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ASCENSION PROPERTIES LIMITED - Reviewed Provisional Results for the financial period ended 30 JUNE 2012

Release Date: 07/09/2012 15:25
Code(s): AIA AIB     PDF:  
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Reviewed Provisional Results for the financial period ended 30 JUNE 2012

ASCENSION PROPERTIES LIMITED
(formerly Grey Jade Trade and Invest 85 (Proprietary) Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2006/026141/06)
A-linked units: JSE code: AIA      ISIN: ZAE000161881
B-linked units: JSE code: AIB      ISIN: ZAE000161899
("Ascension" or "the company")

Reviewed provisional results for the financial period ended 30 June 2012

- Exceeded accrued distribution   - Total assets of R1.236 billion       - Anticipated additional acquisitive growth to
  forecast on listing               (including assets yet to transfer)     exceed R1 billion next 12 months

Reviewed provisional consolidated statement
of comprehensive income
for the six months ended 30 June 2012
                                                            Reviewed             Unaudited                Audited
                                                             30 June               30 June            31 December
                                                                2012                  2011                   2011
                                                            6 months              6 months              12 months
                                                               R000                 R000                  R000
Revenue                                                       40 054                23 509                 54 497
  Contractual rentals and tenant recoveries                   34 738                21 292                 49 227
  Straight-line of lease income adjustment                     5 316                 2 217                  5 270
Property operating expenses                                  (14 744)               (8 670)               (21 578)
Net property and related income                               25 310                14 839                 32 919
Sundry income                                                     83                                           3
Asset management fees                                         (1 619)                                          
Overhead expenses                                               (986)               (3 414)                (5 920)
Operating profit                                              22 788                11 425                 27 002
Fair value adjustments                                        51 053                                      44 152
  Fair value adjustment due to change in
  straight-lining of lease provision                          (5 316)                                     (5 270)
  Fair value adjustment due to change in
  amortisation of upfront lease costs                           (396)                                          
  Fair value adjustment due to change in
  fair value of investment properties                         56 765                                      49 422
Listing expenses                                             (11 395)                                          
Participation right                                                                (5 458)               (10 917)
Finance income                                                   983                   256                    453
Amortisation of debenture discount                               (38)                                          
Finance costs                                                (10 198)              (25 083)               (34 362)
  Interest on loans and amortised
  borrowing costs                                            (12 042)              (25 083)               (35 432)
  Capitalised interest on developments                         1 844                                       1 070
Net profit/(loss) before debenture interest                   53 193               (18 860)                26 328
Debenture interest                                            (8 368)                                          
 Interest on A-debentures                                     (1 383)                                          
 Interest on B-debentures                                     (6 985)                                          
Net profit/(loss) before tax for the period                   44 825                (18 860)               26 328
Income tax expense                                           (14 424)                                     (5 538)
  Deferred taxation                                          (14 424)                                     (5 538)
Net profit/(loss) after tax for the period                    30 401                (18 860)               20 790
Other comprehensive income                                                                                    
Total comprehensive income/(loss) for
the period                                                    30 401                (18 860)               20 790
Reconciliation between earnings, headline
earnings and distributable earnings
Net profit/(loss) for the period                              30 401                (18 860)               20 790
Adjusted for:
Debenture interest                                             8 368                                           
Earnings/(Loss)                                               38 769                (18 860)               20 790
Adjusted for:
Amortisation of discount on debentures                            38                                           
Fair value gain on revaluation of investment
properties (net of deferred taxation)                        (36 629)                                    (43 884)
Headline earnings/(loss)                                       2 178                (18 860)              (23 094)
Adjusted for:
Listing expenses (net of taxation)                            11 395                      -                      
Straight-line of lease income adjustment
(net of taxation)                                             (5 316)                (2 217)               (5 270)
Amortisation of bond raising fees
(net of taxation)                                                111                                           
Distributable earnings (linked units)                          8 368                (21 077)              (28 364)
Basic and fully diluted earnings per share
(cents)                                                        83.81                 Note 2                Note 1
Basic and fully diluted headline loss per
share (cents)                                                 (17.07)                Note 2                Note 1
Basic and fully diluted earnings per
A-linked unit (cents)                                         102.84                    N/A                   N/A
Basic and fully diluted earnings per
B-linked unit (cents)                                         107.89                    N/A                   N/A
Headline and fully diluted headline
earnings per A-linked unit (cents)                              1.96                    N/A                   N/A
Headline and fully diluted headline
earnings per B-linked unit (cents)                              7.01                    N/A                   N/A
Distribution per A-and B-linked units
Forecast distribution per A-linked unit as per
pre-listing statement (30 days to 30 June
2012) (cents)                                                   3.12                    N/A                   N/A
Adjusted forecast distribution per A-linked
unit with listing date of 11 June (20 days to
30 June 2012) (cents)                                           2.08                    N/A                   N/A
Actual accrued distribution per A-linked
unit (cents)                                                    2.08                    N/A                   N/A
Forecast distribution per B-linked unit as per
the pre-listing statement (cents)                               0.48                    N/A                   N/A
Actual accrued distribution per B-linked  
unit (cents)                                                    2.63                    N/A                   N/A
Number of A-linked units as at
30 June 2012                                              66 500 000                    N/A                   N/A
Number of B-linked units as at
30 June 2012                                             265 387 231                    N/A                   N/A
Weighted average number of A-linked units
in issue                                                   7 267 760                    N/A                   N/A
Weighted average number of B-linked units
in issue                                                  29 004 069                    N/A                   N/A

Note 1: During the period to 31 December 2011 the company had 100 B shares in issue and there were no linked
        units in issue. The basic and fully diluted earnings per share in the prior period was R207 789 and the
        headline and fully diluted headline loss per share was R283 643.

Note 2: During the six months to 30 June 2011 the company had 100 B shares and no linked units in issue. The
        basic and fully diluted loss per share and basic and fully diluted headline loss per share for the comparative
        six months to 30 June 2011 was R188 600.

Reviewed provisional consolidated statement of financial position
at 30 June 2012
                                                                Reviewed        Audited
                                                                 30 June    31 December
                                                                    2012           2011
                                                                   R000          R000
ASSETS
Non-current assets                                               598 530        388 248
  Investment properties                                          518 277        339 988
  Straight-line of lease income adjustment                        18 827         13 512
  Unamortised upfront lease costs                                    396              
  Fair value of investment properties                            537 500        353 500
  Properties under development                                    60 917         34 608
  Property, plant and equipment                                      113            140
Current assets                                                   213 451         36 511
  Trade and other receivables                                     13 910         10 438
  Cash and cash equivalents                                      199 541         26 073
Investment property held for sale                                  8 000          8 000
Total assets                                                     819 981        432 759
EQUITY AND LIABILITIES
Shareholders interest                                           208 363         71 512
  Stated capital                                                 106 451              
  Retained income                                                101 912         71 512
Non-current liabilities  Debentures                             380 823              
Linked unitholders' interest                                     589 186         71 512
Other non-current liabilities                                    213 760         17 068
  Interest bearing liabilities                                   182 268              
  Deferred taxation                                               31 492         17 068
Current liabilities                                               17 035        344 179
  Loans from shareholders                                                      117 010
  Interest-bearing liabilities                                                 217 615
  Other financial liabilities                                         23             23
  Trade and other payables                                         8 644          9 531
  Linked unitholders accrued interest                              8 368              
Total equity and liabilities                                     819 981        432 759
TNAV and NAV per A-linked unit                                     396.6            N/A
TNAV and NAV per B-linked unit                                     125.3            N/A
TNAV and NAV per A-linked unit (excluding deferred taxation)       396.6            N/A
TNAV and NAV per B-linked unit (excluding deferred taxation)       137.1            N/A

Reviewed provisional consolidated statement of changes
in equity
for the six months ended 30 June 2012
                                             Stated   Retained      Total
                                            capital     income     equity
                                              R000      R000      R000
Balance at 31 December 2010                            50 721     50 721
Total comprehensive income for the year                20 790     20 790
Balance at 31 December 2011 (audited)                  71 511     71 511
Issue of linked units                       106 451              106 451
Total comprehensive income for the period              30 401     30 401
Balance at 30 June 2012 (reviewed)          106 451    101 912    208 363

Reviewed provisional consolidated statement of cash flows
for the six months ended 30 June 2012
                                                              Reviewed       Audited
                                                               30 June   31 December
                                                                  2012          2011
                                                              6 months     12 months
                                                                 R000         R000
Cash flow from operating activities
Cash generated from operations                                  13 138        11 077
Finance income                                                     983           453
Finance costs                                                  (10 236)      (34 362)
Net cash inflow/(outflow) from operating activities              3 885       (22 832)
Cash flow from investing activities
Purchase of investment properties and cost of improvements    (154 296)      (53 146)
Purchase of property, plant and equipment                                       (60)
Net cash outflow from investing activities                    (154 296)      (53 206)
Cash flow from financing activities
Proceeds on issue of linked units                              359 226              
Net (repayment of)/proceed from interest-bearing loans         (35 347)        27 200
Proceeds from shareholder loans                                               68 305
Net cash inflow from financing activities                      323 879         95 505
Net increase in cash and cash equivalents for the period       173 468         19 467
Cash and cash equivalents at the beginning of the period        26 073          6 606
Cash and cash equivalents at the end of the period             199 541         26 073

Notes:

1.   Basis of preparation, accounting policies and review opinion
     The reviewed consolidated provisional results of Ascension have been prepared in accordance with International
     Financial Reporting Standards ("IFRS") including IAS 34: Interim Financial Reporting, the AC 500 standards as
     issued by the Accounting Practices Board or its successor, the South African Companies Act, 2008 and in
     compliance with the Listings Requirements of the JSE Limited.

     This report has been compiled under the supervision of Henry Dednam CA(SA), the Financial Director of
     Ascension.

     The accounting policies are consistent with those applied in the prior period.
     Grant Thornton has reviewed the financial information set out in this report. Their unmodified review report is
     available for inspection at the registered offices of Ascension.

2.   Property portfolio  as at 30 June 2012 (excluding properties under development, investment property
     held for sale and properties not yet transferred)
     2.1 Property valuation

                                                                         Valuation
                                                         GLA (m2)    (R000)       R/m2
    Gauteng                                               25 606    275 800       10 771
    Western Cape                                          36 138    261 700        7 242
    Total                                                 61 744    537 500        8 705
2.2 Lease expiry profile (GLA)
                                                OFFICE    RETAIL      OTHER        TOTAL
    Vacant                                       5.70%    16.90%      0.00%        6.60%
    Expired leases rolled over                   6.90%     0.00%      0.00%        6.30%
    June 2013                                   23.80%    47.80%      0.00%       25.70%
    June 2014                                   17.50%    19.30%      0.00%       17.60%
    June 2015                                    6.30%     9.20%      0.00%        6.50%
    June 2016                                    2.10%     6.80%      0.00%        2.50%
    June 2017                                    2.10%     0.00%      0.00%        1.90%
    After June 2017                             35.60%     0.00%    100.00%       32.90%
                                               100.00%   100.00%    100.00%      100.00%
2.3 Property profile by sector
                                               OFFICE    RETAIL      OTHER         TOTAL
    Total GLA (m2)                              91.4%      8.3%       0.3%        100.0%
    Total gross rentals (based on June 2012)    88.2%     10.6%       1.2%        100.0%
2.4 Tenant profile 
                                                    A         B          C         TOTAL
    Total GLA (m2)                              72.1%      0.4%      27.5%        100.0%

3.   Capital commitments
     At 30 June 2012 the company had the following contracted capital commitments:     R000
     Unconditional acquisitions transferred since year-end                           217 000
     Conditional acquisitions and acquisitions still to be transferred               341 500
     Contracted building expenses on development properties                           33 700
                                                                                     592 200

     These capital commitments will be funded out of existing cash resources and debt financing facilities.
4.   Events after the balance sheet date
     Subsequent to year-end the transfers of 14 Long Street, PROROM and VWL building to the company was
     completed.

Commentary on results

Introduction
Ascension Properties Limited is a black managed and substantially black owned property loan
stock company that listed on the JSE on 11 June 2012. The company is a property income fund
focusing on centrally located commercial office buildings in South Africa with a strong focus towards
government and other empowerment sensitive tenants.

Results
The reviewed provisional results for financial year ended 30 June 2012 cover the six month period
from 1 January 2012 to 30 June 2012 as a result of the company changing its year-end to 30 June.
These results include the impact of the restructuring of the company, its portfolio and capital structure
in anticipation of and the subsequent listing on the JSE on 11 June 2012. A direct comparison to the
previous reporting periods, being the unaudited 6 months to 30 June 2011 and the audited results
for the twelve months to 31 December 2011, is therefore perhaps not as meaningful as a comparison
to the forecast results contained in the pre-listing statement dated 31 May 2012.

The results for the six months to June 2011 reflects the strategy of the company at the time, to
acquire distressed buildings with high vacancies on high gearing levels in order to renovate and let
the properties at enhanced yields. This strategy has clearly been successful as can be seen by the
improved performance over the subsequent reporting periods. The portfolio of the company has
changed significantly between 30 June 2011 and 30 June 2012, both in terms of quality and vacancy
levels and the company has managed to reduce its gearing levels significantly to existing levels and
as set out in its pre-listing statement.

The company achieved distributable earnings for the period of R8,368 million (forecast: R8,223 million).
The accrued distribution per A-linked unit of 2.08 cents for the 20 days since listing on 11 June 2012
is in line with the forecast (3.12 cents for 30 days having assumed a listing date of 1 June 2012). The
accrued distribution per B-linked unit of 2.63 cents significantly exceeds the forecast distribution of
0.48 cents per unit largely as a result of a decision by the board to also accrue distributable earnings
of the period prior to listing of 2.10 cents per unit.

The accrued distributions will be declared and paid with the distribution in respect of the six month
period ending 31 December 2012 as set out in the pre-listing statement.

Activity since listing
Following the successful listing and the raising of R374 million by way of a pre-listing private
placement the following portfolio movements since listing are highlighted below:

    proceeded with all acquisitions as set out in the prelisting statement except for River Park 1 and
     2 and Riverview 1 and 2 in Nelspruit;
    acquired 14 Long Street, Cape Town for R67 million; and
    acquired 373 Pretorius Street, Pretoria for R155 million.

After the acquisitions above are transferred, the portfolio can be summarised as follows:

                                                                         Valuation
                                                              GLA (m2)   Rmillion
Investment properties as at 30 June 2012                       61 744        537.5
Properties under development as at 30 June 2012                 8 832         60.9
Fair value gain on development properties on completion                      48.9
Properties acquired and transferred since 30 June 2012         32 945        228.3
Conditional acquisitions and properties not yet transferred    31 671        360.9
Total assets (including assets yet to transfer)               135 192      1 236.5

Funding
At the end of June 2012 we restructured our debt facilities with Investec Bank Limited for a
period of three years at prime less 0.5% on an interest-only basis. We are confident that the debt
funding requirements of the targeted acquisitive growth can be adequately funded by new banking
facilities from South African banks at attractive rates. The benign short to medium term interest
rate environment supports yield enhancing acquisitions and will enable the company to conclude
favourable interest rate hedges to support our targeted hedging strategy of 50% fixed rates.

Prospects
As announced on 29 June 2012 we currently forecast a distribution per B-linked unit for the year
ending 30 June 2013 of 18.71 cents per unit and 21.29 cents for the year ending 30 June 2014.
These forecasts are the responsibility of the board of Ascension and have not been reviewed or
reported on by the independent reporting accountants.

Ascension is well on track to exceed its acquisitive growth target of R1 billion per annum. Linked
unitholders are referred to the cautionary announcement published on SENS on 24 August 2012 in
this regard. The board expects that the transaction referred to therein will, if concluded, significantly
increase the asset portfolio as well as the liquidity of the linked units trading on the JSE.

By order of the board
AM Mohamed                                   SL Rai                                        Cape Town
(Chief Executive Officer)                    (Executive Director)                   7 September 2012

Directors: AC Nissen (Chairman), AM Mohamed* (CEO), HB Dednam* (FD), SL Rai*, FW Arendse*,
B Bayvel, M Burton, H Takolia, J de Villiers (alternate to S Rai) *Executive

Registered office: 5th Floor, 14 Long Street, Cape Town, 8001 (PO Box 6886, Roggebaai, 8012)

Transfer secretaries: Computershare Investor Services (Proprietary) Limited

Sponsor: Java Capital

Company secretary: Jeremy de Villiers
Date: 07/09/2012 03:25:00 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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