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RDF - Redefine Income Fund Limited - Audited Results for the Year Ended 31

Release Date: 28/10/2009 14:45
Code(s): RDF
Wrap Text

RDF - Redefine Income Fund Limited - Audited Results for the Year Ended 31 August 2009 REDEFINE INCOME FUND LIMITED ("Redefine" or "the company" or "the group") Registration number 1999/018591/06 JSE share code: RDF ISIN: ZAE000023503 AUDITED RESULTS FOR THE YEAR ENDED 31 AUGUST 2009 - Distribution of 11.75 cents per linked unit for the two months to 31 August 2009 - Total distribution of 56.55 cents per linked unit for the year - Total assets R26 billion - Market capitalisation R19 billion - Gearing 26% CONSOLIDATED INCOME STATEMENT AUDITED AUDITED
31 August 31 August 2009 2008 R`000 R`000 REVENUE Property portfolio 770 139 566 856 Contractual rental income 741 620 539 303 Straight-line rental income accrual 28 519 27 553 Listed security portfolio 308 203 332 396 Property trading income 39 089 23 638 Fee income 14 328 4 091 Total revenue 1 131 759 926 981 Operating costs (130 413) (106 324) Administration costs (92 863) (60 283) BEE transaction costs - (44 000) Net operating income 908 483 716 374 Changes in fair values of properties and listed securities (389 841) (176 538) Interest in associates (3 938) (7 407) Income from operations 514 704 532 429 Interest paid (350 129) (281 796) Interest received 79 079 48 983 Income before debenture interest 243 654 299 616 Debenture interest (711 354) (495 157) Loss before taxation (467 700) (195 541) Taxation 176 949 43 282 Loss for the year (290 751) (152 259) Attributable to: Redefine shareholders (288 104) (157 864) Minorities (2 647) 5 605 (290 751) (152 259) Reconciliation of loss, headline loss and distributable earnings Loss for the year attributable to Redefine shareholders (288 104) (157 864) Changes in fair values of properties (net of deferred taxation) 205 028 (175 776) Changes in fair value of properties 380 619 (228 143) Deferred taxation (175 591) 52 367 Capital gains taxation - 1 197 Headline loss attributable to shareholders (83 076) (332 443) Debenture interest 711 354 495 157 Headline earnings attributable to linked unitholders 628 278 162 714 Changes in fair values of listed securities and financial instruments (net of deferred taxation) 7 864 335 261 Changes in fair values of listed securities and financial instruments 9 222 404 681 Deferred taxation (1 358) (69 420) Deferred taxation rate change - (27 426) Straight-line rental income accrual (28 519) (27 553) Foreign exchange gain (7 244) (1 681) Fair value adjustment of associates and minorities (9 181) 9 842 Impairment of loans receivable 14 930 - July income from ApexHi and Madison 105 226 - BEE transaction costs - 44 000 Distributable earnings 711 354 495 157 Quarter ended 30 November 116 111 108 150 Quarter ended 28 February 123 256 123 256 Four months ended 30 June 2009 (2008: quarter ended 31 May) 160 769 125 043 Two months ended 31 August 2009 (2008: quarter ended 31 August) 311 218 138 708 Total distributions 711 354 495 157 Actual number of linked units in issue (`000) 2 648 662* 893 161* Weighted number of linked units in issue (`000) 1 042 258* 856 002* Earnings per linked unit (cents) 40.61 39.40 Headline earnings per linked unit (cents) 60.31 19.01 Distribution per linked unit (cents) 56.55 56.63 *Excludes 5 876 770 treasury units. CONSOLIDATED CASH FLOW STATEMENT AUDITED AUDITED
31 August 31 August 2009 2008 R`000 R`000 Net cash outflow from operating activities Cash generated from operations 1 034 422 680 727 Net financing costs (271 050) (234 494) Linked unit distributions paid (1 002 916) (475 542) Payments to minorities (280) - Taxation paid - (48 761) Net cash outflow from operating activities (239 824) (78 070) Net cash inflow/(outflow) from investing activities 480 928 (856 072) Net cash (outflow)/inflow from financing activities (288 145) 969 708 Net movement in cash and cash equivalents (47 041) 35 566 Cash and cash equivalents at the beginning of year 158 195 122 629 Cash and cash equivalents at end of year 111 154 158 195 SEGMENTAL ANALYSIS Office Retail R`000 R`000
Year ended 31 August 2009 Revenue (excluding straight-line rental income accrual) 363 556 222 502 Straight-line rental accrual 8 051 30 163 Revenue 371 607 252 665 Operating costs (68 053) (38 465) Net property income* 303 554 214 200 Non-current assets - Investment property 8 066 451 7 535 407 Year ended 31 August 2008 Revenue (excluding straight-line rental income accrual) 288 818 161 590 Straight-line rental accrual (3 912) 14 053 Revenue 284 906 175 643 Operating costs (55 319) (41 280) Net property income 229 587 134 363 Non-current assets - Investment property 2 933 700 1 595 128 Industrial Total R`000 R`000
Year ended 31 August 2009 Revenue (excluding straight-line rental income accrual) 155 562 741 620 Straight-line rental accrual (9 695) 28 519 Revenue 145 867 770 139 Operating costs (23 895) (130 413) Net property income* 121 972 639 726 Non-current assets - Investment property 2 632 918 18 234 776 Year ended 31 August 2008 Revenue (excluding straight-line rental income accrual) 88 895 539 303 Straight-line rental accrual 17 412 27 553 Revenue 106 307 566 856 Operating costs (9 725) (106 324) Net property income 96 582 460 532 Non-current assets - Investment property 1 235 700 5 764 528 *Includes ApexHi net property income for August 2009 only. CONSOLIDATED BALANCE SHEET AUDITED AUDITED 31 August 31 August 2009 2008 R`000 R`000
ASSETS Non-current assets 25 129 646 10 065 443 Investment property 18 234 776 5 896 688 Fair value of property portfolio for accounting purposes 17 555 250 5 538 362 Straight-line rental income accrual 546 475 226 166 Property under development 133 051 132 160 Listed securities portfolio 2 807 448 3 906 307 Goodwill and intangibles 3 258 326 - Interest in associates 201 387 140 227 Loans receivable 560 600 65 248 Interest rate swaps - 6 514 Guarantees fee receivable 36 040 19 865 Property, plant and equipment 31 069 30 594 Current assets 640 129 634 381 Properties held for trading 186 908 197 265 Listed securities held for trading 9 316 105 385 Trade and other receivables 211 996 64 637 Guarantee fees receivable 20 127 - Listed security income 100 628 108 899 Cash and cash equivalents 111 154 158 195 Non-current assets held for sale 173 200 17 585 Total assets 25 942 975 10 717 409 EQUITY AND LIABILITIES Equity 13 200 268 4 404 397 Share capital and premium 11 602 835 2 088 943 Reserves 1 594 332 2 309 748 Capital and reserves attributable to equity holders 13 197 167 4 398 691 Minority interest 3 101 5 706 Non-current liabilities 12 036 910 5 972 087 Debenture capital 4 767 591 1 607 689 Interest-bearing liabilities 5 460 099 3 572 250 Interest rate swaps 46 210 16 823 Financial guarantee contracts 9 838 15 774 Deferred taxation 1 753 172 759 551 Current liabilities 705 797 340 925 Trade and other payables 374 271 95 773 Interest-bearing liabilities 20 308 106 444 Linked unitholders for distribution 311 218 138 708 Total equity and liabilities 25 942 975 10 717 409 The group`s share in associate`s post-acquisition reserves 12 757 16 695 Net asset value per linked unit (excluding deferred taxation) (cents) 744.57 758.17 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY AUDITED AUDITED 31 August 31 August
2009 2008 R`000 R`000 Balance at beginning of year 4 404 397 4 107 996 Issue of shares 9 514 815 448 000 Issue expenses written off (923) (1 272) Loss for the year attributable to Redefine shareholders (290 751) (152 259) Effect of acquiring controlling interest in ApexHi (427 054) - Revaluation of property, plant and equipment (net of deferred taxation) 549 1 831 Foreign currency translation reserve (807) - Transactions with minorities 42 101 Total equity 13 200 268 4 404 397 Basis of preparation - The annual financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), JSE Limited Listings Requirements and the requirements of the South African Companies Act. This report has been prepared in terms of IAS 34 - "Interim Financial Reporting". The accounting policies used are consistent with those applied in the annual financial statements for the year ended 31 August 2008. The group previously provided deferred taxation on the fair value adjustment of investment properties at the income taxation rate. In the current year, deferred taxation has been provided on the fair value adjustment of the land and building portions at the capital gains and income taxation rates, respectively. As this is a change in accounting estimate, the cumulative reduction to deferred taxation in the current year amounted to R96.5 million. Audit opinion - The independent auditors, PKF (Jhb) Inc, have audited these results. Their unqualified opinion is available for inspection at the company`s registered office. COMMENTARY Introduction Following the merger of Redefine with ApexHi Properties Limited ("ApexHi") and Madison Property Fund Managers Limited ("Madison"), Redefine is one of the largest listed South African property companies with a diversified portfolio comprising 403 properties valued at R18.2 billion and a R2.8 billion portfolio of South African and international listed investments. Redefine`s standing in the property sector is reflected by its inclusion post-merger in the Global Property Research (GPR) 250 Index and the Mid Cap segment of the MSCI Global Standard Index. Redefine is internally managed by a proven team of entrepreneurial and experienced property and financial professionals who are committed to achieving sustained growth in distributions for unitholders. Financial results Redefine has declared a distribution of 11.75 cents per linked unit for the two months ended 31 August 2009. The distribution for this period represents the consolidated earnings of Redefine, incorporating ApexHi and Madison. On 30 July 2009, Redefine unitholders were advised that all conditions for the merger between Redefine, ApexHi and Madison had been fulfilled. In terms of the scheme, the effective date of the merger was 1 July 2009. However, as all conditions precedent were only fulfilled on 30 July 2009, income earned by ApexHi and Madison for July 2009 has not been consolidated. Redefine has accounted for this income, amounting to R105 million, by reducing the cost of its investments in ApexHi and Madison and has included the income in its final distribution for the year ended 31 August 2009. The results of ApexHi and Madison have been consolidated with effect from 1 August 2009 as this is the date of the business combination. The revised listing particulars issued in March 2009 ("RLP") forecast a total distribution of 62.21 cents per linked unit for the year to 31 August 2009. This comprised a distribution of 50.50 cents for the 10 months to 30 June 2009 for Redefine pre-merger, and 11.71 cents per linked unit for the two months to 31 August 2009 for Redefine post- merger. The total of 44.80 cents distributed for the 10 months ended 30 June 2009 was lower than the forecast of 50.50 cents, primarily due to reduced distributions from the listed portfolio and lower profits from property trading. The distribution of 11.75 cents per linked unit for the two months ended 31 August 2009 is marginally higher than the forecast of 11.71 cents and, together with the distribution of 44.80 cents for the 10 months to 30 June 2009, results in a total distribution of 56.55 cents per linked unit for the year ended 31 August 2009, a marginal decrease on the total distribution of 56.63 cents for the previous year. Changes in fair values The ApexHi property portfolio was valued on 31 July 2009 and the resulting increase in value of R820 million was accounted for pre-acquisition. The year-end revaluation of investment properties resulted in a decrease in valuation of R380 million and R10 million relates to changes in fair value of listed securities and interest rate swaps. Listed securities portfolio The listed securities portfolio valued at R2.8 billion constituted 13.3% of Redefine`s investment in property and listed securities at 31 August 2009. The listed securities portfolio in 2008 included Redefine`s interest in ApexHi which was eliminated as a result of the merger. Redefine increased its strategic stake in Hyprop Investments Limited ("Hyprop") to 33.3% during the year under review and owns 26.4% of Oryx Properties Limited, listed in Namibia and 3.2% of Sycom Property Fund. Redefine`s offshore listed investments comprise 28.6% of Ciref Plc and 10.6% of Wichford Plc. Subsequent to year-end, the stake in Wichford Plc was increased to 19.2% at a cost of R197.6 million. Listed securities held for trading comprise units in SA Corporate Real Estate Fund which were disposed of subsequent to year-end. Agreement with Hyprop Hyprop`s asset and property management agreement with Madison expires on 31 December 2009. Agreement has been reached in terms of which Redefine will provide consultancy services to Hyprop for an initial period of 18 months at a fee of R1.5 million per month. The agreement is subject to the approval of Hyprop unitholders. Property portfolio At 31 August 2009, the property portfolio comprised 403 properties with a total gross lettable area ("GLA") of 3.6 million m2 valued at R18.2 billion. The substantial increase in the size of the portfolio is a consequence of the merger with ApexHi. All of the properties were valued in July and August 2009. The major portion of the portfolio was valued by independent external valuers and properties, constituting 9% of the portfolio, with a value of less than R20 million each were valued by the directors. SEE PRESS RELEASE FOR GRAPHS At 31 August 2009 8.5% of the total GLA was vacant, made up of office 10.8%, industrial 7.2% and retail 6.9%. Developments At 31 August 2009, Redefine had five projects at various stages of development with an estimated cost to completion of R205 million and land valued at R180 million for future development. Trading Redefine`s trading portfolio consists of 13 300 m2 of commercial sectional title space to be sold in Buchanan, an industrial property called Newmarket Junction and a 50% joint venture interest in Oasis retirement village which has 46 unsold units. There has been an increase in interest in recent months from potential purchasers in Buchanan and Oasis. An agreement has been concluded for the disposal of Newmarket Junction which is subject to conditions which must be fulfilled by no later than 30 November 2009. Associates Redefine`s interest in associates consists of 34% of Corovest Fund Managers Limited ("Corovest"), the asset manager of Ciref Plc and Wichford Plc and 49% in each of two Enterprise Development Initiatives, Dipula Property Investment Trust and Mergence Africa Property Investment Trust. Borrowings At year-end, borrowings of R5.5 billion represented 26% of the value of the property and listed securities portfolios. The current all inclusive interest rate is 9.3% and the interest rates are fixed on 87.7% of borrowings for an average period of six years. Contingencies At year-end, Redefine had the following contingencies: - guarantees for R200 million and suretyships of R119 million for loans to BEE entities; - guarantees for liabilities of joint ventures limited to R30.8 million; and - guarantee to a vendor of Corovest to a maximum of GBP2.68 million. Business combinations On 1 August 2009, the company acquired all of the A, B and C linked units in ApexHi it did not already own and all of the linked units in Madison. The acquired businesses contributed revenues of R145.2 million and net profit after tax of R162.2 million, including the effect of fair value adjustments, to the group for the period 1 August to 31 August 2009. These amounts have been calculated using the group`s accounting policies together with consequential tax effects. If the acquisition had occurred on 1 September 2008, the contribution to group revenue and net profit after tax would have been R1.77 billion and R691 million, respectively. R`000 Purchase consideration: - Cash paid - - Fair value of linked units issued 12 674 716 - Direct costs relating to the acquisition 24 477 Total purchase consideration 12 699 193 The fair value of linked units issued was based on the published linked unit price of Redefine on 14 August 2009, the day prior to that on which the new linked units commenced trading on the JSE Limited. The carrying amount of the assets and liabilities of ApexHi and Madison at 1 August 2009 were as follows: R`000
Investment properties 12 675 038 Cash and cash equivalents (net of costs of acquisition) 794 562 Listed securities portfolio 148 224 Investment in associate 62 657 Intangibles 11 863 Trade and other receivables 702 383 Deferred taxation (1 243 355) Interest-bearing liabilities (2 119 261) Trade and other payables (742 971) Acquirees` carrying amount at acquisition 10 289 140 Goodwill 3 248 835 13 537 975
Cost of ApexHi linked units already owned by Redefine (863 259) Purchase consideration settled by issue of linked units 12 674 716 The business combination has been accounted for using provisional figures in terms of IFRS 3 - "Business Combinations". The excess of the purchase price over the acquirees` net assets has been reflected as goodwill. A detailed assessment of the assets, liabilities and contingent liabilities acquired will be completed during the 2010 financial year and the required adjustments will be processed. It is expected that the main adjustments will relate to intangible assets acquired and the corresponding deferred taxation effects. Linked units and liquidity With effect from 7 August 2009, Redefine issued 1.755 billion linked units to fund the acquisition of ApexHi and Madison which increased the number of linked units in issue to 2.654 billion units of which 333.8 million were traded on the JSE Limited in August 2009. In total, 717.8 million linked units traded during the year under review, equivalent to 68% of the weighted number of linked units in issue. Prospects The management of Redefine, ApexHi and Madison has been successfully integrated which will result in efficiencies and synergies. The property management model is being re-evaluated which could result in additional economies. Savings in property management and administrative expenses and in interest on borrowings may take longer to realise than was originally anticipated and, together with the effects of the global economic recession, the distribution per linked unit for the year ending 31 August 2010 is expected to be below the forecast of 74.67 cents contained in the RLP. The board anticipates that the total distribution for the year ending 31 August 2010 will be between 68 cents and 71 cents per linked unit, an increase of between 20% and 25% on the distribution for 2009. This forecast has not been reviewed or reported on by the group`s auditors. Interest distribution Unitholders are advised that interest distribution number 38 of 11.75 cents per linked unit has been declared for the two months ended 31 August 2009. The distribution will be payable to Redefine linked unitholders in accordance with the abbreviated timetable set out below: 2009 Last day to trade "cum" interest distribution Friday, 13 November Linked units "ex" interest distribution Monday, 16 November Record date Friday, 20 November Payment date Monday, 23 November There may be no dematerialisation or rematerialisation of linked units between Monday, 16 November 2009 and Friday, 20 November 2009, both days inclusive. On behalf of the board D Gihwala W E Cesman Chairman Joint CEO 28 October 2009 REDEFINE INCOME FUND LIMITED ("Redefine" or "the company" or "the group") Registration number 1999/018591/06 JSE share code: RDF ISIN: ZAE000023503 Registered office: 3rd Floor, Redefine Place, 2 Arnold Road, Rosebank, 2196 (PO Box 1731, Parklands, 2121) Transfer secretaries: Computershare Investor Services (Proprietary) Limited Sponsor: Java Capital (Proprietary) Limited Company secretary: Probity Business Services (Proprietary) Limited Directors: D Gihwala (Chairman), W E Cesman* (Joint CEO), M Wainer* (Joint CEO), B Azizollahoff*#, J A Finn*, M N Flax*, G J Heron, G G L Leissner, H K Mehta, M K Khumalo, B Nackan, D Perton #, D H Rice*# *Executive #British Website: www.redefine.co.za Date: 28/10/2009 14:45:25 Supplied by www.sharenet.co.za Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited (`JSE`). The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on, information disseminated through SENS.

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