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RDF/RDFB01 - Redefine Properties Limited - Unaudited results for the six months

Release Date: 03/05/2012 07:30
Code(s): JSE RDF
Wrap Text

RDF/RDFB01 - Redefine Properties Limited - Unaudited results for the six months ended 29 February 2012 REDEFINE PROPERTIES LIMITED ("Redefine" or "the company" or "the group") Registration number 1999/018591/06 JSE share code: RDF ISIN: ZAE000143178 Bond code: RDFB01 ISIN: ZAG00094228 Unaudited results for the six months ended 29 February 2012 - Interim distribution of 31,5 cents on track to achieve full year forecast - Recurring core income up 6,6% on first half 2011 - Significant progress made in improving the quality of the property portfolio - Presence established in the debt capital market - Agreement concluded to acquire Fountainhead management company - International diversification strengthened by increased group holding in Cromwell Distributable income analysis South African Inter- Total national
R`000 R`000 R`000 Net property income (excluding 933 939 300 993 1 234 932 straight-line rental accrual) Listed securities income 183 083 - 183 083 Trading income 894 - 894 Hotel income - 133 750 133 750 Fee income 12 443 28 477 40 920 Total revenue 1 130 359 463 220 1 593 579 Administration costs (50 970) (53 400) (104 370) Interest in associates (excluding fair value adjustments) 5 484 70 780 76 264 Net finance costs (325 859) (337 069) (662 928) Net distributable profit before 759 014 143 531 902 545 taxation Taxation (253) (9 472) (9 725) Net profit before distributable 758 761 134 059 892 820 adjustments Non-controlling interest (excluding fair value adjustments) 356 (61 542) (61 186) 759 117 72 517 831 634 Distribution adjustments: 8 312 5 607 13 919 Align consolidated foreign profits - 603 603 with anticipated dividends Fee income from offshore subsidiary 8 312 - 8 312 Non-distributable costs included in - 5 004 5 004 income statement Distributable income 767 429 78 124 845 553 Condensed consolidated statements of comprehensive income Restated/ Unaudited Unaudited Audited
29 February 28 February 31 August 2012 2011 2011 R`000 R`000 R`000 Revenue Property portfolio 1 568 778 1 443 862 2 754 905 Contractual rental income 1 659 579 1 395 238 2 763 122 Straight-line rental income accrual (90 801) 48 624 (8 217) Listed securities income 183 083 148 232 342 367 Fee income 40 920 83 394 205 485 Hotel income 133 750 - 157 628 Trading income 894 2 803 36 556 Total revenue 1 927 425 1 678 291 3 496 941 Operating costs (424 647) (318 662) (732 648) Administration costs (104 370) (137 208) (158 787) Net operating income 1 398 408 1 222 421 2 605 506 Changes in fair values of investment (340 694) 146 415 532 305 properties, listed securities and financial instruments Amortisation of intangibles (50 485) (48 271) (96 808) Impairment of financial assets, - - (848 713) property, plant and equipment, and goodwill Equity accounted profits/(losses) 32 707 (76 860) (19 988) Income from operations 1 039 936 1 243 705 2 172 302 Net interest (890 379) (356 032) (937 467) Interest paid (991 961) (439 599) (1 098 871) Interest received 101 582 83 567 161 404 Foreign exchange (loss)/gain (17 179) 79 238 1 649 Income before debenture interest 132 378 966 911 1 236 484 Debenture interest (845 553) (832 131) (1 825 321) (Loss)/profit before taxation (713 175) 134 780 (588 837) Taxation (344 524) 65 955 25 575 (Loss)/profit for the period/year (1 057 699) 200 735 (563 262) Other comprehensive income Exchange differences on translation 205 920 42 157 107 598 of foreign operations Revaluation of PPE (net of deferred - - 4 644 taxation) Other comprehensive income for the 205 920 42 157 112 242 period/year, net of deferred taxation Total comprehensive (loss)/income for (851 779) 242 892 (451 020) the period/year (Loss)/profit attributable to: - Redefine shareholders (511 306) 170 809 (519 311) - Non-controlling interests (546 393) 29 926 (43 951) (Loss)/profit for the period/year (1 057 699) 200 735 (563 262) Total comprehensive (loss)/income attributable to: - Redefine shareholders (375 245) 209 477 (267 349) - Non-controlling interests (476 534) 33 415 (183 671) Total comprehensive (loss)/income for (851 779) 242 892 (451 020) the period/year Condensed consolidated statements of financial position Restated/ Unaudited Unaudited Audited 29 February 28 February 31 August
2012 2011 2011 R`000 R`000 R`000 ASSETS Non-current assets 40 366 985 34 247 728 40 036 545 Investment property 28 736 351 22 531 809 28 847 983 Fair value of investment property 27 661 405 21 526 646 27 775 325 for accounting purposes Straight-line rental income accrual 603 297 750 939 694 099 Properties under development 471 649 254 224 378 559 Listed securities 4 659 369 5 086 701 4 664 346 Goodwill 2 570 534 3 225 473 2 570 534 Intangible assets 1 244 574 1 322 092 1 279 075 Interest in associates and joint 1 833 513 326 950 1 236 726 ventures Loans receivable 1 222 077 1 505 900 1 323 126 Other financial assets 6 303 4 058 12 938 Guarantee fees receivable - 21 563 21 349 Property, plant and equipment (PPE) 94 264 223 182 80 468 Current assets 1 342 919 1 100 111 1 680 758 Properties held-for-trading 29 109 120 763 31 052 Trade and other receivables 640 868 638 440 742 665 Guarantee fees receivable 21 349 20 669 - Loans receivable 51 822 - 51 210 Listed security income 146 931 109 459 195 683 Cash and cash equivalents 452 840 210 780 660 148 Non-current assets held-for-sale 2 066 825 788 323 2 646 183 Total assets 43 776 729 36 136 162 44 363 486 EQUITY AND LIABILITIES Shareholders` interest 15 523 616 16 981 090 17 056 251 Share capital 11 165 049 11 788 301 11 788 301 Reserves 2 639 154 3 446 747 2 996 726 Non-controlling interests (NCI) 1 719 413 1 746 042 2 271 224 Non-current liabilities 20 153 034 17 208 234 22 794 297 Debenture capital 4 659 443 4 831 731 4 831 731 Interest-bearing liabilities 13 465 872 10 894 911 16 166 163 Interest rate swaps 288 673 48 222 358 090 Other financial liabilities 15 170 12 439 11 516 Deferred taxation 1 723 876 1 420 931 1 426 797 Current liabilities 8 012 718 1 946 838 4 425 577 Trade and other payables 874 394 685 222 1 037 126 Interest-bearing liabilities 6 106 020 832 129 2 158 496 Interest rate swaps 134 934 - 49 074 Other financial liabilities 6 323 - - Taxation payable 45 494 - 187 691 Linked unitholders for distribution 845 553 429 487 993 190 Non-current liabilities held-for- 87 361 - 87 361 sale Total equity and liabilities 43 776 729 36 136 162 44 363 486 Net asset value per linked unit (excluding deferred tax and NCI ) (cents) 752,06 800,50 783,95 Net tangible asset value per linked 609,93 631,08 640,54 unit (excluding deferred tax and NCI) (cents) Condensed consolidated statements of cash flow Restated/
Unaudited Unaudited Audited 29 February 28 February 31 August 2012 2011 2011 R`000 R`000 R`000
Cash generated from operations 1 396 932 1 272 974 2 819 012 Net financing costs (627 111) (356 032) (937 467) Linked unit distributions paid (993 189) (858 974) (1 288 461) Payments to non-controlling interests (45 566) (8 432) (47 969) Net cash (outflow)/inflow from (268 934) 49 536 545 115 operating activities Net cash outflow from investing (1 020 000) (1 037 534) (2 781 932) activities Net cash inflow from financing 1 051 618 656 566 2 284 967 activities Net movement in cash and cash (237 316) (331 432) 48 150 equivalents Cash and cash equivalents at 660 148 606 980 606 980 beginning of period/year Translation effects on cash and cash 30 008 (64 768) 5 018 equivalents of foreign operations Cash and cash equivalents at end of 452 840 210 780 660 148 period/year Includes restricted cash of R159 million (31 August 2011: R88 million) Distributable income reconciliation Restated/ Unaudited Unaudited Audited 29 February 28 February 31 August 2012 2011 2011
R`000 R`000 R`000 (Loss)/profit for the period/year (511 306) 170 809 (519 311) attributable to Redefine shareholders Changes in fair values of properties 688 578 (39 051) (280 558) (net of deferred taxation) Changes in fair value of properties 459 067 46 885 (285 141) Deferred taxation 229 511 (85 936) 4 583 Impairment of PPE and goodwill - - 837 245 Capital gains tax 38 347 - 49 000 Headline earnings attributable to 215 619 131 758 86 376 Redefine shareholders Debenture interest 845 553 832 131 1 825 321 Headline earnings attributable to 1 061 172 963 889 1 911 697 linked unitholders Changes in fair values of listed (51 432) (174 851) (311 471) securities and financial instruments (net of deferred taxation) Changes in fair values of listed (118 373) (193 300) (247 164) securities and financial instruments Deferred taxation 66 941 18 449 (64 307) Amortisation of intangibles (net of 50 485 48 271 79 208 deferred taxation) Impairment of financial assets - - 11 468 Alignment of consolidated foreign 603 19 991 2 694 profits with anticipated dividends Straight-line rental income accrual 90 801 (48 624) 8 217 Foreign exchange loss/(gain) 17 179 (79 238) (1 649) Fair value adjustment of associates, (336 571) 60 439 60 915 minorities and interest Fee income from foreign subsidiary 8 312 - - Capital write offs included in 5 004 6 387 6 387 administration costs Swaption - - 10 000 Pre-acquisition income on Hyprop - 35 867 47 855 units acquired in prior period/year Distributable earnings 845 553 832 131 1 825 321 Six months ended 29 February 845 553 832 131 832 131 Six months ended 31 August - - 993 190 Total distributions 845 553 832 131 1 825 321 Actual and weighted number of linked 2 684 295 2 684 295 2 684 295 units in issue (000) * Earnings per linked units (cents) 12,45 37,36 48,65 Headline earnings per linked units 39,53 35,91 71,22 (cents) Distribution per linked units (cents) 31,50 31,00 68,00 Redefine has no dilutionary instruments in issue *Excludes 5 876 766 treasury units Condensed consolidated statements of changes in equity Restated/ Unaudited Unaudited Audited 29 February 28 February 31 August 2012 2011 2011
R`000 R`000 R`000 Restated opening balance 17 056 251 15 801 448 15 801 448 Arrowhead unbundling (623 252) - - Total comprehensive (loss)/income (851 779) 242 892 (451 020) for the period/year Transactions with non-controlling 8 014 83 222 (26 308) interests Effective portion of cash flow - 27 029 - hedges NCI on acquisition of subsidiaries (65 618) 826 499 - Issue of capital instrument - - 158 630 Shares issued to NCI - - 1 573 501 Total share capital and reserves 15 523 616 16 981 090 17 056 251 Condensed segmental analysis Office Retail Indus- Inter- Total trial national
R`000 R`000 R`000 R`000 R`000 Six months ended 29 February 2012 Contractual rental 612 492 456 973 169 292 420 822 1 659 579 income (excluding straight-line rental income accrual) Operating costs (160 277) (111 473) (33 068) (119 829) (424 647) Net property income 452 215 345 500 136 224 300 993 1 234 932 Investment property 9 351 279 6 895 041 2 659 702 9 358 680 28 264 702 portfolio (excluding development properties) Six months ended 28 February 2011 Contractual rental 644 577 431 437 173 815 145 409 1 395 238 income (excluding straight-line rental income accrual) Operating costs (160 192) (101 417) (39 483) (17 570) (318 662) Net property income 484 385 330 020 134 332 127 839 1 076 576 Investment property 8 384 6 941 3 043 3 907 621 22 277 585 portfolio (excluding 578 530 856 development properties) Year ended 31 August 2011 Contractual rental 1 255 922 604 358 888 226 410 2 763 122 income (excluding 220 straight-line rental income accrual) Operating costs (330 429) (218 184) (62 459) (121 576) (732 648) Net property income 924 791 704 420 296 429 104 834 2 030 474 Investment property 8 181 6 578 2 540 11 169 28 469 424 portfolio (excluding 042 164 346 872 development properties) Commentary Profile Redefine is a property loan stock company listed on the Johannesburg Stock Exchange ("JSE") and manages a diversified portfolio of property assets valued in excess of R37 billion. The company`s portfolio comprises 243 properties located in South Africa valued at R20 billion and a R5 billion portfolio of strategic listed property securities. Redefine is internationally diversified by way of 206 offshore properties valued at R12 billion, held through Redefine Properties International Limited ("RIN") and its 70% owned subsidiary Redefine International P.L.C. ("RI"), which are listed on the JSE and the London Stock Exchange respectively. Redefine is committed to being the property owner of choice and the company`s primary objective is to provide sustained and growing income for investors. Underscoring this is Redefine`s pursuit of revenue enhancing opportunities that translate into increasing distributions and the prospect of long-term capital appreciation for unitholders. Financial results Redefine has declared a distribution of 31,50 cents per linked unit for the six months ended 29 February 2012 (28 February 2011: 31,00 cents). On a like-for- like recurring income basis, the distribution is 6,6% ahead of the comparable period, after excluding 2,0 cents from the prior period for the contribution from the properties unbundled with Arrowhead Properties Limited ("Arrowhead"), as well as eliminating non-recurring fee income from the current and prior year`s distributions of 0,7 cents and 0,1 cents per linked unit respectively. On a geographic basis, South Africa generated 91% of distributable income. Contractual rental income comprised 81% of total revenue, income from listed securities 10%, hotel income 7%, and trading and fee income 2%. Operating costs represent 25,6% (31 August 2011: 26,5%) of contractual rental income, mainly due to the full period efficiencies arising from the internalisation of property management. RIN along with Redefine International Fund Managers Limited, the fund manager of RI, contributed 3 cents per linked unit to the distribution for the period. Changes in fair values The group property portfolio was valued internally at 29 February 2012, resulting in a net reduction in value of 1,7% (R459 million). The South African portfolio valuation increased by R260 million, while the offshore portfolio valuation declined by R719 million, arising mainly from the Wichford legacy assets in RI. The investment in South African listed securities increased in value by R11 million. The balance of the changes in fair value mainly relates to the mark to market of the group`s interest rate swaps. South African property profile Portfolio split by tenant type Multi tenanted 70% Single tenanted 30% Total 100% Sectoral spread by GLA Office 37 Retail 31 Industrial 32 Total 100 Geographic spread by GLA Gauteng 60 Western Cape 16 KwaZulu-Natal 12 Other 12 Total 100 South African lease expiry profile Office Retail Industrial 2012 61 311 77 215 52 272 2013 280 313 199 459 283 376 2014 135 889 104 422 119 540 2015 197 626 153 997 115 806 Beyond 2015 245 414 335 091 265 772 Letting activity: During the review period, leases covering 384,436 m2 were renewed at an average rental increase of 4,2%. A further 123,609 m2 was let across the portfolio and together with vacancies from properties disposed of, the total vacancy level, after adjusting for unlettable space, reduced marginally by 0,3% to 6,6%. Vacancies are set out below as a percentage of gross lettable area ("GLA"): February 2012 August 2011 Office 7,8% *8,9% Retail 4,9% 4,8% Industrial 7,0% 6,8% Total 6,6% *6,9% *After adjusting for unlettable space Arrears at the end of February 2012 amounted to R31 million (31 August 2011: R34 million) against which a provision for possible bad debts of R13 million (31 August 2011: R9 million) is held. Property portfolio strategy At 29 February 2012, the South African directly managed property portfolio comprised 243 properties with a total GLA of 3,0 million m valued at R18,9 billion. Redefine has continued to make significant progress in implementing its strategy of improving the quality of the core property portfolio, with the average value per property increasing from R54 million to R78 million. Acquisitions: Five properties were acquired and transferred during the review period for an aggregate purchase price of R1,3 billion with a GLA of 110,147 m at an initial yield of 9,1%. Guarantees totalling R585 million were in issue at the period end for properties in the process of being transferred. Agreements concluded with a number of vendors for the acquisition of properties for an aggregate consideration of R775 million, are subject to Competition Commission approval. Disposals: During the period, excluding the Arrowhead portfolio, 15 properties with a GLA of 98,938 m were sold to various buyers for an aggregate consideration of R520 million at an average yield of 10,5%. Unbundling and restructuring: On 9 December 2011 Arrowhead was listed and unbundled to linked unitholders, facilitating a fast track basis to dispose of 89 properties that no longer fitted with Redefine`s investment criteria. As a result, Redefine`s net asset value per linked unit (excluding deferred tax and NCI) reduced by approximately 30 cents. Fountainhead Property Trust Management Limited ("Fountainhead Manco"): On 29 March 2012 an agreement was concluded to acquire Fountainhead Manco for an aggregate consideration of R660 million. The acquisition is conditional on all required regulatory approvals, including approval from the Registrar of Collective Investment Schemes, the Competition Authorities and the South African Reserve Bank. Following the conclusion of this transaction, Redefine intends making an offer to acquire all of the assets of Fountainhead Property Trust ("Fountainhead") in return for new units in Redefine and existing Hyprop Investments Limited ("Hyprop") units held by Redefine. The Fountainhead acquisition will be conditional on a due diligence investigation and all requisite board, trustee and Redefine and Fountainhead unitholder approvals. Redefine envisages pricing the offer at a level that, on the distribution of the consideration units, would result in a Fountainhead unitholder receiving Hyprop and Redefine units with a value at or about the current `clean` price at which Fountainhead units are trading. The successful conclusion of this transaction will largely complete Redefine`s objective to improve the quality of its property portfolio. Listed securities portfolio The listed securities portfolio comprises: February 2012 August 2011 Value Interest Value Interest held held R`000 % R`000 %
Hyprop Investments Limited 4 182 616 31,2 4 122 626 45,7 Oryx Properties Limited 293 478 26,4 155 731 26,4 Dipula Income Fund Limited 183 275 25,3 385 989 33,8 4 659 369 4 664 346
Dipula Income Fund Limited ("Dipula"): On 21 April 2011 it was announced that Redefine had sold its remaining interest in Dipula to a Black Economic Empowerment consortium. The transaction will take effect after payment of the distribution on the Dipula units for the income distribution period ended 29 February 2012 and is still subject to the securing of the necessary funding for the acquisition. Distribution adjustment: It is Redefine`s policy to distribute its share of income from foreign subsidiaries to the extent of dividends received. Accordingly, an adjustment has been made to the company`s distributable earnings for the period to equate the consolidated results from its foreign subsidiaries for the period to the anticipated dividends. Interest in associates and joint ventures This comprises Cromwell Property Group ("Cromwell"), a listed Australian property trust, together with Redefine`s interest in joint venture property investments of R26 million. During the period under review, the group participated in a capital raise by Cromwell which resulted in Redefine taking a direct 3,9% interest in Cromwell and RI increasing its holding to 23,2%. Funding Excluding RI, as at 29 February 2012, Redefine`s local borrowings of R8 billion represent 32,3% of the value of its local property and listed securities portfolio. Redefine`s average cost of funding is 9,4% and the interest rates are fixed on 72% of borrowings for an average period of five years. RI`s borrowings of R11 billion are all negotiated directly by RI and have no recourse to Redefine`s South African balance sheet. RI is in the process of restructuring its maturing facilities. On 5 September 2011, Redefine made its debut in the local bond market with an issue of R250 million 90 day Commercial Paper under its R5 billion Domestic Medium Term Note Programme. This issue has been rolled twice since the initial issue, achieving an all-in rate of 5,88% on the 2 March 2012 issue. On 27 March 2012 Redefine issued a R500 million three year bond, that was priced at an all- in rate of 7%. Moody`s credit rating: Global long term Baa3 Global short term P-3 National long term A3.za National short term P-2.za Change in accounting estimate - Deferred taxation Redefine has accounted for Capital Gains Tax at the increased rate of 18,67%, which affects disposals after 1 September 2012. The change in tax rate caused deferred taxation to increase by R423 million. Contingencies and commitments At 29 February 2012, Redefine had guarantees and suretyships in respect of its BEE initiatives and joint ventures amounting to R209 million and R31 million respectively. Redefine has commitments outstanding in respect of developments amounting to R520 million and acquisitions (detailed above). Prospects Despite ongoing challenging market conditions, which affect the office properties sector in particular, Redefine`s core property portfolio is anticipated to achieve continued growth. The anticipated distribution for the full year of 64,0 cents per linked unit, is in line with forecast. This forecast has not been reviewed or reported on by the group`s independent external auditors. Debenture interest distribution Unitholders are advised that interest distribution number 46 of 31,5 cents per linked unit has been declared for the six months ended 29 February 2012. The distribution will be payable to Redefine linked unitholders in accordance with the abbreviated timetable set out below: 2012 Last day to trade "cum" interest distribution Friday, 18 May Linked units trade "ex" interest distribution Monday, 21 May Record date Friday, 25 May Payment date Monday, 28 May There may be no dematerialisation or rematerialisation of linked units between Monday, 21 May 2012 and Friday, 25 May 2012, both days inclusive. The next interest distribution will be for the six months ending 31 August 2012 payable during November 2012. Basis of preparation The results for the six months ended 29 February 2012 have not been reviewed or audited by the group`s independent external auditors PKF (Jhb) Inc. These results have been prepared in accordance with International Financial Reporting Standards, IAS 34 - Interim Final Reporting, the AC500 series issued by the Accounting Practices Board, JSE Listings Requirements and the requirements of the South African Companies Act, 2008. The accounting policies adopted in the preparation of these unaudited results are consistent with those applied in the preparation of the financial statements for the year ended 31 August 2011. These financial results have been prepared under the supervision of Andrew Konig (CA)SA, the financial director of the group. By order of the Board Redefine Properties Limited 3 May 2012 Directors: D Gihwala (Chairman), M Wainer* (CEO), L Brehm, M N Flax, G J Heron, M K Khumalo, A J Konig* (FD), H K Mehta, B Nackan, D Perton+, D H Rice*+ (COO) *Executive +British 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 Company secretary: Probity Business Services (Proprietary) Limited www.redefine.co.za Date: 03/05/2012 07:30:01 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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