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RDF - Redefine - Reviewed results for the year ended 31 August 2007
Redefine Income Fund Limited
Registration No: 1999/018591/06
Share code: RDF & ISIN Code: ZAE000023503
("Redefine" or "the Company")
REVIEWED RESULTS FOR THE YEAR ENDED 31 AUGUST 2007
Distributions 51.25 cents per linked unit - up 20%
NAV R7.80* per linked unit - up 24%
* Excluding deferred taxation
Total assets R9.8 billion - up 61%
Market capitalisation R6.0 billion - up 60%
Gearing 34% - down 17%
Consolidated income statement
Reviewed Audited
2007 2006
R000 R000
Revenue
Property portfolio 488 799 320 753
Contractual rental 429 948 292 863
Straight-line rental accrual 58 851 27 890
Listed security portfolio 300 285 207 225
Property trading 40 486 -
Total revenue 829 570 527 978
Operating costs - property portfolio (86 655) (56 063)
Administration costs (56 401) (36 116)
Net operating income 686 514 435 799
Changes in fair values and net surplus on 1 070 368 799 083
disposals of properties, listed securities and
intangibles
Income from associates 24 107 -
Income from operations 1 780 989 1 234 882
Interest received 18 638 8 659
Finance charges (269 799) (190 483)
Income before debenture interest 1 529 828 1 053 058
Debenture interest (415 784) (226 085)
Income before taxation 1 114 044 826 973
Taxation (338 005) (161 832)
Income attributable to shareholders 776 039 665 141
RECONCILIATION OF HEADLINE EARNINGS AND
DISTRIBUTABLE EARNINGS
Income attributable to shareholders 776 039 665 141
Changes in fair values and net surplus on (168 097) (776 442)
disposals of properties and intangibles (net of
deferred taxation)
Taxation 47 564 161 832
Headline earnings attributable to shareholders 655 506 50 531
Debenture interest 415 784 226 085
Headline earnings attributable to linked 1 071 290 276 616
unitholders
Changes in fair value of listed securities (net (611 829) (22 641)
of deferred taxation)
Straight line rental income accrual (58 851) (27 890)
31 517 -
Spearhead pre-acquisition income
VAT and interest disallowed 1 894 -
Fair value adjustment in associate (18 237) -
Debenture interest distributions 415 784 226 085
- First quarter 95 027 51 574
- Second quarter 99 206 53 076
- Third quarter 102 458 59 013
- Fourth quarter 119 093 62 422
Actual number of linked units in issue (000`s) 813 161* 556 727*
Weighted number of linked units in issue (000`s) 746 186 516 186
Earnings per linked unit (cents) 159.72 172.66
Headline earnings per linked unit (cents) 143.57 53.59
Average distribution per linked unit (cents) 55.72 43.80
Distribution per linked unit (cents) 51.25 42.70
* Excludes 5 876 770 treasury units
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Reviewed Audited
2007 2006
R000 R000
Balance at beginning of year 2 151 170 1 237 364
Issue of shares 1 191 026 249 449
Issue expenses written-off (10 239) (784)
Income attributable to shareholders 776 039 665 141
Total share capital and reserves 4 107 996 2 151 170
Review opinion - The independent auditors, PKF (JHB) Inc, have reviewed
these results. Their unqualified report is available for inspection at the
company`s registered office.
CONSOLIDATED BALANCE SHEET
Audited Reviewed Audited
2007 2006
R000 R000
ASSETS
Non-current assets 9 306 257 5 961 167
Property portfolio 5 049 733 2 513 337
Fair value of property portfolio for accounting 4 503 606 2 413 913
purposes
Property under development at cost 347 514 -
Straight-line rental income accrual 198 613 99 424
Listed securities portfolio 4 075 285 3 447 830
Other financial assets 179 460 -
Plant and equipment 1 779 -
Current assets 528 231 141 584
Listed securities held for trading 112 401 -
Properties held for trading and development 173 927 83 000
Receivables 54 071 7 908
Listed security income 58 908 50 666
Cash and cash equivalents 128 924 10
Total assets 9 834 488 6 102 751
EQUITY AND LIABILITIES
Share capital and reserves 4 107 996 2 151 170
Share capital and premium 1 642 215 461 428
Accumulated loss (31 517) -
Non-distributable reserves 2 497 298 1 689 742
Non-current liabilities 5 440 207 3 814 338
Debenture capital 1 463 689 1 002 108
Interest-bearing liabilities 3 172 489 2 458 339
Deferred taxation 804 029 353 891
Current liabilities 286 285 137 243
Payables 95 485 66 338
Interest-bearing liabilities 17 848 -
Taxation 47 564 -
Bank overdraft 6 295 8 483
Linked unitholders for distribution 119 093 62 422
Total equity and liabilities 9 834 488 6 102 751
Net asset value per linked unit (cents) 779.89 629.96
Net asset value per linked unit is equal to share capital and reserves plus
debenture capital divided by number of linked units in issue.
- Excludes deferred taxation
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Reviewed Audited
2007 2006
R000 R000
Cash effects of operating activities 34 122 (61 942)
Cash generated from operations 644 397 335 094
Net financing costs (251 161) (181 824)
Debenture interest distributions paid (359 114) (215 212)
Cash effects of investing activities (42 182) (1 234 636)
Net property acquisitions (143 908) (33 009)
Net listed security disposals (acquisitions) 240 496 (1 201 627)
Acquisition of business (21 138) -
Investment in associates (99 990) -
Loans advanced to related parties (17 642) -
Cash effects of financing activities 139 162 1 253 009
Linked units issued 217 855 349 545
Net movement in borrowings (78 693) 903 464
Net movement in cash and cash equivalents 131 102 (43 569)
Opening cash and cash equivalents (8 473) 35 096
Closing cash and cash equivalents 122 629 (8 473)
Basis of preparation - The financial statements have been prepared in accordance
with International Financial Reporting Standards (`IFRS`). All accounting
policies are consistent with those applied or the year ended 31 August 2006.
COMMENTARY
Financial results
Revenue and net operating income increased by 54.1% and 53.9% respectively,
before accounting for the straight-line rental income accrual. The growth is as
a result of the acquisition of Spearhead Property Holdings Limited
("Spearhead"), revenue from property trading, contractual rental escalations and
continued control of expenses.
Higher administration costs were largely due to an increase in asset management
fees, a function of the market capitalisation of Redefine which grew as a result
of the issue of linked units for the acquisition of Spearhead and an increase in
the linked unit price.
The carrying values of the property and listed security portfolios increased by
R2.46 billion and R627.5 million respectively, resulting in an increased net
asset value of R6.85 (2006: R5.66) per linked unit. Net asset value per linked
unit excluding deferred taxation, is R7.80 (2006: R6.30).
Debenture interest distribution ("distribution")
The Board has approved a distribution of 14.65 cents per linked unit for the
quarter ended 31 August 2007. This, together with distributions of 36.60 cents
per linked unit for the nine months ended 31 May 2007, results in a total
distribution for the year ended 31 August 2007 of 51.25 cents per linked unit,
an increase of 20% on the distributions of 42.70 cents per linked unit for the
previous year.
Property portfolio
During the year under review, Redefine acquired the following developed
properties:
Property Gross Purchase Initial Price per
lettable price yield m2
area (m2) (R000) (%) R
Makhado Shopping Centre 13 500 89 000 10 6 593
Pick `n Pay, Newcastle 5 866 33 500 7 5 711
In addition, Redefine acquired vacant land in Isando for R5,7 million which has
been developed as a 40 000m2 warehouse let to Pepkor Limited on a 12 year lease
at a total cost of approximately R100 million.
During the year under review the following properties were sold:
Property Gross Selling Yield Price per Original
lettable price (%) m2 (R) cost
area (m2) (R000) (R000)
Dipula portfolio 40 810 150 363 10 3 684 77 245
(13 properties)
Rosebank Arena 12 496 97 000 3 7 762 45 000
Lindsay Saker, 5 825 30 000 7 10 300 22 500
Rosebank
The property portfolio is 53.9% (2006: 42.2%) of Redefine`s total non-current
assets, made up of 95 investment properties, land under development and
properties held for development and trading with a carrying value of R5,15
billion. The entire property portfolio has been valued by independent external
valuers.
The property portfolio had a gross lettable area of 777 334m2 and 44.3% of
leases, by GLA, expire in 2011 and beyond.
During the year under review 61 300 m2 of vacant space was leased and leases in
respect of 71 244m2 were renewed.
31 Aug 2007 31 Aug 2006
Total lettable area (m2) 777 334 524 815
Lettable area vacant (m2) 17 247 13 918
% of portfolio vacant 2.2 2.7
The increase in vacant lettable area has arisen from the substantial increase in
the size of the property portfolio and presents an opportunity for Redefine.
Developments
Redefine currently has 10 projects under development at an aggregate estimated
cost of R773 million with a projected average forward yield of 9.7%. A further
three developments estimated to cost approximately R1,3 billion (Redefine`s
portion) are planned.
Two trading developments at an estimated cost of R186,5 million (Redefine`s
portion) are in progress with an expected average return on investment of 14.5%.
A further five trading developments estimated to cost R350 million (Redefine`s
portion) are planned with an average return on investment of 18%. Developments
are funded from Redefine`s cash resources and by way of development finance.
Listed securities portfolio
During the year under review, Redefine`s listed securities portfolio increased
by R627,5 million after acquisitions of R487,5 million and disposals of R712,6
million. Redefine disposed of its entire holding in CBS Property Portfolio
Limited to the Public Investment Corporation for R198,2 million in cash and
exercised its rights in terms of an issue undertaken by Coronation International
Real Estate Fund ("CIREF") to acquire 3 182 500 CIREF shares at a cost of
GBP1.45 per share for a total consideration of R68,8 million.
Liquidity
Of the weighted average number of linked units in issue, 36.9% traded during the
year.
Borrowings
Total debt of R3.2 billion at 31 August 2007 represents gearing of 33.98% a
decrease from 41.02% at 31 August 2006.
The current average all-in interest rate is 9.99% and the interest rate on 67.8%
of borrowings is fixed for an average of five years.
Segmental Information
Contractual Net income
rental income 2007
2007 (R000)
(R000)
Property portfolio
Commercial 245 705 209 400
Retail 107 245 98 588
Industrial 76 998 35 305
429 948 343 293
Listed investments n/a 300 285
Property trading n/a 40 486
Total 429 948 684 064
Black Economic Empowerment ("BEE")
Redefine is committed to the Property Transformation Charter and the Department
of Trade and Industry`s B-BBEE Codes of good practice. In terms of this
commitment two successful Enterprise Development Initiatives, Dipula Property
Fund (Pty) Ltd and Mergence Africa Property Investment Fund (Pty) Ltd, were
launched during the year.
Post balance sheet events
- Redefine has reached agreement to give effect to a BEE transaction in terms of
which 80 million Redefine linked units ("the BEE units") constituting
approximately 10% of the current issued linked units in Redefine are to be
issued to a selection of strategic and broad-based BEE entities which will
acquire 48 million and 32 million linked units respectively for an aggregate
cash consideration of R548 million. Following implementation of the transaction
approximately 15.5% of the Redefine linked units will be held by BEE parties.
The linked units are to be issued at a price of R6,85 per linked unit, a
discount of approximately 15% to Redefine`s linked unit market price of R8.08 at
close of trade on 10 October 2007, an economic cost of 1.5% of Redefine`s market
capitalisation. Redefine is of the view that this cost will be outweighed by the
commercial and strategic benefits to be derived from the BEE transaction as well
as its related strategies and transformation objectives in the medium to long
term. This transaction is subject to Redefine linked unitholder approval.
The terms of the transaction are more fully set out in a circular dated 23
October 2007.
- Subsequent to 31 August, the following property has been sold but not
transferred:
Property Gross Selling Yield Price per Original
lettable price (%) m2 cost
area (m2) (R000) (R) (R000)
Old Oak Shopping 2 353 17 500 9 6 903 16 100
Centre
- Redefine has accepted an offer from Hyprop Investments Limited ("Hyprop") in
terms of which Hyprop will issue to Redefine 9 830 728 Hyprop linked units in
exchange for 24 576 821 Sycom Property Fund ("Sycom") units, a swap ratio of 1
Hyprop linked unit per 2.5 Sycom units. Following this transaction Redefine will
hold 30% of Hyprop.
Capital commitments and contingencies
Authorised capital improvements on investment properties total R1,1 billion. The
group has guaranteed liabilities of joint ventures up to an amount of R79,8
million and has provided limited suretyship in respect of liabilities relating
to BEE initiatives in favour of financial institutions.
Prospects
Demand for space at higher rentals, favourable yields on new developments, a
pipeline of property trading revenue, strong income growth from the listed
securities portfolio and debt management will collectively provide growth in
distributions which is anticipated to be at least 14% higher for the year ending
31 August 2008, than for the year ending 31 August 2007. This forecast has not
been reviewed or reported on by the auditors.
Payment of debenture interest
Unitholders are advised that debenture interest distribution no. 30 in respect
of the period 1 June 2007 to 31 August 2007 of 14.65 cents per linked unit has
been declared.
November 2007
- The last date to trade cum interest Friday 9
- Linked units will trade ex interest Monday 12
- Record date Friday 16
- Payment of debenture interest distribution no. 30 Monday 19
Unitholders may not dematerialise or re-materialise their linked units between
Monday 12 November 2007 and Friday 16 November 2007, both days inclusive.
Dines Gihwala Brian Azizollahoff
Chairman Chief Executive Officer
Johannesburg
29 October 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*, N Venter*#, M
Wainer* *non-executive =British #independent
Company secretary: Probity Business Services (Proprietary) Limited.
Sponsor
Java Capital (Proprietary) Limited
Date: 29/10/2007 16:04:01 Supplied by www.sharenet.co.za
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