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Condensed unaudited financial results for the six months ended 30 September 2012 and payment of dividend and interes
ANNUITY PROPERTIES LIMITED
Incorporated in the Republic of South Africa
(Registration number 2011/145994/06)
Share code: ANP ISIN: ZAE000165643
Income tax number 9050/047/19/1
("Annuity" or "the Company")
Condensed unaudited financial results
for the six months ended 30 September 2012
and payment of dividend and interest distribution
1. Introduction
Annuity listed on the Real Estate Real Estate Holdings and Development sector of the Johannesburg Stock Exchange
("JSE") on 4 May 2012. The Company's portfolio consisted of four properties for a significant part of the period under
review, namely the Woolworths Call Centre which was acquired during the previous financial year, the Sasfin building
and the Oakfields Shopping Centre, which was transferred into Annuity's name on 3 May 2012 and the Cell C building
which was transferred into Annuity's name on 22 June 2012.
2. Results
The financial results for the six months ended 30 September 2012 compared to the corresponding previous period and
the most recent financial year are set out below.
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 September 2012
Unaudited Unaudited Audited
six months six months Financial
ended ended year ended
30 September 30 September 31 March
2012 2011 2012
R R R
Revenue
Property portfolio 27 917 655 415 418
Contractual rental income 20 641 612 301 631
Straight line rental income accrual 7 276 043 113 787
Recoveries 5 986 793 76 375
Total revenue 33 904 448 491 793
Property expenses (6 359 588) (90 216)
Administration and corporate costs (1 172 942) (105 642)
Net operating profit 26 371 918 295 935
Investment and other income 3 222 411 226 646
Gains on bargain purchases 20 371 000 8 000 000
Property acquisition costs (6 846 289) (1 571 455)
Changes in fair values of financial instruments (2 324 707) -
Changes in fair values of properties (7 276 043) (113 787)
Net profit before finance charges and taxation 33 518 290 6 837 339
Finance costs (6 298 105) (421 603)
Profit before debenture interest and taxation 27 220 185 6 415 736
Interest on linked units (17 836 436)
Profit before taxation 9 383 749 6 415 736
Taxation (616 375) (1 021 688)
Total comprehensive income for the financial period 8 767 374 5 394 048
RECONCILIATION OF EARNINGS, HEADLINE EARNINGS AND DISTRIBUTABLE EARNINGS
Unaudited Unaudited Audited
six months six months Financial
ended ended year ended
30 September 30 September 31 March
2012 2011 2012
R R R
Profit for the financial year attributable to equity holders 8 767 374 5 394 048
Adjusted for interest on linked units 17 836 436
Earnings 26 603 810 5 394 048
Add back fair value adjustments (13 880 139) (6 895 100)
Gains on bargain purchases net of deferred taxation (19 799 345) (6 987 668)
Property fair value adjustments net of deferred taxation 5 919 206 92 568
Headline earnings /(loss) attributable to linked unitholders 12 723 671 (1 501 052)
Straight line rental income accrual (net of deferred taxation) (5 238 751) (81 927)
Amortisation of debt transaction costs 357 074 8 218
Interest on other borrowings IFRS adjustment 1 508 823
Fair value adjustments on interest rate swaps
(net of deferred taxation) 1 673 789
Deferred tax on estimated tax loss utilised 1 285
Once-off-property acquisition costs 6 846 289 1 571 455
Available for distribution/(loss attributable) to
linked unitholders 17 872 180 (3 306)
Weighted average number of linked units in issue used
for the calculation of earnings and headline earnings
per linked unit 85 807 690 301
Number of linked units in issue used for the calculation of
distributable earnings/(attributable loss) per linked unit 93 340 341 1 000
Basic and diluted earnings per linked unit (cents) 31.00 1 792 000.00*
Headline earnings/(loss) and diluted headline earnings/(loss)
per linked unit (cents) 14.83 (498 700.00)*
Distributable earnings /(attributable loss) per linked unit
(cents) 19.15 (300.00)
* Calculated based on the number of linked units in issue on 31 March 2012.
CONDENSED STATEMENT OF FINANCIAL POSITION
At 30 September 2012
Unaudited Unaudited Audited
30 September 30 September 31 March
2012 2011 2012
R R R
ASSETS
Non-current assets 633 779 823 144 000 000
Investment properties 579 081 171 143 886 213
Straight-line rental adjustment 7 389 829 113 787
Other financial assets 47 308 823
Current assets 10 667 265 100 4 309 318
Trade and other receivables 9 259 568 4 308 960
Cash and cash equivalents 1 407 697 100 358
Total assets 644 447 088 100 148 309 318
EQUITY AND LIABILITIES 15 028 592 100 5 394 058
Stated capital 902 914 10
Member's interest 100
Accumulated profit 14 125 678 5 394 048
Non-current liabilities 595 462 649 128 263 666
Debentures 446 678 549 4 990
Secured financial liabilities 107 290 509 76 341 612
Other non-current liabilities 37 544 718 50 895 376
Interest rate swaps 2 324 707
Deferred taxation 1 624 166 1 021 688
Current liabilities 33 955 847 14 651 594
Trade and other payables 6 305 665 2 200 041
Current portion of secured financial liabilities 11 854 681
Current portion of other non-current liabilities 9 764 105 596 872
Taxation payable 13 897
Linked unitholders for distribution 17 872 180
Total equity and liabilities 644 447 088 100 148 309 318
Number of linked units in issue 93 340 341 1 000
Net asset value per linked unit (R) 4.95 5 394.00
CONDENSED STATEMENT OF CHANGES IN EQUITY
For the six months ended 30 September 2012
Stated Member's Accumulated
capital interest profit Total
R R R R
Balance at 1 March 2011 100 100
Issue of shares 1 000 (100) 900
Conversion to linked units (990) (990)
Total comprehensive income for the financial year 5 394 048 5 394 048
Balance at 31 March 2012 10 5 394 048 5 394 058
Issue of linked units 933 393 933 393
Transaction costs incurred to issue linked units (30 489) (30 489)
Total comprehensive income for the six months 8 767 374 8 767 374
Dividends declared (35 744) (35 744)
Balance at 30 September 2012 902 914 14 125 678 15 028 592
CONDENSED STATEMENT OF CASH FLOWS
For the six months ended 30 September 2012
Unaudited Unaudited Audited
6 months 6 months Financial
ended ended year ended
30 September 30 September 31 March
2012 2011 2012
R R R
Net cash generated from/(utilised in) operating
activities 8 460 581 (3 518 396)
Cash generated from/(absorbed by) operations 11 179 201 (3 519 641)
Interest received 1 713 588 226 646
Finance costs paid (4 432 208) (225 401)
Net cash utilised in investing activities (445 797 591) (135 978 584)
Acquisition of businesses (net of cash acquired) (399 997 591) (135 978 584)
Loans advanced (45 800 000)
Net cash generated from financing activities 438 744 349 139 497 238
Proceeds from issue of linked units 413 996 464 4 900
Proceeds from secured borrowings 18 737 141 88 000 090
Proceeds from unsecured borrowings 6 010 744 51 492 248
Net movement in cash and cash equivalents 1 407 339 258
Cash and cash equivalents at the beginning of
the financial year 358 100
Cash and cash equivalents at the end of the
financial year 1 407 697 358
Segmental report
Total
property Admin-
Offices Retail portfolio istration Total
R R R R R
Property portfolio 20 908 206 7 009 449 27 917 655 27 917 655
Rental income 15 193 195 5 448 417 20 641 612 20 641 612
Straight line rental income
accrual 5 715 011 1 561 032 7 276 043 7 276 043
Recoveries 3 026 060 2 960 733 5 986 793 5 986 793
Total revenue 23 934 266 9 970 182 33 904 448 33 904 448
Property expenses (2 960 588) (3 399 000) (6 359 588) (6 359 588)
Investment and other income 3 222 411 3 222 411
Administration and corporate
costs (1 172 942) (1 172 942)
Gains on bargain purchases 13 200 000 7 171 000 20 371 000 20 371 000
Changes in fair values of
properties and financial
instruments (8 039 718) (1 561 032) (9 600 750) (9 600 750)
Property acquisition costs (4 526 678) (2 319 611) (6 846 289) (6 846 289)
Finance costs (6 298 105) (6 298 105)
Segmental profit before
debenture interest and taxation 21 607 282 9 861 539 31 468 821 (4 248 636) 27 220 185
Investment properties 447 300 000 139 171 000 586 471 000 586 471 000
Other assets 2 825 371 2 321 069 5 146 440 52 829 648 57 976 088
Total assets 450 125 371 141 492 069 591 617 440 52 829 648 644 447 088
Total liabilities (excluding
debentures and deferred tax) 125 891 066 32 956 783 158 847 849 4 381 856 163 229 705
3. Acquisitions and commitments
Annuity acquired three properties during the six month period under review namely the Sasfin building for
R167,9 million, Oakfields Shopping Centre for R140,7 million and the Cell C building for R125 million. The
properties were financed through a combination of funds raised on listing, vendor loans and a vendor placement
of linked units for a portion of the Sasfin building acquisition price.
As at 30 September 2012 the company was committed to acquire the Ethos building for an amount of
R46 million. Details relating to the transaction were announced on SENS on 8 June 2012.
4. Related party transactions
During the six month period under review, the Company paid transaction fees of R4 335 775 and asset
management fees of R501 269 to Annuity Asset Managers (Pty) Ltd ("the Asset Manager") and property
management fees of R300 350 to Annuity Property Managers (Pty) Ltd, which two entities are considered to be
related parties to Annuity. Irrevocable loans from related parties amounting to R51 million were converted into
Annuity linked units on 4 April 2012 and bridging loans of R1 million were repaid to related parties during the
period. The Company has granted to Sasfin Financial Services (Pty) Ltd who is a 25% shareholder in the Asset
Manager, the right to sell to the Company, its shareholding in, and claims against the Asset Manager at a price
for the shares to be determined in terms of a formula which is 0.875% of the Company's enterprise value, being
the market capitalisation plus debt, less trade creditors and cash. The shares and claims so acquired shall
subsequently be purchased and cancelled by the Asset Manager in consideration for a reduction in the annual
asset management fee charged by the Asset Manager to the Company, which has the effect of making the total
transaction non-dilutionary to earnings during the term of the asset management contract.
5. Business combinations
The Company acquired a 100% interest in all the assets of three letting enterprises during the period under
review. The Sasfin building and Oakfields Shopping Centre letting enterprises were acquired with effect from 3
May 2012 and the Cell C letting enterprise was acquired with effect from 22 June 2012. The letting enterprises
were acquired as going concerns and were paid in cash for the Oakfields shopping centre and Cell C building
and partly in cash and linked units for the Sasfin building.
Details of the net assets acquired are as follows:
R
Investment properties at acquisition price 433 577 591
Portion settled in linked units (33 580 000)
Portion settled in cash 399 997 591
The investment properties were recognised at their fair values of R442 471 000 resulting in a gain on bargain
purchase of R20 371 000.
The net operating income (excluding the straight lining of income accrual) earned by the Company from
these three properties was R14 353 566 for the period under review. Based on the net operating income for
the period of ownership the Company would have earned R19 395 777 if these properties were owned for
the entire six month period.
6. Property portfolio
Geographical profile % of total Western Cape Gauteng Total
By revenue 12 030 769 44 038 928 56 069 697
By rentable area (m2) 11 320 24 705 36 025
Sectoral profile Offices Retail Total
By revenue 39 459 388 16 610 309 56 069 697
By rentable area (m2) 24 587 11 438 36 025
Weighted average monthly rental per m2 91.64 84.15
Geographical profile % of total Western Cape Gauteng Total
Weighted average
rental escalation 8,11% 7,29%
Vacancy percentage 0% 0,25% 0,17%
Lease expiry profile
by rentable area
Expiring within one year 3,8 320 1 058 1 378
Expiring between one
and two years 2,4 869 869
Expiring between two
and three years 16,9 5 819 280 6 099
Expiring between three
and four years 9,1 3 245 3 245
Expiring between four
and five years 1,0 372 372
Expiring after five years 66,8 18 448 5 614 24 062
Lease expiry profile
by revenue
Expiring within one year 0,2 145 200 793 672 938 872
Expiring between one
and two years 0,3 1 815 371 1 815 371
Expiring between two
and three years 12,1 37 780 383 23 543 075 61 323 458
Expiring between three
and four years 2,7 13 896 944 13 896 944
Expiring between four
and five years 0,5 2 543 398 2 543 398
Expiring after five years 84,2 369 160 371 58 981 439 428 141 810
Tenant profile "A" Tenants "B" Tenants "C" Tenants Total
By rentable area 30 873 1 285 3 867 36 025
Annualised property
yield 8,8% 9,2% 8,96%
7. Development and capital Projects
The Company was not engaged in any developments or capital projects during the
financial period under review.
8. Borrowings
The Company's borrowings at 30 September 2012 consisted of a R61,5 million secured
loan from Rand Merchant Bank (a division of FirstRand Bank Ltd) and a three year secured
loan from Standard Bank of R47,3 million. The Rand Merchant Bank Loan consists of a
three year facility of R77 million of which R60 million bears interest at a fixed rate of 8,83%
and R17 million bears interest at a floating rate of prime rate less 70 basis points. Surplus
cash is invested into the R17 million floating facility to ensure effective cash management.
An initial bridging loan from Rand Merchant Bank of R12 million was repaid during the
period. The Standard Bank loan bears interest at a floating rate of 3 month JIBAR plus
222 basis points. The base rate was fixed with a swap at 6,04%.
At 30 September 2012, Annuity's loan to value ratio was 26,8% based on investment
properties valued at R586,5 million.
9. Share and debenture capital
The Company issued 11 026 027 linked units at a price of 462,5 cents per linked unit on
the conversion on 4 April 2012 of the irrevocable loans advanced to Annuity by the initial
pre listing investors. A further 82 313 314 linked units were issued at 500 cents per linked
unit on Annuity's listing date of 4 May 2012 consisting of 75 597 314 linked units issued
in terms of the private placement and 6 716 000 linked units issued to the vendor of the
Sasfin building.
10. Events subsequent to reporting date
The Company has concluded agreements to acquire five properties ("the acquisition
portfolio") from three different groups of vendors. Linked unitholders are referred to
the circular dated 25 October 2012 ("the Circular") which sets out the detail on these
transactions.
11. Strategy and prospects
Annuity's strategy is to establish and build a balanced property portfolio consisting of
income producing properties in the commercial, retail and industrial sectors. Its growth
and investment philosophy is focused on delivering sustainable real income distribution
and capital growth over the long term through active portfolio management and its
continued focus on quality properties in the larger metropolitan areas.
Despite a challenging operating and economic climate, Annuity has performed in
accordance with the financial targets set at the time of its listing on the JSE in May
2012. Looking forward, the recently announced acquisitions of the acquisition portfolio,
as set out in further detail in the Circular together with Annuity's existing properties, are
expected to provide Annuity with a strong platform from which to leverage its growth
and investment strategy. The acquisition portfolio comprises high quality properties which
are being acquired for R817 million, and contains a large proportion of national tenants,
underpinned by long leases and strong underlying covenants, which is consistent with
Annuity's strategy of pursuing long term value enhancing acquisitions.
12. Directorate
Panico Theocharides was appointed as an executive director and Sarah J Williams as a
non-executive director with effect from 2 April 2012 and 17 April 2012 respectively.
13. Payment of dividend and interest distribution number 1
Notice is hereby given that the directors have declared an interim cash dividend
and interest distribution of 19.15 cents per linked unit for the period 1 April 2012 to
30 September 2012 consisting of a gross cash dividend of 0.0383 cents (0.03256 cents
net of dividend withholding tax) and interest of 19.1117 cents.
The dividend portion has been declared from income reserves and no secondary tax on
companies' credit has been used.
A dividend withholding tax of 15% will be applicable on the dividend portion to all linked
unitholders who are not exempt.
The issued share capital at the declaration date is 93 340 341 linked units.
The salient dates for the distribution will be as follows:
2012
Last day to trade cum distribution Friday, 7 December
Linked units trade ex distribution Monday, 10 December
Record date Friday, 14 December
Payment date Tuesday, 18 December
Linked unitholders may not dematerialise or rematerialise their linked units between
Monday, 10 December 2012 and Friday, 14 December 2012 both days included.
14. Basis of preparation and accounting policies
The financial statements are prepared in accordance with International Financial
Reporting Standards (IFRS), including the presentation and disclosure requirements of
IAS34, the interpretations issued respectively by the International Accounting Standards
Board, the International Financial Reporting Interpretations Committee (IFRIC) of the IASB
and the AC500 series issued by the South African Institute of Chartered Accountants and
the requirements of the Companies Act of South Africa, 2008, as amended.
The financial results above include disclosure of earnings and headline earnings per linked
unit, which is obligatory in terms of IAS33, Earnings per share, and the JSE Listings
Requirements. The directors are of the view that this disclosure is not meaningful to
investors as the shares are traded as part of a linked unit and practically all the distributable
earnings are distributed in the form of debenture interest with a small dividend portion in
the ratio of 500: 1. In addition, headline earnings include fair value adjustments for financial
liabilities, accounting adjustments to account for lease income on a straight line basis,
once off property acquisition costs, as well as other non-cash accounting adjustments
which do not affect distributable earnings. The calculation of distributable earnings per
linked unit as disclosed above is therefore more meaningful to investors.
These interim financial statements have not been reviewed or audited by the Company's
independent external auditors.
The accounting policies are consistent with those applied in the most recent audited
financial statements for the year ended 31 March 2012.
The financial results have been prepared by Mr S Strydom CA(SA), the Chief Financial
Officer of the Company.
By order of the Board
PJ Moleketi (Chairman) P Theocharides (Joint Chief Executive Officer)
22 November 2012
Directors Registered Office
PJ Moleketi* (Chairman); P Theocharides (Joint CEO) Boundary Place Office Park, 18 Rivonia Road
D Greenberg (Joint CEO); AM Chait*; M Ettin#; EC Loubser*; Illovo, Sandton.
DE Rubenstein; RDEB Sassoon# (alternate director); Tel: 011 215 6442 Fax: 086 718 3622
DT Soondarjee#; S Strydom; SJ Williams* Email: info@annuityproperties.co.za
*Independent non-executive director #Non-executive director
Sponsor
RAND MERCHANT BANK (A division of FirstRand Bank Limited)
www.annuityproperties.co.za
Date: 22/11/2012 05:35:00 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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