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RES - Resilient Property Income Fund Limited - Condensed audited consolidated
financial statements for the year ended 31 December 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 AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31
DECEMBER 2011
Directors` commentary
The distributions for the 2011 financial year increased to 230,71 cents per
linked unit (interim: 109,36 cents; final: 121,35 cents), an increase of 8,91%
over the distributions for the previous financial year. Resilient undertook a
number of transactions which are earnings dilutionary in the short term but that
will support earnings growth in the long term. These include the disposal of
Resilient`s holding in Fortress Income Fund Limited-A units, acquisition of
properties at yields below the cost of funding and the acquisition of additional
units in New Europe Property Investments plc ("Nepi") pursuant to that company`s
rights issue.
The highlights of the year were the successful opening in April 2011 of the 75
000m2 GLA Mall of the North and the November 2011 opening of the 9 190m2 GLA
Tzaneen Lifestyle Centre.
1 PROPERTY ACQUISITIONS
With effect from June 2011, Resilient acquired the remaining 50% interest in The
Grove for R356,4 million based on a forward yield of 8,25%. 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. An additional 20% interest in I`langa Mall
was acquired at a cost of R135,2 million based on a forward yield of 8%
effective from October 2011. Resilient agreed to acquire a 40% interest in a
14,13 ha property in Secunda for the development of the 45 000m2 GLA Secunda
Mall from Sasol Pension Fund.
On 1 December 2011 Resilient acquired the 65 516m2 GLA Boardwalk Shopping Centre
from Capital Property Fund ("Capital") at a forward yield of 8%. The purchase
price of R1 028 million was settled through the issue of 16 211 238 units in
Resilient at a price of R31,71 per linked unit and the balance of R514 million
in cash.
2 COMPLETED DEVELOPMENTS
Mall of the North
The Mall of the North, in which Resilient has a 60% interest, was completed
within budget and opened ahead of schedule on 14 April 2011. This development
achieved a forward yield of 10,2%. The 500m2 extension to the Woolworths store
to accommodate its full range was completed in November 2011. The mall is
trading well and has established itself as the dominant retail centre in Limpopo
Province.
Northam Plaza
The 5 031m2 GLA 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 Totalsports. The Shoprite store was also extended.
Tzaneen Lifestyle Centre
Construction of this development commenced in January 2011 and opened on
schedule and within budget in November 2011. Resilient has a 70% interest in
this development. This first phase has a GLA of 9 190m2 and is anchored by
Checkers and a Food Lovers Market. Initial trading reports are encouraging and a
second phase is currently being evaluated.
3 NEW DEVELOPMENTS AND EXTENSIONS
Burgersfort Mall
The development of a 42 000m2 GLA regional mall has been approved with
completion scheduled for April 2013. Earthworks have been completed. The mall
will be anchored by Shoprite, Game, Edgars and Pick `n Pay and will include the
major national retailers. The development is projected to achieve a 9% yield.
Developers of a competing shopping centre, being developed in the eastern
suburbs of Burgersfort, attempted to delay the development of the mall through
an urgent High Court application. The application was dismissed with costs. The
full matter is still to be heard, however, Resilient has obtained opinion from
senior counsel that the claims are without merit.
Highveld Mall
A 12 000m2 GLA third extension to Highveld Mall to accommodate Game and HiFi
Corporation commenced in September 2011 with completion scheduled for November
2012. Resilient has a 60% interest in Highveld Mall. The extension is expected
to yield 9,2%
Secunda Mall
The development of a regional mall with a GLA of 45 000m2 has been approved.
Resilient has a 40% interest in the property and Sasol Pension Fund and local
BEE consortiums own 40% and 20% respectively. Each co-owner will fund their
respective share of the development. The property is situated adjacent to the
Secunda CBD. An additional 10 000m2 of retail rights have been approved
resulting in total retail rights of 50 000m2. Earthworks have been completed and
construction is anticipated to commence before the end of February 2012. This
development is projected to achieve a 9% yield.
Sterkspruit Plaza
The first phase of this development with a GLA of 9 000m2 will be anchored by
Shoprite. Construction commenced in August 2011 with completion scheduled for
October 2012. 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%.
Tenant demand supports a second phase of this development.
4 FUTURE EXTENSIONS
Significant extensions to meet tenant demand will be undertaken at The Grove,
Mvusuludzo Mall Thohoyandou, Circus Triangle Mthatha, Village Mall Kathu and
Northam Plaza during 2012. The extensions will be yield enhancing.
5 RESILIENT AFRICA
Resilient has agreed in principle to invest up to R500 million in retail
developments in Nigeria in partnership with Standard Bank and Group 5.
6 INVESTMENTS
% of
Number units/ Carrying
of units/ shares value
Investment shares in issue (R`000)
Capital 208 000 000 12,94% 1 830 400
Fortress Income Fund Limited - B 63 000 000 22,04% 318 150
Nepi 19 100 000 18,58% 620 750
2 769 300
7 VACANCIES
Vacancies decreased from 3,1% at December 2010 and 2,8% at June 2011 to 1,9% at
December 2011. The most significant reduction in vacancies occurred at Village
Mall Kathu and The Grove where vacancies were reduced from 6,0% and 6,6% at
December 2010 to the current 0,8% and 1,4% respectively.
8 BORROWINGS
Secured facilities of R850 million from Standard Bank and R268 million from RMB
were accepted during the year.
Resilient`s unsecured DMTN programme has been utilised as follows:
Pricing over
Amount 3-month Jibar
3-month issuance expiring 14 February 2012 R275 million +0,30%
1-year issuance expiring 17 October 2012 R150 million +0,86%
3-year issuance expiring 3 June 2014 R225 million +1,45%
3-year issuance expiring 18 October 2014 R350 million +1,55%
Resilient intends increasing the size of the programme from the current R1
billion to R2 billion.
9 PROSPECTS
The board is confident that growth in distributions of approximately 10% will be
achieved for the 2012 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 Nick Hanekom
Managing director Financial director
Johannesburg
8 February 2012
Consolidated statement of financial position
Audited Audited
Dec 2011 Dec 2010
R`000 R`000
ASSETS
Non-current assets 13 063 400 9 758 917
Investment property 8 759 377 5 764 050
Straight-lining of rental revenue adjustment 122 359 89 598
Investment property under development 346 376 792 810
Investment in associate company - 425 728
Investments 2 769 300 2 216 200
Intangible asset 26 422 26 422
Resilient Unit Purchase Trust loans 420 320 272 303
Loans to employees to acquire Capital units 279 249 9 608
Loans to BEE partners 221 632 97 716
Loans to development partners 118 365 64 482
Current assets 47 068 186 817
Loans to development partners 6 885 95 783
Trade and other receivables 36 357 86 602
Cash and cash equivalents 3 826 4 432
Total assets 13 110 468 9 945 734
EQUITY AND LIABILITIES
Total equity attributable to equity holders 6 573 956 5 216 765
Share capital 2 697 2 471
Share premium 2 490 931 1 904 106
Non-distributable reserves 4 080 328 3 310 188
Retained earnings - -
Total liabilities 6 536 512 4 728 969
Non-current liabilities 4 680 213 3 319 527
Linked debentures 1 294 681 1 186 003
Interest-bearing borrowings 2 690 016 1 603 304
BEE instrument 150 350 118 900
Deferred tax 545 166 411 320
Current liabilities 1 856 299 1 409 442
Trade and other payables 220 905 169 413
Linked debenture interest payable 327 312 274 831
Income tax payable 876 1 663
Interest-bearing borrowings 1 307 206 963 535
Total equity and liabilities 13 110 468 9 945 734
Consolidated statement of comprehensive income
Audited Audited
for the for the
year ended Year ended
Dec 2011 Dec 2010
R`000 R`000
Net rental and related revenue 603 423 403 948
Recoveries and contractual rental revenue 843 738 572 097
Straight-lining of rental revenue adjustment 32 761 15 628
Rental revenue 876 499 587 725
Property operating expenses (273 076) (183 777)
Distributable income from investments 181 283 161 502
Fair value gain on investment property
and investments 933 326 1 196 075
Fair value gain on investment property 568 696 744 611
Adjustment resulting from straight-lining
of rental revenue (32 761) (15 628)
Fair value gain on investments 397 391 467 092
Fair value loss on BEE instrument (31 450) (53 116)
Management fees received from PFM 63 609 32 267
Administrative expenses (71 353) (29 475)
Profit on sale of subsidiaries and joint
ventures - 36 868
Income from associate 13 959 56 493
- distributable 13 959 48 204
- non-distributable - 8 289
Profit before net finance costs 1 692 797 1 804 562
Net finance costs (788 702) (661 116)
Finance income 99 793 70 233
Interest from loans 70 935 69 489
Fair value adjustment on interest rate
derivatives 8 064 -
Interest on linked units issued cum
distribution 20 794 744
Finance costs (888 495) (731 349)
Interest on borrowings (289 089) (211 883)
Capitalised interest 43 396 65 779
Fair value adjustment on interest rate
derivatives (42 491) (61 847)
Interest to linked debenture holders
- interim (272 999) (248 566)
- final (327 312) (274 832)
Profit before income tax expense 904 095 1 143 446
Income tax expense (133 955) (149 587)
Profit for the year attributable to equity
holders 770 140 993 859
Total comprehensive income for the year 770 140 993 859
Basic earnings per share (cents) 296,57 402,24
Basic earnings per linked unit (cents) 527,75 614,07
Diluted earnings per share (cents) 284,72 385,37
Diluted earnings per linked unit (cents) 506,65 588,32
Reconciliation of profit for the year to headline earnings and distributable
income
Audited Audited
for the for the
year ended year ended
Dec 2011 Dec 2010
R`000 R`000
Basic earnings (shares) - profit for the year
attributable to equity holders 770 140 993 859
- interest to linked debenture holders 600 311 523 398
Basic earnings (linked units) 1 370 451 1 517 257
Adjusted for: (451 076) (661 326)
- fair value gain on investment property (535 935) (728 983)
- profit on sale of subsidiaries and joint
ventures - (36 868)
- fair value adjustments on investment
property of associate - (6 437)
- income tax effect 84 859 110 962
Headline earnings (linked units) 919 375 855 931
Adjustment resulting from straight-lining of
rental revenue (32 761) (15 628)
Fair value gain on investments (397 391) (467 092)
Fair value loss on BEE instrument 31 450 53 116
Fair value adjustment on interest rate
derivatives 34 427 61 847
Interest paid by BEE SPV 21 057 21 352
Income received by BEE SPV (24 942) (22 901)
Fair value adjustments on investments of
associate - (1 852)
Income tax effect 49 096 38 625
Distributable income 600 311 523 398
Less: distribution declared (600 311) (523 398)
Income not distributed - -
Headline earnings per share (cents) 122,87 134,58
Headline earnings per linked unit (cents) 354,04 346,41
Diluted headline earnings per share (cents) 117,96 128,94
Diluted headline earnings per linked unit
(cents) 339,89 331,89
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 259 679 640 (2010: 247 084 021) shares/linked units
in issue during the year.
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 270 490 451 (2010: 257 894 832)
shares/linked units in issue during the year.
Consolidated statement of changes in equity
Non-
Share Share distributable Retained
capital premium reserves earnings Total
Audited R`000 R`000 R`000 R`000 R`000
Balance at31 December
2009 2 451 1 863 2 316 319 10 4 182
969 749
Issue of 2 010
000units on8 March
2010 20 40 137 40 157
Total comprehensive
income for the year 993 859 993 859
Transfer to non-
distributablereserves
993 869 (993 -
869)
Balance at
31 December 2010 2 471 1 904 3 310 188 - 5 216
106 765
Issue of units 226 586 825 587 051
- Issue of2 550 000
units on9 March 2011
25 60 062 60 087
- Issue of 3 880 000
units on10 November
2011 39 107 300 107 339
- Issue of 16 211 238
units on1 December
2011 162 419 463 419 625
Total
comprehensiveincome 770 140 770 140
for the year
Transfer to non-
distributable reserves
770 140 (770 -
140)
Balance at 31 December
2011 2 697 2 490 4 080 328 - 6 573
931 956
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.
Abridged consolidated statement of cash flows
Audited Audited
for the for the
year ended year ended
Dec 2011 Dec 2010
R`000 R`000
Cash inflow/(outflow) from operating activities 68 208 (54 739)
Cash outflow from investing activities (1 680 926) (394 581)
Cash inflow from financing activities 1 612 112 443 112
Decrease in cash and cash equivalents (606) (6 208)
Cash and cash equivalents at beginning of year 4 432 10 640
Cash and cash equivalents at end of year 3 826 4 432
Cash and cash equivalents consist of:
Current accounts 3 826 4 432
Notes
1 PREPARATION, ACCOUNTING POLICIES AND AUDIT OPINION
The condensed audited consolidated financial statements have been prepared in
accordance with the measurement and recognition requirements of IFRS, the AC500
standards as issued by the Accounting Practices Board, the information contained
in IAS 34: Interim Financial Reporting, the JSE Listings Requirements, the
requirements of the South African Companies Act and the Collective Investment
Schemes Control Act (Act 45 of 2002). This report was compiled under the
supervision of Nick Hanekom CA(SA), the financial director.
The accounting policies adopted are consistent with those applied in the prior
periods.
The directors are not aware of any matters or circumstances arising subsequent
to 31 December 2011 that require any additional disclosure or adjustment to the
financial statements.
Deloitte & Touche have issued their unmodified opinion on the group financial
statements for the year ended 31 December 2011. These condensed financial
statements have been derived from the group financial statements and are, in all
material respects, consistent with the group financial statements. A copy of
their audit report is available for inspection at the company`s registered
office.
2 SUMMARY OF FINANCIAL PERFORMANCE
Dec 2011 Jun 2011 Dec 2010 Jun 2010
Distribution per
linked unit (cents) 121,35 109,36 111,23 100,60
Units in issue 280 536 070 260 444 832 257 894 832 257 894 832
Property operations
Net asset value* R29,32 R26,80 R26,11 R22,44
Gearing ratio** 28,8% 27,7% 23,6% 23,8%
Units in issue 280 536 070 260 444 832 257 894 832 257 894 832
Consolidated
Net asset value* R29,17 R26,67 R25,91 R22,22
Gearing ratio** 30,5% 29,7% 25,8% 26,4%
Units in issue 269 725 259 249 634 021 247 084 021 247 084 021
*Net asset value includes total equity attributable to equity holders and
linked debentures.
**The gearing ratio is calculated by dividing the total interest-bearing
borrowings by the 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 R150 350 000
(2010: R118 900 000). 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
Dec 2011 R`000 R`000 R`000
Statement of comprehensive income
Fair value loss on BEE instrument (31 450) 31 450 -
Finance costs
- Interest on borrowings (289 089) 21 057 (268 032)
- Interest to linked debenture
holders (600 311) (24 942) (625 253)
Statement of financial position
Current assets
- Trade and other receivables 36 357 (1 353) 35 004
Share capital 2 697 108 2 805
Share premium 2 490 931 142 270 2 633 201
Non-distributable reserves 4 080 328 163 595 4 243 923
Non-current liabilities
- Linked debentures 1 294 681 51 892 1 346 573
- Interest-bearing borrowings
(non-current and current) 3 997 222 (221 739) 3 775 483
BEE instrument 150 350 (150 350) -
Current liabilities
- Trade and other payables 220 905 (248) 220 657
- Linked debenture interest
payable 327 312 13 119 340 431
2.3 The intangible asset relates to the management contract of PFM, the
management company of Capital, and is carried at cost.
3 FACILITIES AND INTEREST RATE DERIVATIVES
Amount Margin
Facility expiry R`million over Jibar
2012 1 500 1,24%
2013 835 1,66%
2014 575 1,51%
2015 - -
2016 1 221 1,63%
2017 - -
2018 53 1,21%
2019 327 1,64%
4 511 1,49%
Amount Swap % of
Interest rate swaps expiry R`million rate borrowings
2012 400 7,82% 10,60%
2013 400 7,22% 10,60%
2014 650 7,42% 17,22%
2015 600 7,71% 15,89%
2016 600 7,42% 15,89%
2017 600 7,80% 15,89%
2018 500 7,54% 13,25%
Hedged borrowings 3 750 7,57% 99,34%
Variable rate borrowings 25 0,66%
Total borrowings* 3 775 8,78%** 100,00%
* Total borrowings comprise the level of external interest-bearing
borrowings, excluding those of BEE SPV.
**Represents the all-in average rate for Resilient on 31 December 2011.
4 LEASE EXPIRY PROFILE (unaudited)
Based on
Based on contractual
rentable rental
Lease expiry area revenue
Vacant 1,9%
December 2012 19,0% 20,1%
December 2013 15,0% 17,8%
December 2014 16,8% 20,3%
December 2015 10,1% 11,2%
December 2016 15,7% 15,9%
>December 2016 21,5% 14,7%
Total 100,0% 100,0%
5 SEGMENTAL ANALYSIS
Dec 2011 Dec 2010
Rental revenue R`000 R`000
Retail 876 499 587 725
Dec 2011 Dec 2010
Profit before net finance costs R`000 R`000
Retail 1 139 358 1 132 931
Corporate 553 439 671 631
Total 1 692 797 1 804 562
6 PAYMENT OF FINAL DISTRIBUTION
The board has approved and notice is hereby given of a final interest
distribution (distribution no 18) of 121,35 cents per linked unit for the six
months ended 31 December 2011.
The last date to trade linked units cum distribution will be Friday, 24 February
2012 and trading will commence ex distribution on Monday, 27 February 2012. The
record date to participate in the distribution will be Friday, 2 March 2012.
Linked unit certificates may not be dematerialised or rematerialised between
Monday, 27 February 2012 and Friday, 2 March 2012, both days inclusive.
Payment of the distribution will be made to linked unitholders on Monday, 5
March 2012.
In respect of dematerialised linked unitholders, the distribution will be
transferred to the Central Securities Depository Participant accounts/broker
accounts on Monday, 5 March 2012. Certificated linked unitholders` distribution
payments will be posted on or about Monday, 5 March 2012.
Directors
JJ Njeke (chairman) Des de Beer* Thembi Chagonda# Jorge da Costa
Andries de Lange* Marthin Greyling Nick Hanekom* Bryan Hopkins
Johann Kriek* David Lewis* Phumelele Msweli# Rory Turner Barry van Wyk
(*executive) (#non-independent)
Company secretary
Rajeshree Sookdeyu
Business address
4th Floor Rivonia Village Rivonia Boulevard Rivonia 2191
Transfer secretaries
Link Market Services South Africa Proprietary Limited
13th Floor Rennie House 19 Ameshoff Street Braamfontein 2001
(PO Box 4844 Johannesburg 2000)
Sponsor
Java Capital
Date: 08/02/2012 16:44:01 Supplied by www.sharenet.co.za
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