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RES - Resilient Property Income Fund Limited - Condensed reviewed consolidated
interim financial statements for the six months ended 30 June 2011
Resilient Property Income Fund Limited
Incorporated in the Republic of South Africa
Reg no 2002/016851/06
Share code RES
ISIN ZAE000043642
("Resilient" or "the group")
CONDENSED REVIEWED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 30 JUNE 2011
DIRECTORS` COMMENTARY
Resilient`s distribution of 109,36 cents for the six months to June 2011 is an
8,71% increase on the 100,60 cents distribution for the prior comparable period.
These results were achieved despite Resilient undertaking a number of
transactions which will enhance growth in distributions in the long term but
which are earnings dilutionary in the short term. These included the disposal of
Resilient`s entire Fortress Income Fund Limited-A holding and increasing its
interests in partially owned properties at yields below its cost of funding.
Resilient`s focus remains to invest in dominant retail centres situated in non-
metropolitan areas with strong anchor tenants and a high percentage of national
retailers. Retail sales in non-metropolitan centres were supported by the 14%
increase in Government`s social spending. Increased mining investment,
particularly in coal, platinum and manganese, had a positive economic impact in
a number of areas in which Resilient owns centres.
The highlight of the period was the successful opening of the 75 000m2 GLA Mall
of the North in which Resilient now has a 60% interest.
PROPERTY ACQUISITIONS
Resilient acquired the remaining 50% interest in The Grove for R356,4 million
based on a forward yield of 8,25% with effect from June 2011. An additional 3%
interest in the Mall of the North was acquired at cost. The interest in Brits
Mall was increased from 80% to 93% at a cost of R48,5 million based on a forward
yield of 8,5%, effective August 2011. Resilient has entered into an agreement to
acquire an additional 20% interest in I`langa Mall at a cost of R135,2 million
based on a forward yield of 8%. This acquisition remains subject to Competition
Commission approval.
Resilient has agreed to acquire a 40% interest in a 14,13 ha property in Secunda
from Sasol Pension Fund. The property has approved retail rights and the board
has approved the development of a 40 000m2 GLA regional mall. The anticipated
yield on this development is 9%. Sasol Pension Fund has retained a 40% interest
in the property and the remaining 20% has been acquired by a BEE consortium.
PROPERTY DEVELOPMENTS AND EXTENSIONS
Checkers Burgersfort
Construction of this 7 000m2 GLA convenience centre, anchored by Checkers, has
been approved. The development is scheduled to commence in October 2011 with
completion in November 2012 at a forecast yield of 9%.
Highveld Mall
A third extension to Highveld Mall to accommodate Game and Wetherleys has been
approved at a forecast yield of 9%. Construction of this 12 000m2 development in
which Resilient has a 60% interest is scheduled to commence in September 2011,
with completion in November 2012.
Mall of the North
The Mall of the North was completed within budget and opened ahead of schedule
on 14 April 2011 at a forward yield of 10,2%. The mall is the largest retail
development in the Limpopo Province. Initial feedback from tenants is positive
and a 500m2 extension to the Woolworths store to accommodate its full range is
currently in progress.
Northam Plaza
The 5 031m2 extension to Northam Plaza was completed within budget at a cost of
R42 million and a yield of 13,1%. Tenants include Truworths, John Craig, Mr
Price, Standard Bank and Totalsport. The Shoprite store was also extended.
Sterkspruit Plaza
The first phase of this retail development with a GLA of 9 000m2 and anchored by
Shoprite is scheduled to commence in August 2011. As only 30% of the site is
being developed, the forecast yield is 8,5%. As subsequent phases will have no
land cost, higher returns will be achieved. Resilient has increased its interest
in this property from 68% to 82%.
Tzaneen Lifestyle Centre
Construction of the first phase of this retail development commenced in January
2011. Despite record rainfall in the area, management remains confident that the
centre will open on schedule in December 2011. This first phase has a GLA of 8
000m2 and is anchored by Checkers and a Food Lovers Market. This development in
which Resilient has a 70% interest, is expected to achieve a yield of 9%.
PROPERTY PIPELINE
Burgersfort Mall
Resilient has secured the required electricity for this development and
construction of a 40 000m2 GLA regional mall is scheduled to commence before the
end of the year.
INVESTMENTS
% of
Number units/ Carrying
of units/ shares value
shares in issue (R`000)
Capital Property Fund ("Capital") 221 800 000 13,80% 1 820 978
Fortress Income Fund Limited - B 63 000 000 27,27% 205 380
New Europe Property Investments
plc ("Nepi") 16 100 000 18,19% 515 200
2 541 558
Resilient`s holding in Nepi is no longer equity accounted and all investments
were accordingly fair valued.
VACANCIES
Vacancies decreased from 3,1% at 31 December 2010 to 2,8% at 30 June 2011.
Vacancies were reduced at Brits Mall, Rivonia Village, The Galleria and Central
Park, Bloemfontein.
BORROWINGS
Facilities of R665 million and R268 million were accepted from Standard Bank and
RMB respectively. Three-year unsecured funding of R225 million was raised
through Resilient`s DMTN programme at a margin of 1,45% over 3-month Jibar.
Funding through the commercial paper programme was increased to R250 million at
a current margin of 42 basis points over 3-month Jibar.
PROSPECTS
The board is confident that growth in distributions of between 8% and 9% will be
achieved for the 2011 financial year. The growth is based on the assumptions
that a stable macro-economic environment will prevail, no major corporate
failures will occur and that tenants will be able to absorb the recovery of
rising utility costs. Budgeted rental income was based on contractual
escalations and market related renewals. This forecast has not been audited or
reviewed by Resilient`s auditors.
By order of the board
Des de Beer
Managing director
Nick Hanekom
Financial director
Johannesburg
10 August 2011
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Reviewed/
Reviewed Audited restated
Jun 2011 Dec 2010 Jun 2010
R`000 R`000 R`000
ASSETS
Non-current assets 10 730 091 9 758 917 7 950 595
Investment property 6 888 688 5 764 050 4 175 683
Straight-lining of rental revenue
adjustment 107 145 89 598 84 792
Investment property under
development 287 213 792 810 751 661
Investment in associate companies - 425 728 734 189
Investments 2 541 558 2 216 200 1 686 378
Intangible asset 26 422 26 422 26 422
Resilient Unit Purchase Trust loans 316 669 255 889 286 433
Loans to employees to acquire
Capital units 297 126 9 608 9 544
Loans to BEE partners 192 729 119 963 194 330
Loans to development partners 72 541 58 649 -
Property, plant and equipment - - 1 163
Current assets 126 525 186 817 540 051
Loans to development partners 63 603 95 783 448 133
Trade and other receivables 51 785 86 602 82 858
Cash and cash equivalents 11 137 4 432 9 060
Total assets 10 856 616 9 945 734 8 490 646
EQUITY AND LIABILITIES
Total equity attributable to equity
holders 5 460 207 5 216 765 4 305 013
Share capital 2 496 2 471 2 471
Share premium 1 964 168 1 904 106 1 904 106
Non-distributable reserves 3 493 543 3 310 188 2 398 426
Retained earnings - - 10
Total liabilities 5 396 409 4 728 969 4 185 633
Non-current liabilities 3 987 141 3 319 527 3 188 502
Linked debentures 1 198 243 1 186 003 1 186 003
Interest-bearing borrowings 2 256 337 1 603 304 1 650 753
BEE instrument 112 306 118 900 83 017
Deferred tax 420 255 411 320 268 729
Current liabilities 1 409 268 1 409 442 997 131
Trade and other payables 165 073 169 413 142 306
Linked debenture interest payable 272 999 274 831 248 566
Income tax payable 818 1 663 12 221
Interest-bearing borrowings 970 378 963 535 594 038
Total equity and liabilities 10 856 616 9 945 734 8 490 646
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Reviewed Audited Reviewed
for the six for the for the six
months year months
ended ended ended
Jun 2011 Dec 2010 Jun 2010
R`000 R`000 R`000
Net rental and related revenue 271 208 403 948 190 025
Recoveries and contractual rental
revenue 375 495 572 097 257 436
Straight-lining of rental revenue
adjustment 17 547 15 628 10 822
Rental revenue 393 042 587 725 268 258
Property operating expenses (121 834) (183 777) (78 233)
Distributable income from
investments 80 328 161 502 73 835
Fair value gain on investment
property and investments 132 276 1 196 075 96 597
Fair value gain on investment
property - 744 611 -
Adjustment resulting from straight-
lining of rental revenue (17 547) (15 628) (10 822)
Fair value gain on investments 149 823 467 092 107 419
Fair value gain/(loss) on BEE
instrument 6 594 (53 116) (17 233)
Management fees received from PFM 28 145 32 267 15 139
Administrative expenses (30 813) (29 475) (16 083)
Profit on sale of subsidiaries and
joint ventures - 36 868 36 868
Income from associates 13 959 56 493 44 653
- distributable 13 959 48 204 36 997
- non-distributable - 8 289 7 656
Profit before net finance costs 501 697 1 804 562 423 801
Net finance costs (309 399) (661 116) (329 042)
Finance income 64 992 70 233 36 004
Interest from loans 29 116 69 489 35 260
Fair value adjustment on interest
rate derivatives 34 830 - -
Interest on linked units issued cum
distribution 1 046 744 744
Finance costs (374 391) (731 349) (365 046)
Interest on borrowings (126 499) (211 883) (104 644)
Capitalised interest 25 107 65 779 28 245
Fair value adjustment on interest
rate derivatives - (61 847) (40 081)
Interest to linked debenture
holders
- interim (272 999) (248 566) (248 566)
- final - (274 832) -
Profit before income tax expense 192 298 1 143 446 94 759
Income tax expense (8 943) (149 587) (12 652)
Profit for the period attributable
to equity holders 183 355 993 859 82 107
Total comprehensive income for the
period 183 355 993 859 82 107
Basic earnings per share (cents) 73,45 402,24 33,23
Basic earnings per linked unit
(cents) 182,81 614,07 133,83
Diluted earnings per share (cents) 70,40 385,37 31,84
Diluted earnings per linked unit
(cents) 175,22 588,32 128,22
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-
Share Share distributable Retained
capital premium reserves earnings Total
Restated R`000 R`000 R`000 R`000 R`000
Balance at
31 December
2009 previously
reported 2 451 1 863 969 2 207 414 10 4 073 844
Change in
accounting
policy 108 905 108 905
Balance at
31 December
2009 restated 2 451 1 863 969 2 316 319 10 4 182 749
Issue of units 20 40 137 40 157
Total
comprehensive
income for the
period 82 107 82 107
Transfer to non-
distributable
reserves
82 107 (82 107) -
Balance at
30 June 2010 2 471 1 904 106 2 398 426 10 4 305 013
Total
comprehensive
income for the
period 911 752 911 752
Transfer to non-
distributable
reserves
911 762 (911 762) -
Balance at
31 December
2010 2 471 1 904 106 3 310 188 - 5 216 765
Issue of
2 550 000 units
on 9 March 2011 25 60 062 60 087
Total
comprehensive
income for the
period 183 355 183 355
Transfer to non-
distributable
reserves
183 355 (183 355) -
Balance at
30 June 2011 2 496 1 964 168 3 493 543 - 5 460 207
Non-distributable reserves comprise those profits and losses that are not
distributable to unitholders and are made up of revaluation adjustments on
investment property, investment property held for sale and investments, the
share of post-acquisition reserves of associates, straight-lining adjustments
and other non-distributable balances.
RECONCILIATION OF PROFIT FOR THE PERIOD TO HEADLINE EARNINGS AND DISTRIBUTABLE
INCOME
Reviewed Audited Reviewed
for the six for the for the six
months year months
ended ended ended
Jun 2011 Dec 2010 Jun 2010
R`000 R`000 R`000
Basic earnings (shares) - profit
for the period attributable to
equity holders 183 355 993 859 82 107
- interest to linked debenture
holders 272 999 523 398 248 566
Basic earnings (linked units) 456 354 1 517 257 330 673
Adjusted for: 29 440 (661 326) (28 211)
- fair value loss/(gain) on
investment property 17 547 (728 983) 10 822
- profit on sale of subsidiaries
and joint ventures - (36 868) (36 868)
- fair value adjustments on
investment property of associates - (6 437) (7 305)
- income tax effect 11 893 110 962 5 140
Headline earnings (linked units) 485 794 855 931 302 462
Adjustment resulting from straight-
lining of rental revenue (17 547) (15 628) (10 822)
Fair value gain on investments (149 823) (467 092) (107 419)
Fair value (gain)/loss on BEE
instrument (6 594) 53 116 17 233
Fair value adjustment on interest
rate derivatives (34 830) 61 847 40 081
Interest paid by BEE SPV 10 772 21 352 10 746
Income received by BEE SPV (11 823) (22 901) (10 876)
Fair value adjustments on
investments of associates - (1 852) (351)
Income tax effect (2 950) 38 625 7 512
Distributable income 272 999 523 398 248 566
Less: distribution declared (272 999) (523 398) (248 566)
Income not distributed - - -
Headline earnings per share (cents) 85,24 134,58 21,81
Headline earnings per linked unit
(cents) 194,60 346,41 122,41
Diluted headline earnings per share
(cents) 81,70 128,94 20,90
Diluted headline earnings per
linked unit (cents) 186,52 331,89 117,28
Basic earnings per share, basic earnings per linked unit, headline
earnings per share and headline earnings per linked unit are based on the
weighted average of 249 634 021 (Dec 2010: 247 084 021; Jun 2010: 247 084
021) shares/linked units in issue during the period.
Diluted earnings per share, diluted earnings per linked unit, diluted
headline earnings per share and diluted headline earnings per linked unit
are based on the weighted average of 260 444 832 (Dec 2010: 257 894 832;
Jun 2010: 257 894 832) shares/linked units in issue during the period.
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOWS
Reviewed Audited Reviewed
for the six for the for the six
months year months
ended ended ended
Jun 2011 Dec 2010 Jun 2010
R`000 R`000 R`000
Cash inflow/(outflow) from
operating
activities 26 023 (54 739) (178 574)
Cash (outflow)/inflow from
investing activities (751 521) (394 581) 55 930
Cash inflow from financing
activities 732 203 443 112 121 064
Increase/(decrease) in cash and
cash equivalents 6 705 (6 208) (1 580)
Cash and cash equivalents at
beginning of period 4 432 10 640 10 640
Cash and cash equivalents at end of
period 11 137 4 432 9 060
Cash and cash equivalents consist
of:
Current accounts 11 137 4 432 9 060
NOTES
1 PREPARATION AND REVIEW OPINION
The condensed reviewed consolidated interim financial statements have been
prepared in accordance with the measurement and recognition requirements of
IFRS, the AC500 standards, the principles of IAS 34: Interim Financial Reporting
and the JSE Listings Requirements.
The accounting policies adopted are consistent with those applied in the prior
periods except for the recognition of deferred tax. In December 2010 the IASB
released amendments to IAS 12 effective from 1 January 2012. These amendments
impact on the rate at which deferred tax is recognised specifically on the fair
value movement of the building component of investment property as it
establishes a presumption that it will be recovered through disposal and hence
will attract deferred tax at the capital gains tax rate. Resilient has elected
the early adoption of these amendments and applied them retrospectively as
required by IAS 8. It is the view of the board that the adoption of this policy
results in more accurate and meaningful information. The early adoption had the
following effect on the June 2010 results: deferred tax balance R108 905 000
decrease.
The directors are not aware of any matters or circumstances arising subsequent
to 30 June 2011 that require any additional disclosure or adjustment to the
interim financial statements.
Deloitte & Touche has reviewed the financial information set out in this report.
The review was conducted in accordance with ISRE 2410: Review of Interim
Financial Information performed by the Independent Auditor of the Entity. Their
unmodified review report is available for inspection at the group`s registered
address.
2 SUMMARY OF FINANCIAL PERFORMANCE
Jun 2011 Dec 2010 Jun 2010 Dec 2009
Distribution per
linked unit (cents) 109,36 111,23 100,60 102,62
Units in issue 260 444 832 257 894 832 257 894 832 255 884 832
Property operations
Net asset value* R26,80 R26,11 R22,44 R22,03
Gearing ratio** 27,7% 23,6% 23,8% 23,7%
Units in issue 260 444 832 257 894 832 257 894 832 255 884 832
Consolidated
Net asset value* R26,67 R25,91 R22,22 R21,87
Gearing ratio** 29,7% 25,8% 26,4% 26,4%
Units in issue 249 634 021 247 084 021 247 084 021 245 074 021
*Net asset value includes total equity attributable to equity holders and
linked debentures.
**The gearing ratio is calculated by dividing total interest-bearing
borrowings by total assets.
2.1 To comply with financial reporting requirements the group will account for
entities that do not form part of its operations, do not operate under its
operating policies and whose businesses, risk profiles and debt levels are not
comparable with its own. Disclosure under "Property operations" excludes Eagle`s
Eye Investments (Proprietary) Limited (BEE SPV).
2.2 On 27 June 2006 10 810 811 linked units were issued to BEE SPV and Resilient
is standing surety for the funding obligations of BEE SPV in acquiring these
units. In terms of IFRS the issue did not take place and the essence of the
transaction was that the BEE shareholders received a right/option to acquire
linked units in Resilient at a future date at a predetermined price. As a
consequence the issue of linked units has been eliminated in the preparation of
these financial statements.
The right/option the BEE shareholders have acquired has a value of R112 306 000
(Dec 2010: R118 900 000; Jun 2010: R83 017 000). The value of this right/option
will be considered on an ongoing basis and changes in its fair value are
accounted for through profit and loss.
The following table indicates the effect of the BEE transaction on the group
financial statements (the column "Property operations" indicates Resilient`s
results had the BEE transaction been accounted for as an issue for value):
Property
Consolidated BEE SPV operations
Jun 2011 R`000 R`000 R`000
Statement of comprehensive income
Fair value gain on BEE instrument 6 594 (6 594) -
Finance costs
- Interest on borrowings (126 499) 10 772 (115 727)
- Interest to linked debenture
holders (272 999) (11 823) (284 822)
Statement of financial position
Current assets
- Trade and other receivables 51 785 (1 262) 50 523
Share capital 2 496 108 2 604
Share premium 1 964 168 142 270 2 106 438
Non-distributable reserves 3 493 543 128 386 3 621 929
Non-current liabilities
- Linked debentures 1 198 243 51 892 1 250 135
- Interest-bearing borrowings
(non-current and current) 3 226 715 (222 258) 3 004 457
BEE instrument 112 306 (112 306) -
Current liabilities
- Trade and other payables 165 073 (1 177) 163 896
- Linked debenture interest payable 272 999 11 823 284 822
3 HEDGED BORROWINGS
Amount Interest % of
Expiry R`million rate borrowings
Interest rate swaps
March 2012 100 7,41% 3,33%
July 2012 100 6,64% 3,33%
September 2012 200 8,61% 6,66%
November 2012 50 8,53% 1,66%
March 2013 100 7,77% 3,33%
June 2013 100 9,51% 3,33%
November 2013 100 8,06% 3,33%
February 2014 100 8,19% 3,33%
March 2014 100 7,44% 3,33%
March 2014 100 8,07% 3,33%
July 2014 100 7,21% 3,33%
August 2014 100 6,84% 3,33%
November 2014 50 8,94% 1,66%
February 2015 50 8,47% 1,66%
March 2015 100 8,29% 3,33%
April 2015 100 6,84% 3,33%
August 2015 100 7,23% 3,33%
October 2015 100 7,07% 3,33%
November 2015 50 8,86% 1,66%
November 2015 100 8,20% 3,33%
February 2016 100 7,84% 3,33%
August 2016 100 7,36% 3,33%
October 2016 100 7,23% 3,33%
October 2016 100 7,14% 3,33%
November 2016 100 8,18% 3,33%
February 2017 100 8,76% 3,33%
March 2017 100 8,26% 3,33%
July 2017 100 7,93% 3,33%
November 2017 100 7,15% 3,33%
December 2017 100 7,62% 3,33%
March 2018 100 8,38% 3,33%
Hedged borrowings 3 000 99,88%
Variable rate borrowings 4 0,12%
Total borrowings* 3 004 9,39% 100,00%
* Total borrowings comprise the level of external interest-bearing
borrowings, excluding those of BEE SPV.
4 LEASE EXPIRY PROFILE
Based on
Based on contractual
rentable rental
Lease expiry area revenue
Vacant 2,8% -
December 2011 11,2% 10,8%
December 2012 12,5% 15,8%
December 2013 13,6% 15,8%
December 2014 17,9% 20,1%
December 2015 8,8% 10,6%
December 2016 13,2% 12,8%
>December 2016 20,0% 14,1%
Total 100,0% 100,0%
5 SEGMENTAL ANALYSIS
Jun 2011 Dec 2010 Jun 2010
Rental revenue R`000 R`000 R`000
Retail 393 042 587 725 268 258
Jun 2011 Dec 2010 Jun 2010
Profit before net finance costs R`000 R`000 R`000
Retail 253 661 1 132 931 179 203
Corporate 248 036 671 631 244 598
Total 501 697 1 804 562 423 801
6 PAYMENT OF INTERIM DISTRIBUTION
The board has approved and notice is hereby given of a cash interim interest
distribution (distribution no 17) of 109,36 cents per linked unit for the six
months ended 30 June 2011.
The last date to trade linked units cum distribution will be Friday,
26 August 2011 and trading will commence ex distribution on Monday, 29 August
2011. The record date to participate in the distribution will be Friday, 2
September 2011.
Linked unit certificates may not be dematerialised or rematerialised between
Monday,29 August 2011 and Friday, 2 September 2011, both days inclusive. Payment
of the distribution will be made to linked unitholders on Monday,5 September
2011. In respect of dematerialised linked unitholders, the distribution will be
transferred to the Central Securities Depository Participant accounts/broker
accounts on Monday, 5 September 2011. Certificated linked unitholders`
distribution payments will be posted on or about Monday, 5 September 2011.
Directors
JJ Njeke (chairman) Des de Beer* Thembi Chagonda Jorge da Costa
(alt: Daniel Rodriques) Andries de Lange* Marthin Greyling
Nick Hanekom* Bryan Hopkins Johann Kriek* David Lewis*
Phumelele Msweli Rory Turner Barry van Wyk
(*executive director)
Company secretary
Rajeshree Sookdeyu
Business address
4th Floor Rivonia Village Rivonia Boulevard Rivonia 2191
Transfer office
Link Market Services South Africa (Proprietary) Limited
13th Floor Rennie House 19 Ameshoff Street Braamfontein 2001
Sponsor
Java Capital
Date: 10/08/2011 17:11:00 Supplied by www.sharenet.co.za
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