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Audited financial results for the year ended 30 September 2012 and renewal of cautionary
FOUNTAINHEAD PROPERTY TRUST
Short name: FPT
Share code: FPT
ISIN: ZAE000097416
SUMMARY OF AUDITED FINAL RESULTS for the year ended 30 September 2012
* Final distribution of 27.83 cents per unit
* Market capitalisation of R9.4 billion
* NAV of R6.94 per unit up 3.7%
* Completion of Blue Route Mall
* Renewal of cautionary
* Vacancies reduced to 6.7%
The Directors of Fountainhead Property Trust Management Limited, the Manager of
Fountainhead Property Trust, submit their report on the audited results of Fountainhead
Property Trust for the year ended 30 September 2012. These financial statements have been
summarised from the audited financial statements on which KPMG Inc. have issued an
unmodified audit opinion and which are available for inspection at Fountainhead Property
Trust Management Limited's registered office.
STATEMENT OF FINANCIAL POSITION
30 September 30 September
2012 2011
R'000 R'000
ASSETS
Property assets 10 794 992 8 815 317
Investment properties 10 477 200 8 529 779
Straight-line lease accrual 317 792 285 538
Current assets 454 612 454 562
Trade and other receivables 93 653 70 453
Cash and cash equivalents 360 959 384 109
Total assets 11 249 604 9 269 879
UNITHOLDERS' FUNDS AND LIABILITIES
Unitholders' funds 8 062 932 7 776 713
Capital of the fund 2 874 030 2 874 030
Capital reserve 609 810 574 903
Fair value reserve 4 261 240 4 042 182
Retained earnings 317 852 285 598
Non-current liabilities
Interest-bearing liability 1 983 205 355 940
Current liabilities 1 203 467 1 137 226
Trade and other payables 129 885 123 783
Interest-bearing liability 750 000 693 000
Unitholders for distribution 323 582 320 443
Total unitholders' funds and liabilities 11 249 604 9 269 879
STATEMENT OF COMPREHENSIVE INCOME
30 September 30 September
2012 2011
R'000 R'000
Revenue 1 074 471 902 263
Contractual rental income 1 042 217 879 745
Straight-line lease adjustment 32 254 22 518
Expenses (261 998) (228 904)
Administrative expenses (59 564) (44 982)
Property operating expenses (202 434) (183 922)
Operating profit 812 473 673 359
Net finance costs (131 079) (54 395)
Interest received 23 750 27 703
Interest paid (154 829) (82 098)
Profit on disposal of investment properties 11 786 13 869
Fair value adjustments to investment properties 242 179 80 544
Profit for the year 935 359 713 377
Total comprehensive income for the year 935 359 713 377
Basic/diluted earnings per unit (cents) 80.45 66.36
Headline earnings and distribution income
reconciliation
Profit for the year 935 359 713 377
Adjusted for:
Profit on disposal of investment properties (11 786) (13 869)
Fair value adjustments to investment properties (242 179) (80 544)
Headline earnings 681 394 618 964
Less: Straight-line lease adjustment (32 254) (22 518)
Distribution income 649 140 596 446
Headline earnings per unit (cents) 58.60 57.58
Distribution per unit (cents) 55.83 55.27
Interim distribution per unit (cents) 28.00 27.71
Final distribution per unit (cents) 27.83 27.56
Weighted average units in issue 1 162 709 748 1 075 038 515
Units in issue at year-end 1 162 709 748 1 162 709 748
STATEMENT OF CASH FLOWS
30 September 30 September
2012 2011
R'000 R'000
Cash effects from operating activities
Profit for the year 935 359 713 377
Adjusted for:
Straight-line lease adjustment (32 254) (22 518)
Interest received (23 750) (27 703)
Interest paid 154 829 82 098
Profit on disposal of investment property (11 786) (13 869)
Fair value adjustments to investment properties (242 179) (80 544)
Operating profit before changes in working
capital 780 219 650 841
Trade and other receivables increased (23 200) (16 579)
Trade and other payables increased/(decreased) 6 103 (2 418)
Cash generated from operations 763 122 631 844
Interest received 23 750 27 703
Interest paid (154 829) (82 098)
Income distributions (646 002) (589 424)
Cash outflows from operating activities (13 959) (11 975)
Cash effects from investing activities
Additions to investment properties (1 741 205) (870 730)
Proceeds from disposal of investment properties 47 749 112 388
Cash outflows from investing activities (1 693 456) (758 342)
Cash effects from financing activities
Interest-bearing liabilities raised 1 684 265 355 940
Interest-bearing liabilities repaid (532 000)
Issue of units 1 000 000
Rights offer expenses (13 141)
Cash inflows from financing activities 1 684 265 810 799
Net (decrease)/increase in cash and cash
equivalents (23 150) 40 482
Cash and cash equivalents at the beginning of the year 384 109 343 627
Cash and cash equivalents at the end of the year 360 959 384 109
STATEMENT OF CHANGES IN UNITHOLDERS' FUNDS
Total
Capital Capital Fair value Retained unitholders'
(R'000) of the fund reserve reserve earnings funds
Balance as at 1 October 2010 1 933 354 513 837 4 008 835 263 080 6 719 106
Total comprehensive income for the year
Profit and total comprehensive income for the year 713 377 713 377
Transactions with unitholders, recorded directly in equity
Profit and fair value reserve realised on sale of property transferred to capital reserve 61 066 (47 197) (13 869)
Fair value adjustment on investment properties transferred to fair value reserve 80 544 (80 544)
Issue of units 953 817 46 183 1 000 000
Rights offer expenses (13 141) (13 141)
Income distributions (642 629) (642 629)
Total transactions with unitholders 940 676 61 066 33 347 (690 859) 344 230
Balance as at 30 September 2011 2 874 030 574 903 4 042 182 285 598 7 776 713
Total comprehensive income for the year
Profit and total comprehensive income for the year 935 359 935 359
Transactions with unitholders, recorded directly in equity
Profit and fair value reserve realised on sale of properties transferred to capital reserve 34 907 (23 121) (11 786)
Fair value adjustment on investment properties transferred to fair value reserve 242 179 (242 179)
Income distributions (649 140) (649 140)
Total transactions with unitholders 34 907 219 058 (903 105) (649 140)
Balance as at 30 September 2012 2 874 030 609 810 4 261 240 317 852 8 062 932
COMMENTARY
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The results have been prepared in accordance with International Financial Reporting Standards (IFRS), the
AC 500 series issued by the Accounting Practices Board, the requirements of the Collective Investment
Schemes Control Act and the JSE Limited. The accounting policies are consistent in all material respects
with those applied in prior years. The annual results have been prepared under the supervision of Aaron
Suckerman ACCA (UK).
2. INCOME DISTRIBUTION PER UNIT
Fountainhead Property Trust has declared a distribution of 27.83 cents per unit for the six months
ended 30 September 2012 which, combined with the distribution of 28 cents for the half year
ended 30 March 2012, results in a total distribution of 55.83 cents per unit for the year ended
30 September 2012. The total distribution is 1% ahead of the prior year. Included in the current year's
distribution is the reversal of prior year municipal accruals of R11.6 million and the dilutive effect of
expensing the borrowing costs on the redevelopment of Blue Route Mall. The core portfolio excluding
properties acquired, properties disposed of, or properties under development showed growth of 4.25%
with contractual rental showing muted growth of 4% primarily due to tougher market conditions and
negative reversions on lease renewals.
3. INTEREST-BEARING LIABILITIES
Term Loan 1 a R750 000 000 interest only facility at a rate of three-month JIBAR plus 1.98%
repayable by 30 June 2015. A total of R685 544 278 of this facility has been utilised.
Term Loan 2 a R250 000 000 interest only facility fixed at a rate of 11.39% until 15 February 2013,
reverting thereafter to a floating rate interest only facility of three-month JIBAR + 1.55%. This facility is
repayable by 30 June 2013. The facility has been fully utilised.
Term Loan 3 a R200 000 000 interest only facility at a rate of three-month JIBAR +1.68%. This facility
is repayable by 30 June 2013. The facility has been fully utilised.
Term Loan 4 the Blue Route Mall Development Loan Facility a R935 000 000 interest only facility
floating at a rate of one-month JIBAR + 2.60% until 31 May 2015.
This facility is repayable by 31 May 2015. To date R777 660 689 has been drawn from the facility.
R350 000 000 of the facility has been fixed at 8.42% until 31 May 2015. Since 1 April 2012, interest
on R626 990 332 was capitalised, representing the spend to date when the mall commenced trading.
Interest payments on further capital expenditure as from 1 April 2012 will be capitalised until the
project completion date, which is estimated to be in January 2013.
Term Loan 5 a R600 000 000 interest only facility floating at a rate of one-month JIBAR + 2.39%
until 28 February 2016. A total of R520 000 000 of this facility has been utilised. R500 000 000 of this
facility has been fixed at a rate of 8.72% until 29 May 2015.
Term Loan 6 a R220 000 000 interest only facility at a rate of three-month JIBAR +1.71%. This facility
is repayable by 30 June 2013. This facility has been fully utilised.
Term Loan 7 a R80 000 000 interest only facility at a rate of three-month JIBAR +1.66%. This facility
is repayable by 30 June 2013. This facility has been fully utilised.
The Board is reviewing interest rate hedging instruments with a view to taking advantage of the current
low interest rate environment by increasing the percentage of debt that is hedged to a minimum of
65%. Based on preliminary discussions, the risk of new facilities not being granted is minimal due to
the low gearing of the Trust.
4. MAJOR CAPITAL PROJECTS
Blue Route Mall
The mall was opened on 29 March 2012 and was 99% let at the time. The mall is trading in line with
expectations and has been well received by tenants and shoppers. On-grade parking for an additional
2 000 parking bays is currently under construction and is due for completion in early 2013 bringing
this phase of the project to final completion. During the year an application for additional bulk was
submitted to allow for future expansion of the mall. The additional parking bays under construction will
allow for future expansion of the mall.
Bryanston Shopping Centre
A R32 million refurbishment is underway at Bryanston Shopping Centre. The centre will receive a major
facelift with all ceilings and floors being replaced and entrances enhanced. The refurbishment is due
for completion in November 2012. The total refurbishment will be marginally enhancing to earnings.
Centurion Mall
A R19 million refurbishment is underway which includes an upgrade of the spine area and capital
replacement of the skylights. The refurbishment is due for completion in November 2012. This capital
expenditure will enhance the overall appeal of the mall.
5. ACQUISITIONS AND DISPOSALS
The Trust purchased the following properties during the year:
Initial
Sector Building name Location Price yield Transfer date
Retail Centurion Mall 25%
undivided share Centurion, PTA R751 519 364 7.10% 15 December 2011
Retail Centurion Boulevard Centurion, PTA R366 000 000 8.20% 27 March 2012
Office Cedarwood Bryanston, JHB R77 843 799 9.00% 4 January 2012
The Trust sold the following properties during the year:
Selling Profit on
Sector Building name Location Transfer date price Valuation sale
Industrial Medsave House Strijdom Park,
JHB 3 October 2011 2 446 000 2 446 000
Industrial 4 Walter Place Watervalpark,
Mayville 18 April 2012 27 352 730 22 536 643 4 816 087
Office Wierda Mews 41 Wierda Road,
Wierda Valley 3 April 2012 17 949 963 10 979 681 6 970 282
Essex Park realised net proceeds of R30.2 million with registration of transfer occurring subsequent to
year end.
6. SEGMENTAL INFORMATION
Year ended Year ended
September 2012 September 2011
Revenue Net income % of Revenue Net income % of
Rm Rm total Rm Rm total
Retail 735 583 90 621 482 81
Office 186 156 24 143 116 20
Industrial 88 70 11 85 68 11
Specialised 33 33 5 31 31 5
Corporate (192) (30) (101) (17)
Total 1 042 650 100 880 596 100
7. VACANCY LEVELS
Vacancy levels in terms of rentable area were as follows:
30 September 30 September
2012 2011
Sector % %
Retail 6.5 7.0
Office 7.1 10.2
Industrial 8.0 7.3
Specialised
Total 6.7 7.4
By value, the vacancies equated to 3.5% of the rent roll for September 2012,
compared with 4.9% at 30 September 2011.
The retail component has a vacancy of 6.5% primarily located at Brightwater
Commons and the offices at Centurion Mall, also known as Die Anker.
The office component has a vacancy of 7.1% which is primarily in Grayston Ridge
and AMR Office Park.
The industrial component has a vacancy of 8%, primarily at Supreme Industrial
Park and the Jet Park mini-units.
8. PORTFOLIO VALUATIONS
The composition of the Trust's portfolio, as valued by the independent valuer,
Rode and Associates CC, as at 30 September 2012, is as follows:
Sector Value Cents/ Forward % of portfolio
(Rm) unit EY (%) 2012 2011
Retail 8 226 707 8,0% 76 72
Office 1 680 145 9,7% 16 18
Industrial 541 47 12,1% 5 7
Specialised 348 30 10,4% 3 3
Total property 10 795 929 8,5% 100 100
Interest-bearing
liabilities (2 733) (235)
Net current assets 1
Net asset value 8 063 694
9. LEASE EXPIRY PROFILE
The lease expiry profile by rentable area as at 30 September 2012 is as
follows (m2):
(SEE PRESS FOR GRAPH)
10. PROSPECTS
Based on difficult trading conditions being experienced, the temporary dilution
of Blue Route Mall, the effect of hedging the debt and further committed capital
expenditure of approximately R98 million, it is anticipated that distributions
for 2013 will be unchanged compared with the year ended 30 September 2012.
Distributions for the year ending 30 September 2014 are expected to show an
increase of 7,2%. This forecast has not been reviewed or reported on by
Fountainhead Property Trust's auditor.
11. CHANGES TO THE BOARD OF DIRECTORS
The following resignations occurred during the year: Stewart Shaw-Taylor and
Donald Samuel Ogbu effective 24 August 2012 and Anton Raubenheimer
effective 30 September 2012. The following appointments were made during
the year: Andrew J Konig and Bernard Nackan effective 20 September 2012.
12. APPOINTMENT OF CHIEF EXECUTIVE OFFICER
Alex Phakathi has been appointed as Chief Executive Officer effective
7 September 2012.
13. CHANGE TO THE TRUSTEE
During November 2011, Absa Bank Limited (Absa) issued a notice of intention to resign
as Trustee under the Collective Investment Schemes Control Act. The extension
of the notice period expires on 16 November 2012. FirstRand Bank Limited
has been appointed to replace Absa as Trustee. The appointment is subject to
approval by the Financial Services Board.
14. RENEWAL OF CAUTIONARY ANNOUNCEMENT
On 28 September 2012, the Board received a proposal from Redefine Properties
Limited to acquire the Trust's property portfolio other than Orion Place, Gail
Industrial Park and Precision House for a purchase consideration that will
result in unitholders receiving 3 Hyprop units and 62.5 Redefine units for every
100 Fountainhead units.
On 23 October 2012, the Board received a proposal from Growthpoint Properties
Limited to acquire the Trust's property portfolio in return for a combination of cash
and Growthpoint units that will result in unitholders receiving 35 Growthpoint
units for every 100 Fountainhead units currently held and Growthpoint will
discharge all of the existing borrowings in the Trust.
There are a number of conditions precedent to these two offers as well as
regulatory and commercial issues. The Board has constituted an independent
sub-committee which, together with its advisors, will consider the proposals in
the light of the practicalities of each and present these to the Board.
15. INCOME DISTRIBUTION ANNOUNCEMENT
Notice is hereby given of distribution number 59 of 27.83 cents per unit for
the six months ended 30 September 2012. The source of distribution is net
income from property rentals. The distribution is not regarded as a dividend and
therefore no dividend withholding tax is payable on the distribution amount.
The last date to trade cum distribution will be Friday, 16 November 2012. The
units of Fountainhead Property Trust will commence trading ex-distribution on
Monday, 19 November 2012 and the record date will be Friday, 23 November
2012. The distribution will be paid on Monday, 26 November 2012.
Unit certificates may not be dematerialised or rematerialised between Monday,
19 November 2012 and Friday, 23 November 2012, both dates inclusive.
BY ORDER OF THE BOARD
Fountainhead Property Trust Management Limited
(Registration number 1983/003324/06)
Johannesburg
31 October 2012
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Secretary
Broll Property Group (Pty) Limited, Broll House
27 Fricker Road, Illovo, Johannesburg, 2196
(PO Box 1455, Saxonwold, 2132)
Registered office
Redefine Place, 2 Arnold Road, Rosebank
Johannesburg (PO Box 1731, Parklands, 2121)
Short name: FPT Share code: FPT
ISIN: ZAE000097416
Directors
WM Kirchmann (Chairman), VA Christian
AJ Konig, HY Laher, B Nackan, JD Rainier,
DS Savage
Chief Executive Officer
MA Phakathi
Sponsor
The Standard Bank of
South Africa Limited
Website: www.fountainheadproperty.co.za
Date: 01/11/2012 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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