabuswa phase 3 extension. The residential portfolio has benefitted from
enhanced rentals achieved through short-term lettings. However, the office sector is still suffering the effects of
the COVID-19 pandemic with challenges in filling vacancies and reduced rentals on lease renewals.
While the group achieved double-digit growth from its property operations, distributions were negatively
impacted by the 350 bps increase in the repo rate during the reporting period as Heriot's debt consisted entirely
of floating facilities for the period under review. As a result, the average cost of borrowings increased by 2.39%,
from 6.29% in the comparable period to 8.68%, reducing distributable earnings growth to 4.2%.
Effective cash management and strong cash flows support the payment of 100% of distributable earnings as a
dividend and therefore, after accounting for the interim dividend of 52.04 cents paid on 11 April 2023, the
Company is declaring a final dividend of 54.29 cents per share.
Heriot has adopted the SA REIT Association's best practice metrics for reporting purposes. On this basis, Heriot's
net asset value per share increased by 22.0% from R12,06 at 30 June 2022 to R14,72 at 30 June 2023. This increase
is mainly attributable to the consolidation of Safari's statement of financial position at 31 March 2023 which
resulted in an unrealised, non-distributable bargain gain of R464,3 million for the reporting period. The growth is
further attributable to an increase of R289,3 million in the valuation of Heriot’s property portfolio, which is
supported by the positive rental escalations achieved on renewals and re-lets across the portfolio during the period.
PROSPECTS
Heriot's results for the reporting period demonstrate the resilience of its portfolio and in particular, the durability
of its emerging market retail and industrial properties. The current local and global macro-economic conditions
have created difficult trading conditions for the Company in the short to medium term. Future prospects are
inherently linked to the Group's operating environment and to significant macro issues facing the Company. The
board is committed to a proactive yet conservative approach to mitigate the effects of elevated interest rates,
increasing costs of fuel, electricity shortages, unprecedent levels of unemployment and high levels of inflation.
Heriot will continue to explore strategic opportunities that will extract value from its existing portfolio while
continuing to grow its asset base through the acquisition of high yielding properties in its target markets.
Furthermore, given the strength of Heriot's cash flows, the board has resolved to maintain the 100% pay-out ratio
of distributable earnings.
Despite difficult trading conditions, management is pursuing growth of 3,0% to 7,0% in the distribution per share
for the year ending 30 June 2024.
The forecast in support of this guidance has been prepared using the following key assumptions:
• The inclusion of Safari's distributable income for the 15-month period 1 April 2023 to 30 June 2024;
• Forecast property income is based on contractual rental escalations and market-related renewals;
• Adequate allowance has been made for vacancies and rent reversions;
• No further major corporate and tenant failures will occur; and
• Interest rates will increase by no more than 50 bps during the 12 months ending 30 June 2024.
This guidance has not been reviewed or reported on by the Company's auditors.
PAYMENT OF FINAL DIVIDEND
The board has declared a final gross cash dividend of 54.28910 cents per share out of the Company's distributable
income for the year ended 30 June 2023.
The dividend is payable to Heriot shareholders in accordance with the timetable set out below:
2023
Last date to trade cum dividend Tuesday, 17 October
Shares trade ex dividend Wednesday, 18 October
Record date Friday, 20 October
Payment date Monday, 23 October
Share certificates may not be dematerialised or rematerialised between Wednesday, 18 October 2023 and Friday,
20 October 2023, both days inclusive. The dividend will be transferred to dematerialised shareholders'
CSDP/broker accounts on Monday, 23 October 2023. Certificated shareholders' dividend payments will be posted
or paid to certificated shareholders' bank accounts on or about, Monday, 23 October 2023.
In accordance with Heriot's status as a REIT, shareholders are advised that the 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 on the shares 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 such shareholders provide the following forms to their Central Securities
Depository Participant ("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. 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 43.43128 cents per share. A reduced dividend withholding rate in terms of the applicable DTA
may only be relied on 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) 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.
Shares in issue at the date of the dividend: 255,395,858 (excluding 900,000 treasury shares)
Heriot's income tax reference number: 9541295185
Where the transfer secretaries do not have the banking details of any certificated shareholders, the cash dividend
will be held in trust by the transfer secretaries pending receipt of the relevant certificated shareholder's banking
details where after the cash dividend will be paid via electronic transfer into the personal bank accounts of
certificated shareholders.
REVIEW CONCLUSION
The condensed consolidated financial statements for the year ended 30 June 2023 have been reviewed by the
Company's auditors, BDO South Africa Inc., who expressed an unmodified review conclusion. A copy of the
auditor's review report together with the condensed financial statements identified in the auditor's report is
available for inspection at the Company's registered office.
ABOUT THIS ANNOUNCEMENT
This short-form announcement is the responsibility of the directors of Heriot and the contents were approved by
the board on 27 September 2023. This short-form announcement is a summary of the information contained in
the full announcement released on SENS on 28 September 2023 and does not include full or complete details.
The short-form announcement has not been audited or reviewed by the Company's external auditors.
The full announcement is available on the Company's website at www.heriotreit.com and can be accessed using
the following JSE link: https://senspdf.jse.co.za/documents/2023/jse/isse/HETE/FY2023.pdf
The full announcement is available for inspection at the registered offices of the Company or its designated
advisor, at no charge, during office hours from Thursday, 28 September 2023 to Thursday, 5 October 2023 or on
the Company's website at www.heriotreit.com. Any investment decision by investors and/or shareholders should
be based on the full announcement.
By order of the board
28 September 2023
COMPANY SECRETARY
CIS Company Secretaries Proprietary Limited
REGISTERED OFFICE
Suite 1, Ground Floor, 3 Melrose Boulevard, Melrose Arch, Johannesburg, 2196
PO Box 652737, Benmore, 2010
DIRECTORS
SB Herring (Chairperson)*, RL Herring (CEO), JA Finn (CFO), SJ Blieden*†, T Cohen*†, R Lockhart-Ross*†,
N Ngale*†
*Non-executive †Independent
TRANSFER SECRETARIES
Computershare Investor Services Proprietary Limited
DESIGNATED ADVISOR
Java Capital, 6th Floor, 1 Park Lane, Wierda Valley, Sandton, 2196
Date: 28-09-2023 02:10:00
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