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RDF - Redefine - Reviewed interim results for the six months ended 28 February
2007 and Payment of debenture interest
Redefine Income Fund Limited
(Registration No. 1999/018591/06)
Share Code: RDF & ISIN Code: ZAE000023503
("Redefine" or the "company")
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2007
- Distributions up 14.8% to 24.0 cents per linked unit
- NAV per linked unit up 12.8% to R6.41
- Total assets up 79.3% to R9.3 billion
- Gearing 35.9%
- Market capitalisation R6.0 billion
CONSOLIDATED INCOME STATEMENT
Reviewed Reviewed Audited
Feb 2007 Feb 2006 Aug 2006
R000 R000 R000
Revenue
Property portfolio 206 414 155 203 320 753
Contractual rental income 190 247 141 480 292 863
Straight-line rental income accrual 16 167 13 723 27 890
Listed security portfolio 143 405 88 324 207 225
Property trading income 15 316 - -
Total revenue 365 135 243 527 527 978
Operating costs - property portfolio (39 156) (26 554) (56 063)
Administration costs (27 247) (16 064) (36 116)
Net operating income 298 732 200 909 435 799
Changes in fair values of properties 428 525 525 380 474 193
and listed securities
Net surplus on disposal of 275 519 306 059 324 890
properties and listed securities
Income from associate 783 - -
Income from operations 1 003 559 1 032 348 1 234 882
Interest received 5 893 3 428 8 659
Finance charges (128 419) (85 964) (190 483)
Income before debenture interest 881 033 949 812 1 053 058
Debenture interest (194 234) (104 650) (226 085)
Income before taxation 686 799 845 162 826 973
Taxation (217 376) (135 903) (161 832)
Net income 469 423 709 259 665 141
RECONCILIATION OF HEADLINE EARNINGS AND DISTRIBUTABLE EARNINGS
Income attributable to 469 423 709 259 665 141
shareholders
Straight-line rental income (16 167) (13 723) (27 890)
accrual
Changes in fair values of (428 525) (525 380) (474 193)
properties and listed securities
Net surplus on disposal of (275 519) (306 059) (324 890)
properties and listed securities
Deferred taxation 217 376 135 903 161 832
Headline loss attributable to (33 412) - -
shareholders
Debenture interest 194 234 104 650 226 085
Headline earnings attributable to 160 822 104 650 226 085 650
linked unitholders
Spearhead pre-acquisition income 31 516 - -
VAT and interest disallowed 1 896 - -
Distributions 194 234 104 650 226 085 650
- First quarter 95 028 51 574 51 574
- Second quarter 99 206 53 076 53 076
- Third quarter N/A N/A 59 013
- Fourth quarter N/A N/A 62 422
Actual number of linked units in 813 161* 500 719* 556 726*
issue (000)
Weighted number of linked units 678 101* 500 719* 516 186*
in issue (000)
Earnings per linked unit (cents) 97.87 162.55 172.66
Headline earnings per linked unit 23.72 20.90 43.80
(cents)
Distribution per linked unit 24.00 20.90 42.70
(cents)
*Excludes 5 876 770 (Feb 2006: 5 866 500) treasury units
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Reviewed Reviewed Audited
Feb 2007 Feb 2006 Aug 2006
R000 R000 R000
Cash effects of operating (58 713) 16 722 (61 942)
activities
Cash generated from operations 221 263 202 381 335 094
Net financing costs (122 526) (82 536) (181 824)
Linked unit distributions paid (157 450) (103 123) (215 212)
Cash effects of investing 176 929 (366 723) (1 234 636)
activities
Net property disposals 46 320 1 100 (33 009)
(acquisitions)
Net listed security disposals 208 162 (367 823) (1 201 627)
(acquisitions)
Acquisition of business (7 190) - -
Investment in associate (70 363) - -
Cash effects of financing 189 185 321 452 1 253 009
activities
Linked units issued 217 855 - 349 545
Net movement in borrowings (28 670) 321 452 903 464
Net movement in cash and cash 307 401 (28 549) (43 569)
equivalents
Opening cash and cash equivalents (8 473) 35 096 35 096
Closing cash and cash equivalents 298 928 6 547 (8 473)
CONSOLIDATED BALANCE SHEET
Reviewed Reviewed Reviewed
Feb 2007 Feb 2006 Aug 2006
R000 R000 R000
ASSETS
Non-current assets 8 838 646 5 089 902 5 961 167
Property portfolio at valuation 4 524 747 2 391 488 2 513 337
Fair value of property portfolio 4 213 947 2 335 028 2 413 913
for accounting purposes
Property under development at cost 154 872 - -
Straight-line rental income accrual 155 928 56 460 99 424
Listed security portfolio 4 243 536 2 698 414 3 447 830
Interest in associate 70 363 - -
Current assets 444 100 87 556 141 584
Trading securities - 492 -
Trade receivables 55 952 13 326 7 908
Listed security income 72 580 67 191 50 666
Properties for sale 16 640 - 83 000
Cash and cash equivalents 298 928 6 547 10
Total assets 9 282 746 5 177 458 6 102 751
EQUITY AND LIABILITIES
Share capital and reserves 3 752 260 1 946 624 2 151 170
Share capital and premium 1 642 216 212 762 461 428
Non-distributable reserves 2 112 049 1 733 862 1 689 742
Deferred interest rate hedging loss (2 005) - -
Non-current liabilities 5 316 807 3 097 618 3 814 338
Debenture capital 1 463 689 901 294 1 002 108
Interest-bearing liabilities 3 152 043 1 876 327 2 458 339
Interest rate swaps 2 005 - -
Deferred taxation 699 070 319 997 353 891
Current liabilities 213 679 133 216 137 243
Payables 114 473 80 140 66 338
Bank overdraft - - 8 483
Linked unitholders for distribution 99 206 53 076 62 422
Total equity and liabilities 9 282 746 5 177 458 6 102 751
Net asset value per linked unit 641.44 568.77 566.40
(cents)
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Reviewed Reviewed Audited
Feb 2007 Feb 2006 Aug 2006
R000 R000 R000
Balance at beginning of period 2 151 170 1 237 365 1 237 364
Issue of shares 1 132 050 - 249 449
Issue expenses written-off (383) - (784)
Income attributable to 469 423 709 259 665 141
shareholders
Total share capital and reserves 3 752 260 1 946 624 2 151 170
Review opinion - The independent auditors, PKF (Jhb) Inc., have reviewed these
interim results. Their unqualified report is available for inspection at the
company`s registered office.
Basis of preparation - The interim financial statements have been prepared in
accordance with International Financial Reporting Standards (`IFRS`) and IAS34 -
Interim Financial Reporting. All accounting policies are consistent with those
applied for the year ended 31 August 2006.
COMMENTS
Financial results
Revenue and net operating income, before accounting for the straight-line rental
income accrual, increased by 51.9% and 51.0% respectively. This is mainly as a
result of the acquisition of Spearhead Property Holdings Limited ("Spearhead"),
including sustainable income from property trading, contractual rental
escalations and continued control of expenses.
In terms of the agreement for the acquisition of Spearhead, Redefine received
payment in lieu of income of R31.5 million in respect of 1 July to 30 November
2006 which was not included in income. Of this amount, R13.9 million is non-
recurring. The total amount received has been included in distributions for the
period under review.
The higher administration costs were largely due to an increase in the asset
management fees, a function of the market capitalisation of Redefine which grew
as a result of the acquisition of Spearhead. SARS has disallowed the input VAT
on transaction costs relating to acquisitions and corporate activities amounting
to R1.9 million, inclusive of interest, which has been expensed.
The carrying values of the property and listed security portfolios increased by
R2.13 billion and R1.55 billion respectively, resulting in an increased net
asset value of R6.41 (Feb 2006: R5.69) per linked unit. Net asset value
excluding deferred taxation is R7.27 (Feb 2006: R6.33).
Distribution
The Board has approved an interest distribution of 12.2 cents per linked unit
for the quarter ended 28 February 2007. This together with an interim
distribution of 11.8 cents per linked unit for the quarter ended 30 November
2006 amounts to a total interest distribution for the six months ended 28
February 2007 of 24.0 cents per linked unit, an increase of 14.8% on the
distribution of 20.9 cents for the comparable period.
Property Portfolio
In addition to the Spearhead portfolio, during the period under review, Redefine
acquired the 13 500 m2 Makhado shopping centre for R94.5 million at an initial
forward yield of 10%. Redefine disposed of 12 properties to Dipula Property Fund
(Pty) Ltd ("Dipula"), a joint venture enterprise development initiative with
Dijalo Property Services (Pty) Ltd, and two other properties with an aggregate
GLA of 59 220 m2 for R224.3 million (valuation: R220.2 million) at an average
yield of 9.8%.
At 28 February 2007 Redefine`s property portfolio comprised 96 investment
properties with a carrying value of R4.52 billion. The Directors have valued the
property portfolio by applying market related yields which are substantiated by
independent external valuers. The property portfolio is revalued by independent
external valuers at the end of each financial year.
The property portfolio constitutes 51.2% of Redefine`s total non-current assets
(Feb 2006: 47.0%).
After the acquisition of 303 329 m2 from Spearhead, the property portfolio has a
gross lettable area of 783 994 m2. Sectoral spread by revenue is 56.8%
commercial, 27.3% retail and 15.9% industrial.
During the period under review 7 162 m2 of vacant space was leased and leases in
respect of 15 546 m2 were renewed. 53.6% of leases, by GLA, expire in 2010 and
beyond.
Vacancies increased from 14 590 m2 at 28 February 2006 to 43 605 m2 at 28
February 2007. This increase in vacancies, which account for 5.6% of lettable
area, has arisen from the substantial increase in the size of the property
portfolio and presents an opportunity for Redefine.
Redefine currently has 13 projects with an estimated cost of R1.2 billion in
various stages of development at an average initial forward yield of 10.07%. A
further five developments estimated to cost approximately R1.3 billion are
planned.
Listed securities portfolio
Redefine`s listed securities portfolio increased by R1.55 billion after
acquisitions of R417,95 million and disposals of R417.50 million.
In terms of a scheme of arrangement between ApexHi Properties Limited ("ApexHi")
and its unitholders, Redefine received 31 708 340 ApexHi C units. Redefine
disposed of 22 430 074 ApexHi C units resulting in a holding of 9 278 266 ApexHi
C units at 28 February 2007.
Borrowings
Arising from the acquisition of Spearhead, Redefine`s borrowings increased by
R787 million. Total debt of R3.2 billion represents gearing of 35.9%, a
reduction from 41.0% at August 2006.
The current average all-in interest rate is 10.29% and the interest rate on
67.8% of borrowings is fixed for an average of five years.
BEE
Redefine is committed to the Property Transformation Charter and the DTI`s BBBEE
Codes of good practice. Negotiations are ongoing with a view to introducing BEE
at linked unit level.
Post-balance sheet events
Agreement subject to certain conditions has been reached for the disposal of
Rosebank Arena, a commercial property, to Standard Bank of South Africa Limited
for R100 million. The proceeds will be utilised to finance new developments.
Redefine exercised its right to acquire an additional 3 182 500 units in
Coronation International Real Estate Fund ("CIREF`) at a cost of '1.50 per unit.
Redefine acquired 2 863 714 A, B and C units in ApexHi in terms of a vendor
placement at an aggregate cost of R35 per unit.
Liquidity
19.5% of the weighted average number of linked units in issue have traded during
the six months ended February 2007.
Directorate
Colin Clarke resigned as a Director on 23 February 2007 in order to pursue his
own interests.
Dines Gihwala has been appointed as non-executive chairman, with immediate
effect.
Prospects
The Board anticipates that Redefine`s distribution per linked unit for the year
ending 31 August 2007 will be at least 50.62 cents.
This forecast was included in the circular to Redefine linked unitholders dated
12 October 2006.
Payment of debenture interest
Unitholders are advised that interest distribution no. 28 in respect of the
period 1 December 2006 to 28 February 2007 of 12.2 cents per linked unit has
been declared.
- The last date to trade cum interest Friday, 4 May 2007
- Linked units will trade ex interest Monday, 7 May 2007
- Record date Friday, 11 May 2007
- Payment of interest distribution no. 28 Monday, 14 May 2007
Unitholders may not dematerialise or re-materialise their linked units between
Monday, 7 May 2007 and Friday, 11 May 2007, both days inclusive.
Wolf Cesman Brian Azizollahoff
Director Chief Executive Officer
Johannesburg
18 April 2007
REDEFINE INCOME FUND LIMITED
2 Arnold Road, Rosebank, Johannesburg. P O Box 1731, Parklands, 2121, South
Africa. Telephone +27 11 283 0110 E-mail: mail@redefine.co.za Website:
www.redefine.co.za
Directors: D Gihwala*#(Chairman), B Azizollahoff+ (CEO), L Barnard*#, W Cesman*,
E Ellerine*#, D Perton*^#, S Shaw-Taylor*, M Wainer*
*non-executive ^British #independent
Company secretary: Probity Business Services (Proprietary) Limited.
Date: 18/04/2007 17:12:10 Supplied by www.sharenet.co.za
Produced by the JSE SENS Department.
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