Wrap Text
Reviewed condensed consolidated financial statements for the year ended 31 August 2012
VIVIDEND INCOME FUND LIMITED
(Incorporated in the Republic of South Africa under registration number 2010/003232/06)
JSE code: VIF
ISIN: ZAE000150918
(Vividend or the company)
REVIEWED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 AUGUST 2012
Highlights
- 52% distribution growth to 50,50 cents per linked unit
- Additional R801 million invested in property portfolio
- R415 million in equity raised
- Introduction of a R387 million debt funding facility
- Market capitalisation above R1,1 billion
- Property portfolio valued at R1,36 billion
Statement of comprehensive income
2012 2011
Notes R000 R000
Revenue, excluding straight-line lease income adjustment 127 194 33 594
Straight-line lease income adjustment 7 405 2 893
Revenue 134 599 36 487
Property expenses (37 952) (7 853)
Net property income 96 647 28 634
Other operating expenses (8 537) (1 744)
Operating profit 88 110 26 890
Fair value adjustments 19 819 6 780
Finance costs (12 147) (2 837)
Capital costs (2 761) (4 670)
Investment income 6 323 13 622
Profit before debenture interest and taxation 99 344 39 785
Debenture interest (75 311) (34 782)
Profit before taxation 24 033 5 003
Deferred taxation charge (5 638) (1 760)
Total comprehensive income 18 395 3 243
Distribution per linked unit (cents) 50,50 33,25
Interim 24,50 9,96
Final 26,00 23,29
Basic earnings and diluted earnings per share 2 12,33 3,94
DISTRIBUTION PER LINKED UNIT
Calculation of distributable earnings
Profit before debenture interest and taxation 99 344 39 785
Adjusted for:
Straight-line lease income adjustment (7 405) (2 893)
Fair value adjustment Investment property (28 520) (6 780)
Fair value adjustment Financial instrument 8 701
Amortisation of debenture discount 430
Capital costs 2 761 4 670
Distributable earnings 75 311 34 782
Distribution comprises:
Debenture interest (75 311) (34 782)
Ordinary dividend
Total distribution (75 311) (34 782)
Weighted average linked units in issue (000s) 149 131 82 261
Distribution to linked unitholders 75 311 34 782
Interim 25 631 10 418
Final 49 680 24 364
cents cents
Distributable earnings per linked unit 50,50 33,25
Distribution per linked unit 50,50 33,25
Reconciliation earnings to distributable earnings
Earnings attributable to equity shareholders 18 395 3 243
Fair value adjustment investment property, net of deferred tax (21 558) (5 831)
Amortisation of debenture discount 430
Headline earnings before debenture interest 3 (2 733) (2 588)
Debenture interest 75 311 34 782
Headline earnings attributable to linked unitholders 72 578 32 194
Fair value adjustment of financial instruments, net of deferred tax 6 265
Straight-lining of leases adjustment, net of deferred tax (6 293) (2 082)
Capital costs 2 761 4 670
Distributable earnings attributable to linked unitholders 75 311 34 782
Headline earnings per linked unit (cents) 3 48,67 39,14
Statement of financial position
2012 2011
R000 R000
ASSETS
Non-current assets 1 360 662 518 275
Fair value of investment property for accounting purposes 1 350 364 515 382
Straight-line lease income adjustment 10 298 2 893
Current assets 95 264 56 105
Trade and other receivables 14 069 8 857
Cash and cash equivalents 81 195 47 248
Total assets 1 455 926 574 380
EQUITY AND LIABILITIES
Shareholders interest 21 640 3 244
Ordinary share capital 2 1
Retained income 21 638 3 243
Non-current liabilities debentures 931 874 523 085
Linked unitholders interest 953 514 526 329
Other non-current liabilities 413 149 12 763
Other non-current financial liabilities 401 785 7 037
Deferred taxation liability 11 364 5 726
Current liabilities 89 263 35 288
Trade and other payables 38 268 10 924
Current portion of other non-current financial liabilities 1 315
Taxation payable
Linked unitholders interest 49 680 24 364
Total equity and liabilities 1 455 926 574 380
Linked units in issue (000s) 191 075 104 617
cents cents
Net asset value per linked unit 499 503
Net asset value per linked unit, excluding deferred
taxation liability 505 509
Statement of changes in equity
Ordinary share Retained
capital earnings Total
R000 R000 R000
Balance at 1 September 2010 * *
Shares issued 1 1
Total comprehensive income 3 243 3 243
Balance at 31 August 2011 1 3 243 3 244
Shares issued 1 1
Total comprehensive income 18 395 18 395
Balance at 31 August 2012 2 21 638 21 640
Statement of cash flows
2012 2011
R000 R000
Cash flows from operating activities
Cash received from tenants 161 930 45 968
Cash paid to suppliers (61 424) (23 406)
Cash generated from operations 100 506 22 562
Investment income 6 323 13 622
Finance costs (12 147) (2 504)
Distribution to unitholders (49 995) (10 418)
Net cash inflow from operating activities 44 687 23 262
Cash flows from investing activities
Investment in investment property (5 512) (166)
New acquisitions of business undertakings (800 950) (457 886)
Net cash outflow from investing activities (806 462) (458 052)
Cash flows from financing activities
Non-current loans raised 386 047
Current loans raised 1 315
Repayment of other non-current financial liabilities (42 259)
Proceeds from issue of linked units 415 000 523 086
Expenses on issue of linked units (6 640)
Net cash inflow from financing activities 795 722 480 827
Net increase in cash and cash equivalents 33 947 46 037
Cash acquired on acquisition of business undertaking 1 211
Cash and cash equivalents at the beginning of the year 47 248
Cash and cash equivalents at the end of the year 81 195 47 248
Segmental analysis
Retail Commercial Head office Total
R000 R000 R000 R000
Statement of comprehensive income August 2012
Revenue, excluding straight-line lease income adjustment 72 579 54 615 127 194
Straight-line lease income adjustment 4 744 2 661 7 405
Total revenue 77 323 57 276 134 599
Net property income 53 500 43 147 96 647
Assets
Investment property 685 529 664 835 1 350 364
Straight-line lease income adjustment 6 412 3 886 10 298
Other assets 5 052 6 628 83 584 95 264
Total assets 696 993 675 349 83 584 1 455 926
Total liabilities (16 667) (19 519) (1 398 100) (1 434 286)
Statement of comprehensive income August 2011
Revenue, excluding straight-line lease income adjustment 16 102 17 492 33 594
Straight-line lease income adjustment 1 669 1 224 2 893
Total revenue 17 771 18 716 36 487
Net property income 13 724 14 910 28 634
Assets
Investment properties 271 664 243 718 515 382
Straight-line lease income adjustment 1 669 1 224 2 893
Other assets 7 955 (366) 48 516 56 105
Total assets 281 288 244 576 48 516 574 380
Total liabilities (4 265) (4 471) (562 400) (571 136)
Analysis by usage Retail Commercial Total % of total
Number of properties 12 7 19
Vacant GLA 3 706 680 4 386 2
GLA occupied by A Tenants 84 023 54 458 138 481 73
GLA occupied by B Tenants 6 173 2 611 8 784 5
GLA occupied by C Tenants 22 890 13 995 36 885 20
GLA available 116 792 71 744 188 536 100
Lease expiry profile to 31 August (GLA) Retail Commercial Total % of total
Vacant 3 706 680 4 386 2
Month to month 9 449 2 766 12 215 6
2013 19 647 17 592 37 239 20
2014 13 127 12 767 25 894 14
2015 17 769 8 783 26 552 14
>2016 53 094 29 156 82 250 44
Total 116 792 71 744 188 536 100
Gross rental per m2 per month 62,49 91,56 74,24
Operational costs per m2 per month 11,00 10,96 10,98
Reconciliation of vacant GLA Retail Commercial Total
Vacant as at 1 September 2011 2 050 1 054 3 104
Acquired during the period 3 454 1 028 4 482
Expired during the period 3 834 1 129 4 963
Re-let during the period (1 270) (387) (1 657)
Tenanted during the period (4 362) (2 144) (6 506)
GLA vacant as at 31 August 2012 3 706 680 4 386
Weighted average lease duration (years) 3,13 2,10 2,73
Weighted average lease escalation (%) 7,42 7,18 7,47
Notes to the financial statements
1. Basis of preparation
The reviewed condensed consolidated financial statements have been prepared in accordance with the measurement and recognition requirements of
International Financial Reporting Standards (IFRS), the AC 500 standards as issued by the Accounting Standards Board, the presentation and disclosure
requirements of IAS 34: Interim Financial Reporting, the requirements of the Companies Act 2008, as amended, and the JSE Listings Requirements.
The accounting policies used in the preparation of these reviewed condensed consolidated financial statements are consistent with those of the prior
period. This report was compiled under the supervision of Robert Amoils CA(SA), the financial director.
Charles Orbach & Company has issued an unqualified opinion on the reviewed consolidated financial results for the year ended 31 August 2012.
A copy of their review report is available for inspection at the companys registered office.
2. Basic, diluted and headline earnings per share
The directors are of the view that the disclosure of earnings per share, while obligatory in terms of IAS 33: Earnings per Share, and the JSE
Listings Requirements, is not meaningful to investors as the shares are traded as part of a linked unit and all the revenue earnings are distributed
in the form of debenture interest.
In addition, headline earnings include fair value adjustments for financial liabilities and accounting adjustments required to account for lease
income on a straight-line basis, as well as other non-cash accounting adjustments that do not affect distributable earnings. The calculation of
distributable earnings and the distribution per linked units as set out above is more meaningful.
3. Headline earnings per linked unit
In terms of Circular 3/2012, issued by SAICA, the fair value adjustments on investment property are added back in the calculation of headline earnings
per linked unit. The Circular does not make provision for the fair value adjustment on other non-current financial liabilities to be added back.
4. Prior year reclassification
To align itself with prevailing best practice disclosure, the company has reclassified certain items within its statement of comprehensive income for
the year ended 31 August 2011. The impact of this reclassification is as follows:
Difference Retail Commercial
R000 R000 R000
Revenue, excluding straight-line lease income adjustment (7 303) (3 501) (3 802)
Property expenses 7 333 3 531 3 802
Net property income 30 30
Other operating expenses and capital costs (30)
Profit before debenture interest and taxation
The above had no effect on the statement of financial position.
5. Subsequent events
Vividend linked unitholders are referred to the SENS announcement dated 22 June 2012 in respect of the company entering into an agreement with the Sasol
Pension Fund to acquire two Sasol Group tenanted properties and associated letting enterprises (the Sasol Kent Street Properties) situated at 272 Kent
Avenue, Ferndale, Randburg and 316 Kent Avenue, Ferndale, Randburg (the Sasol Kent Street Acquisition) for an aggregate purchase consideration of R155,1 million.
Furthermore, Vividend linked unitholders are referred to the SENS announcement dated 22 August 2012 in which the company advised that the conditions precedents
applicable to the Sasol Kent Street Acquisition had been fulfilled and accordingly the Sasol Kent Street Properties would be acquired by Vividend using its
existing debt financing facilities to fund the aggregate purchase consideration.
The Sasol Kent Street Properties are expected to be transferred into the name of the company on or about 1 December 2012.
Directors' commentary
INTRODUCTION
Vividend is a property loan stock company listed on the JSE Limited (JSE) under Financial Real Estate Holdings, with a market capitalisation at 31 August 2012
of R1 085 million and a portfolio of 19 directly owned properties valued at R1 361 million.
The companys primary objective is to identify value and value enhancing opportunities within target sectors of the South African property market by using defined
investment strategies that have a goal of creating a diverse and stable portfolio of assets capable of generating secure, consistent and continually escalating
free cash flows. Linked unitholders are entitled, through the debenture portion of their linked units, to the after-tax profits of the company, excluding capital
profits and losses and after adjusting for all non-cash items. The interest entitlement is calculated and accrues to linked unitholders on the last days of February
and August of each year and is payable within 90 days of accrual date, or such shorter period as prescribed in the JSE Listings Requirements. The company does not
distribute capital profits.
HIGHLIGHTS FOR THE PERIOD
Financial results
The distribution per linked unit for the 12-month period ended 31 August 2012 increased 52% relative to the comparable period ended 31 August 2011 and is a)
consistent with the forecasted distribution per linked unit published by the company in the Circular dated 27 January 2012; b) 6,1% higher than the distribution
per linked unit for the immediately preceding six-month period ended 29 February 2012.
Net property income
The increase in revenue was due in most part to a) the inclusion of revenue from the Vusani Portfolio; b) contractual rental escalations within the portfolio;
and c) the full year inclusion of revenue applicable to properties acquired in the second half of the 2011 reporting period. Earnings from the Vusani Portfolio
were in line with expectations, both at the time of the transaction and for the period to 31 August 2012.
The ratio of property expenses to revenue increased from 21,5% to 28,2%, largely due to accelerated repairs and maintenance allocations deployed into the portfolio
to enhance the quality and sustainability of earnings, while other operating expenses increased from 5,2% to 6,7% of revenue due to additional statutory charges
associated with asset management, shareholder communication and enhanced governance.
Fair value adjustments
Revaluation of the property portfolio at 31 August 2012 resulted in an upward revision of R28,5 million. This was mainly due to an increase in future contractual
rental. Interest-bearing borrowings were fair valued upwards by R8,7 million using the yield curve, as applied to the applicable swaps, at 31 August 2012.
Finance costs
Finance costs increased by 328%. This was as a result of a debt funding facility secured by the company to facilitate, in part, the acquisition of the Vusani Portfolio.
Arrears
At 31 August 2012, arrears amounted to R3,7 million (August 2011: R5,0 million) with a provision of R2 million (August 2011: R1,4 million) having been raised for
potential bad debts.
For the 12-month period ended 31 August 2012, the total bad debts expense amounted to R1,2 million (August 2011: Rnil).
Vacancy levels
The companys vacancy levels, as a percentage of gross lettable area (GLA) are:
Retail % Commercial % Total %
29 February 2012 3,9 0,4 4,3
31 August 2012 2,0 0,4 2,4
Acquisitions, disposals and commitments
Vividend acquired the Vusani Portfolio in April 2012 for a total purchase consideration of R801 million, which added 126 000 m2 of GLA to the portfolio.
In addition, the company has commitments outstanding in respect of redevelopments amounting to R32 million. These commitments will be financed from available
cash resources and existing debt funding facilities.
The company disposed of no properties during the reporting period.
In terms of the Asset Management Agreement concluded on 27 October 2010, the company is committed to acquire the Asset Manager on 18 November 2015 for an amount
equivalent to 4% of the enterprise value of the company.
Borrowings
At 31 August 2012 the loan to value ratio (LTV), which is measured by dividing the nominal value of interest bearing borrowings (net of cash not allocated to
linked unitholders at 31 August 2012) by the fair value of property assets was 26,6% (29 February 2012: 0%).
The increase in gearing is a result of a debt funding facility secured by the company to facilitate, in part, the acquisition of the Vusani Portfolio.
Share and debenture capital
The authorised share capital of the company is R50 000, divided into 5 000 000 000 ordinary shares of R0,00001 each. Each ordinary share is linked to a variable
rate debenture of R4,99999 each.
The ordinary shares and debentures trade as linked units on the JSE Limited (JSE). In terms of the debenture trust deed, the interest payable on the debenture
component of the linked unit is equal to after-tax profits of the company, excluding capital profits and losses and after adjusting for all non-cash items.
Equity raised
In terms of the Circular dated 27 January 2012, the company issued 86 458 334 linked units to specific issue participants on 29 February 2012 at R4,80 per linked unit.
After the specific issue the issued share capital was 191 075 436.
The issue price applicable to the specific issue, being R4,80 per linked unit, resulted in a decline in the net asset value (NAV) per linked unit to 499 cents
(August 2011: 503 cents). However, the decline was offset, in most part, by the upward revaluation of the property portfolio at 31 August 2012.
Prospects
Should a) existing economic conditions prevail; b) the portfolio perform in line with initial forecasted expectations, the distribution per linked unit for the
year ended 31 August 2013 is expected to be in line with that forecasted by the company in the Circular dated 27 January 2012, being 52,38 cents per linked unit.
Declaration of interest distribution number 4
Notice is hereby given that interest of 26,00 cents per linked unit has been declared, in accordance with the debenture trust deed, for the period 1 March 2012
to 31 August 2012, payable to linked unitholders recorded in the register of the company on Friday, 9 November 2012. The last day to trade cum distribution will
be Friday, 2 November 2012 and trading will commence ex distribution on Monday, 5 November 2012.
In respect of dematerialised linked unitholders, the distribution will be transferred to the Central Security Depository Participant accounts or brokers accounts
on Monday, 12 November 2012. Certificated linked unitholder distribution payments will be posted on or about 12 November 2012.
No dematerialisation or rematerialisation of linked units may take place between Monday, 5 November 2012, and Friday, 9 November 2012, both days inclusive.
By order of the board
Vividend Income Fund Limited
18 October 2012
Directors
KK Combi (Chairman)#, A Jacobson (Chief Executive Officer), R Amoils (Financial Director), M Sandak-Lewin*, B Rubenstein, A Wit, M Jacobson*, S Slom#, G Rabinowitz*, B Bank#
* Non-executive # Independent
Registered office
Unit 6 Rozenhof Office Court
20 Kloof Street, Gardens, Cape Town 8001
Postnet Suite 137, Private Bag X1, Vlaeberg 8018
Transfer secretaries
Link Market Services South Africa Proprietary Limited
Asset manager
Vividend Management Group Proprietary Limited
Sponsor
PSG Capital Proprietary Limited
www.vividend.co.za
Date: 19/10/2012 02:00:00 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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