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RDF - Redefine - Audited Annual Results For The Year Ended 31 August 2008
REDEFINE INCOME FUND
Registration No: 1999/018591/06
Share code: RDF
ISIN Code: ZAE000023503
("Redefine" or "the company")
2008 AUDITED ANNUAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2008
- ANNUAL DISTRIBUTIONS UP 10.5% TO 56.63 CENTS PER LINKED UNIT
- NAV R7.58 PER LINKED UNIT
- TOTAL ASSETS R10.7 BILLION
- MARKET CAPITALISATION R6.2 BILLION
- GEARING 35.2%
CONSOLIDATED INCOME STATEMENT
Audited Audited
31 Aug 2008 31 Aug 2007
R000 R000
Revenue
Property portfolio 566 856 488 799
Contractual rental income 539 303 429 948
Straight-line rental income accrual 27 553 58 851
Listed security portfolio 332 396 300 285
Property trading income 23 638 40 486
Total revenue 922 890 829 570
Operating costs (106 324) (86 655)
Administration costs (60 283) (56 401)
BEE transaction costs (44 000) -
Net operating profit 712 283 686 514
Changes in fair values of properties, (176 538) 1 105 548
listed securities and intangibles
Interest in associates (7 407) 24 107
Profit from operations 528 338 1 816 169
Net finance charges (228 722) (251 161)
Profit before debenture interest 299 616 1 565 008
Debenture interest (495 157) (415 784)
(Loss)/profit before taxation (195 541) 1 149 224
Taxation 43 282 (364 090)
(Loss)/profit for the year (152 259) 785 134
Attributable to:
Equity holders of the parent (157 864) 785 134
Minority interest 5 605 -
(152 259) 785 134
RECONCILIATION OF HEADLINE EARNINGS &
DISTRIBUTABLE EARNINGS
(Loss)/profit for the year attributable to (157 864) 785 134
equity holders
Changes in fair values of properties and (175 776) (180 090)
intangibles (net of deferred taxation)
Changes in fair values of properties and (228 143) (391 531)
intangibles
Deferred taxation on properties 52 367 211 441
Taxation - CGT 1 197 47 564
Headline (loss)/earnings to shareholders (332 443) 652 608
Debenture interest 495 157 415 784
Headline earnings attributable to linked 162 714 1 068 392
unitholders
Changes in fair values of listed securities 335 261 (608 931)
and financial instruments (net of deferred
taxation)
Changes in fair values of listed securities 404 681 (714 017)
and financial instruments
Deferred taxation (69 420) 105 086
Deferred taxation rate change (27 426) -
Straight line rental income accrual (27 553) (58 851)
Foreign exchange gain (1 681) -
Spearhead pre-acquisition income - 31 517
Fair value adjustment in associate 4 237 (18 237)
VAT and interest disallowed - 1 894
Minority interest 5 605 -
BEE transaction costs 44 000 -
Distributions 495 157 415 784
First quarter 108 150 95 027
Second quarter 123 256 99 206
Third quarter 125 043 102 458
Fourth quarter 138 708 119 093
Actual number of linked units in issue 893 161* 813 161*
(000)
Weighted number of linked units in issue 856 002* 746 186*
(000)
Earnings per linked unit (cents) 39.40 160.94
Headline earnings per linked unit (cents) 19.01 143.18
Distribution per linked unit (cents) 56.63 51.25
* Excludes 5 876 770 treasury units
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Audited Audited
31 Aug 2008 31 Aug 2007
R000 R000
Balance at beginning of year 4 107 996 2 151 170
Issue of shares 448 000 1 181 169
Issue expenses written-off (1 272) (382)
(Loss)/profit for the year (157 864) 785 134
Revaluation of property, plant and 1 831 -
equipment (net of deferred taxation)
Minority interest 5 706 -
Other movements - (9 095)
Total share capital and reserves 4 404 397 4 107 996
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
Audited Audited
31 Aug 2008 31 Aug 2007
R000 R000
Cash effects from operating activities (78 070) 34 700
Cash generated from operations 680 727 644 975
Net financing costs (234 494) (251 161)
Linked unit distributions paid (475 542) (359 114)
Taxation paid (48 761) -
Cash effects of investing activities (856 072) (44 621)
Net property acquisitions (558 205) (118 278)
Net listed security (228 307) 243 886
(acquisitions)/disposals
Acquisition of property, plant and (29 766) -
equipment
Acquisition of subsidiary (105) (21 138)
Loans to associate companies (23 542) (99 990)
Loans to related parties (16 147) (49 101)
Cash effects from financing activities 969 708 141 023
Linked units issued 546 731 217 855
Net movement in borrowings 422 977 (76 832)
Net movement in cash and cash equivalents 35 566 131 102
Opening cash and cash equivalents 122 629 (8 473)
Closing cash and cash equivalents 158 195 122 629
CONSOLIDATED BALANCE SHEET
Audited Audited
31 Aug 2008 31 Aug 2007
R000 R000
ASSETS
Non-current assets 10 143 277 9 306 257
Investment property 5 974 522 5 049 733
Fair value of property portfolio for 5 538 362 4 503 606
accounting purposes
Straight-line rental income accrual 226 166 198 613
Property under development 209 994 347 514
Listed securities portfolio 3 906 307 4 075 285
Interest in associates 140 227 124 097
Loans receivable 65 248 49 101
Interest rate swaps 6 514 6 262
Guarantee fee receivable 19 865 -
Property, plant and equipment 30 594 1 779
Current assets 574 134 528 231
Properties held for trading 137 016 173 927
Listed securities held for trading 105 385 112 401
Trade and other receivables 64 637 54 071
Listed securities income receivable 108 899 58 908
Cash and cash equivalents 158 197 128 924
Total assets 10 717 411 9 834 488
EQUITY AND LIABILITIES
Share capital and reserves 4 404 397 4 107 996
Share capital and premium 2 088 943 1 642 215
Accumulated loss (31 517) (31 517)
Non-distributable reserves 2 341 265 2 497 298
Minority interest 5 706 -
Non-current liabilities 5 972 087 5 440 207
Debenture capital 1 607 689 1 463 689
Interest-bearing liabilities 3 572 250 3 172 489
Interest rate swaps 16 823 -
Financial guarantee contract 15 774 -
Deferred taxation 759 551 804 029
Current liabilities 340 927 286 285
Trade and other payables 95 773 95 485
Interest-bearing liabilities 106 444 17 848
Taxation - 47 564
Bank overdraft 2 6 295
Linked unitholders for distribution 138 708 119 093
Total equity and liabilities 10 717 411 9 834 488
Net asset value per linked unit excluding 7.58 7.84
deferred taxation (cents)
Share in associate`s post acquisition 16 695 24 107
reserves (R000)
AUDIT OPINION - The independent auditors, PKF (Jhb) Inc., have audited these
results. Their unqualified report is available for inspection at the
company`s registered office.
BASIS OF PREPARATION - The financial results have been prepared in
accordance with International Financial Reporting Standards (`IFRS`) and in
terms of IAS 34- "Interim Financial Reporting", JSE listing requirements and
the Companies Act. All accounting policies are consistent with those applied
for the year ended 31 August 2007.
BUSINESS COMBINATIONS
On 26 March 2008, the group acquired a 51% interest in Freedom Square (Pty)
Ltd ("Freedom Square") which is developing its property. The fair value of
assets and liabilities on acquisition was the same as those carried in
Freedom Square`s books. The purchase price of R104 550 was paid in cash.
Since acquisition, Freedom Square`s investment property was revalued by R5.4
million which has been included in Redefine`s profit for the year.
Freedom Square did not trade prior to acquisition and accordingly earned no
revenue or profit for the period.
Fair value of assets and liabilities acquired: R000
Investment property 83 561
Interest bearing debt (83 252)
Trade and other receivables 7
Trade and other payables (110)
Fair value of assets and liabilities acquired 206
Attributable to non-controlling interest (101)
Cash outflow on acquisition and purchase consideration 105
COMMENTS
FINANCIAL RESULTS
Distributable earnings have increased by 19.1%. Net income from properties
held for the full 12 month period has grown by 13.0% due to firmer rentals,
positive rental reversions and new developments completed during the year.
Property expenses have been contained at 19.6% of contractual rental income.
The contribution of R23.6 million from trading represents 3.3% (2007: 5.9%)
of net operating income. Income from the listed securities portfolio grew
by 10.7%.
Trading developments, particularly Oasis Luxury Retirement Estate, have been
affected by higher interest rates resulting in a slowdown in sales and
increasing holding costs arising from which the increase in distributions
per linked unit for the year did not meet the forecast.
DISTRIBUTION
The Board has approved an interest distribution of 15.53 cents per linked
unit for the quarter ended 31 August 2008. This, together with the
distributions of 41.10 cents per linked unit for the nine months ended 31
May 2008, results in interest distributions for the year of 56.63 cents per
linked unit, an increase of 10.5% on the distributions of 51.25 cents for
the comparable period.
BORROWINGS
Redefine`s borrowings increased by R488.3 million from August 2007. Total
debt of R3.7 billion represents gearing of 35.2%, an increase from 33.9% at
August 2007.
Proactive interest rate management protected against the increases in the
prime interest rate of 2% during the year. The current average all inclusive
interest rate is 10.5% (Aug 2007: 10.0%) and the interest rate is fixed on
71.6% (2007: 76.5%) of borrowings for an average period of 5 years.
Post year end a fixed rate term loan was entered into at 12.35% NACM and an
interest rate swap was concluded for R230 million at a rate of 11.58% NACM
resulting in 86.3% of the total debt fixed for an average of 7 years.
LIQUIDITY
33.1% of the weighted average number of linked units in issue traded during
the year under review.
CAPITAL COMMITMENTS AND CONTINGENCIES
Capital expenditure of R172.1 million has been authorised.
Guarantees issued amount to R104.0 million.
Suretyships, limited to R119.1 million, have been provided relating to BEE
initiatives.
Liabilities of JV`s up to an amount of R30.8 million have been guaranteed.
SEGMENTAL INFORMATION
Contrac- % Contrac- % Net % Net %
tual tual income income
revenue revenue 2008 2007
2008 2007 (R000) (R000)
(R000) (R000)
Property
portfolio
Commercial 288 818 54 274 108 64 233 499 30 209 400 31
Retail 161 590 30 107 245 25 120 310 15 98 588 14
Industrial 88 895 16 48 595 11 79 170 10 35 305 5
539 303 100 429 948 100 432 979 55 343 293 50
Listed securities - - 332 396 42 300 285 44
portfolio
Property trading - - 23 638 3 40 486 6
Total 539 303 100 429 948 100 789 013 100 684 064 100
PROPERTY PORTFOLIO
At 31 August 2008 Redefine`s property portfolio comprised 101 properties
with a total gross lettable area ("GLA") of 858 357m2, valued at R5.8
billion. The property portfolio has been valued by independent external
valuers in terms of Redefine`s policy.
The property portfolio constitutes 56.8% (Aug 2007: 50.5%) of Redefine`s
total non-current assets.
During the year under review, 93 940m2 of vacant space was leased and leases
in respect of 51 036m2 were renewed. Vacancies at 31 August 2008 were 4.8%
(Aug 2007: 2.2%) of GLA. The increased GLA of the portfolio which includes
completed new developments has resulted in additional vacant space. Post 31
August 2008, 11 425m2 has been leased reducing vacancies to 3.4%.
45% of leases by GLA, expire in 2012 and beyond.
DEVELOPMENTS
The development of Festival Town Square, a retail centre with an estimated
cost to be incurred to completion of R157.1 million at an anticipated
forward yield of 9.7% has commenced.
During the year under review Redefine acquired:
Property Location Type GLA Purchase Initial Price
(m2) price yield per m2
(R000) (%) (R)
Paarden Western Cape Commercial 16 203 70 000 7.8 4 184
Eiland1
Dock Road2 Western Cape 51 700 N/A N/A
City Deep Gauteng Industrial 13 400 47 000 8.9 3 507
1. Three contiguous buildings with re-development opportunities.
2. Purchased 50/50 with SA Reit for re-development.
During the year under review Redefine disposed of:
Property Location Type GLA Selling Yield Price Original
(m2) price (%) per m2 cost
(R000) (R) (R000)
Standard Gauteng Retail 4 191 50 000 4.2 1 193 8 335
Bank
Rosebank
Shoprite Western Retail 5 958 20 000 8.4 3 357 11 500
Strand & Cape
Vredenburg
Old Oak Western Retail 2 328 17 000 8.7 7 302 11 600
Shopping Cape
Centre
During the year under review the following developments were completed:
Property Location Type GLA (m2) Cost Cost
(R000) per m2
(R)
Convention Tower Western Cape Commercial 17 223 245 600 14 260
Sable Square Western Cape Retail 8 900 110 400 12 404
Phase 2
Pepkor, Isando Gauteng Industrial 40 000 100 800 2 520
Berg River Park Western Cape Industrial 36 518 76 400 2 092
Heron Place Western Cape Commercial 4 958 60 600 12 223
China City Western Cape Retail 8 276 52 000 6 283
Knowledge Park 3 Western Cape Commercial 3 757 49 700 13 229
CTX Business Western Cape Industrial 9 041 45 000 4 977
Park, Phase 1
Platinum Park 3 Western Cape Industrial 2 215 10 100 4 560
Spearhead Western Cape Industrial 495 3 232 6 529
Business Park 4
131 388 753 832
TRADING
A joint venture ("JV"), has been established between Redefine and Madison
Property Fund Managers Limited in order to redevelop Buchanan Square and
Newmarket Junction into sectional title office units for sale of which 15%
have been sold.
Oasis Luxury Retirement Estate, of which the first phase, including 2
apartment blocks, a community centre and a frail care centre have been
developed, is 67% sold. The frail care centre is fully functional and is
expected to be cash positive during the 2009 financial year.
The development of Upper East Side Phase ll has commenced and is 92% pre-
sold. Redefine is a 25% shareholder.
LISTED SECURITIES PORTFOLIO
Redefine acquired an additional 10.6 million units in CIREF Limited for
R236.9 million (GBP16.0 million). This was financed by a LIBOR (London Inter
Bank Offered Rate) based loan.
Redefine exchanged 18.0 million units in Sycom Property Fund for 7.2 million
units in Hyprop Investments Limited.
BLACK ECONOMIC EMPOWERMENT
On 18 February 2008, Redefine issued 80 million linked units to strategic
and broad-based BEE partners at R6.85 per linked unit, representing a
discount of 7% to the market value. The proceeds from the issue of these
units have been applied to floating debt. A fee is payable by the
beneficiaries of the linked units in respect of the guarantee that Redefine
has provided for the loan to finance a portion of the transaction.
PROSPECTS
The Board anticipates that, subject to no further deterioration in market
conditions, Redefine`s distributions per linked unit for the year ending 31
August 2009 will increase by between 9% and 11% compared to 2008. This
forecast has not been audited or reported on by the company`s auditors.
PAYMENT OF DEBENTURE INTEREST
Unitholders are advised that interest distribution no. 34 in respect of the
period 1 June 2008 to 31 August 2008 of 15.53 cents per linked unit has been
declared.
November 2008
- The last date to trade cum interest Friday 14
- Linked units will trade ex interest Monday 17
- Record date Friday 21
- Payment of interest distribution no. 34 Monday 24
Unitholders may not dematerialise or re-materialise their linked units
between Monday 17 November 2008 and Friday 21 November 2008, both days
inclusive.
Dines Gihwala Brian Azizollahoff
Chairman Chief Executive Officer
Johannesburg
30 October 2008
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: 30/10/2008 13:49:01 Supplied by www.sharenet.co.za
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