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Audited Results For The Year Ended 30 September 2012
ARROWHEAD PROPERTIES LIMITED
(formerly Nervada Trading 13 (Proprietary) Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2011/000308/06)
JSE code for A-linked units: AWA
ISIN for A-linked units: ZAE000158101
JSE code for B-linked units: AWB
ISIN for B-linked units: ZAE000158119
(“Arrowhead” or “the company”)
AUDITED RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2012
- distribution of 100,58 cents per combined A and B linked unit 2,2% ahead of forecast
distribution per linked unit
Financial performance for the year ended 30 September 2012
R’000
Revenue (excluding straight line rental income) 259 735
Property expenses (92 567)
Administration and corporate costs (14 311)
Finance expense (50 109)
Finance income 25 784
Distributable income 128 532
Distributable earnings payable to Redefine Properties Limited
(“Redefine”) for the months of October 2011 and November 2011 21 220
Distribution payable to Arrowhead Linked Unit Holders pursuant to the
unbundling for the month of December 2011 7 086
Distribution for the quarter ended 31 March 2012 21 615
Distribution for the quarter ended 30 June 2012 34 229
Distribution for the quarter ended 30 September 2012 44 382
Summary of financial performance
Audited year
ended 30
September 2012
Distribution per A-linked unit for the ten months ended 30 September 2012
(cents) 50,00
Distribution per B-linked unit for the ten months ended 30 September 2012
(cents) 33,82
Annualised distribution per A-linked unit (cents) 60,00
Annualised distribution per B-linked unit (cents) 40,58
A-linked units in issue 170 562 166
B-linked units in issue 170 562 166
Net asset value per A- and B-linked unit excluding deferred taxation
(cents) 484
Net asset value per A- and B-linked unit (cents) 511
Gearing ratio** 28%
* Net asset value includes total equity attributable to equity holders and linked debentures.
**The gearing ratio is calculated by dividing interest-bearing liabilities, excluding linked
debenture liabilities, by investment properties. Surplus cash is deposited into the company’s
access debt facilities. At 30 September 2012, Arrowhead`s net borrowings of R615 million translate
to a gearing ratio of 28%.
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Set out below are extracts from the annual financial statements for the year ended 30 September 2012.
Arrowhead’s integrated report for the year ended 30 September 2012, containing a notice of annual
general meeting which is to be held at the company’s offices at 10h00 on 30 January 2013 and
incorporating the audited annual financial statements for the year ended 30 September 2012, has
been posted to linked unitholders today and is available in hard copy from Arrowhead’s offices
at 2nd floor, 18 Melrose Boulevard, Melrose Arch, or in electronic form at the company’s website,
www.arrowheadproperties.co.za.
Nature of business
Arrowhead is a property loan stock company holding a diverse portfolio of properties in secondary
locations throughout South Africa. Its main focus is on paying growing income returns to its
investors. This will be achieved through escalating rentals in terms of leases with tenants,
satisfactory renewal of leases with existing tenants, renting of vacant space within the property
portfolio, managing and reducing, where possible, costs associated with the property portfolio and
by acquiring revenue enhancing properties.
The results for the year ended 30 September 2012 is Arrowhead’s maiden set of results as a listed
company and the performance of the company in this period has been satisfactory.
Commentary
Revenue is inclusive of rentals and utility recoveries and is ahead of the forecast in the
prelisting statement mainly due to a change in the administration of electricity during the year.
A third party had administered Arrowhead’s electricity management and collection, for its own
account, since the acquisition of the property portfolio until the end of February 2012. From
1 March 2012 Arrowhead’s property managers, JHI, assumed the electricity administration for
Arrowhead’s account.
Included within revenue is an increased electricity recovery due to the change in March 2012 to
the internal electricity administration, in terms of which Arrowhead, through JHI, now recovers
electricity usage directly from its tenants. This has also resulted in higher property expenditure.
Excluding the effects of the electricity recoveries, revenue would be only just ahead of forecast
notwithstanding the inclusion of rental income arising from acquisitions for a portion of the
year. This is largely due to two underperforming buildings in the Western Cape, de Goede Hoop and
Parc du Bel.
The de Goede Hoop building is currently unoccupied and the Parc du Bel building was tenanted by
two government departments and a Spur franchisee. One government department has subsequently
vacated its premises.
The ratio of actual property expenses to income at 36% (inclusive of recoveries) is considered
satisfactory when compared to forecast after taking into consideration the change in the process
of electricity administration as set out under the revenue above.
If the additional electricity recovery and expenditure were excluded the actual expense ratio would
compare favourably with forecast.
Finance charges are lower than originally forecast since the drawdown on loan facilities took place
in the latter part of November whereas the forecast assumed the drawdown in September. This resulted
in higher distributable income accruing to Redefine for the months of October and November 2011.
The effective interest rate for the year was 8,13 %, after taking into account the later drawdown and
deposits of excess funds into the access facility, whilst the weighted interest rate on the
company’s borrowings was 8,97%.
Finance income includes an amount of R24 million in respect of antecedent interest, resulting from the
issuing of new Arrowhead units to fund acquisitions during the financial period and in respect of which
income had not been earned for a full period.
The company has implemented the acquisition of R532 million of investment properties at year end, and
implemented an additional R153 million of investment after year end. Investment properties have been
revalued by R230 million in aggregate.
During the year 168 830 102 linked units were issued to fund the acquisition of investment properties
and 1 732 064 were issued to the executive directors, as set out in the pre-listing statement dated
{A404/00113020.DOC/ANNOUNCE/SJ}
30 September 2011. Included in the 170 562 166 linked units in issue at 30 September 2012 was the
8 528 000 units issued pursuant to the general issue of units for cash on 28 September 2012 at an
effective price of R10.60 per combined A and B linked unit.
PROSPECTS
It is expected that Arrowhead will achieve total distributions for the 2013 financial year of R1,11
for one A plus one B unit, an increase of 10 cents (10%) on the annualised 2012 distributable income.
All the growth will be attributable to the B units whose income will increase by 25% whereas the A unit
sees no growth. The auditors have not reported on the forecast upon which the distribution is based.
Payment of distributions for the quarter ended 30 September 2012
As announced on SENS on 13 November 2012, the Board has approved the interest distributions
(distribution number 4) of 15,00 cents per A-linked unit and 11,02 cents per B-linked unit for the
quarter ended 30 September 2012 in accordance with the abbreviated timetable set out below:
2012
Last date to trade cum distribution Friday, 30 November
Linked units trade ex distribution Monday, 3 December
Record date Friday, 7 December
Payment date Monday, 10 December
Linked unit certificates may not be dematerialised or rematerialised between Monday, 3 December 2012
and Friday, 7 December 2012, both days inclusive.
Basis of preparation
The results for the year ended 30 September 2012 have been audited by the company`s independent
auditors, PKF (Jhb) Inc. The financial statements have been prepared in accordance with the requirements
of International Financial Reporting Standards, the AC 500 series of interpretations, IAS 34: Interim
Financial Reporting, the JSE Listings Requirements and the requirements of the South African Companies
Act, 2008. These results have been prepared under the supervision of Imraan Suleman CA(SA), Arrowhead’s
Chief Financial Officer.
The accounting policies adopted are consistent with those applied in the prior period.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
30September 30 September
2012 2011
R'000 R'000
Rental income 259 735 17 015
Straight-line rental income accrual 10 490 -
Total revenue 270 225 17 015
Property expenses (92 567) (4 207)
Administration and corporate costs (14 311) (1 987)
Net operating profit 163 347 10 821
Sign on bonuses (13 545) -
Profit from operations 149 802 10 821
Changes in fair values 231 377 7 258
Loan facility interest (53 746) (16 356)
Amortisation of debenture interest 21 840 -
Finance income 25 784 42
(Loss)/Profit before debenture interest and taxation 375 057 1 765
Debenture interest (128 532)
(Loss)/Profit before taxation 246 525 1 765
Taxation (58 022)
(Loss)/Profit for the year after taxation 188 503 1 765
Other comprehensive income - -
Total comprehensive (loss)/income for the year
attributable to equity holders 188 503 1 765
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Reconciliation of (loss)/earnings, headline
(loss)/earnings and distributable earnings
(Loss)/Profit for the year attributable to equity
holders 188 503 1 765
Debenture interest 128 532 -
(Loss)/Earnings -
Headline (loss)/earnings attributable to linked
unitholders 317 035 1 765
Change in fair value of properties (net of deferred
tax adjustments) (187 971) (7 258)
Deferred tax –CGT rate adjustments 12 137 -
Headline profit/(loss) attributable to linked unit
holders 141 201 (5 493)
Straight-line rental income accrual (net of deferred
taxation) (7 553) -
Deferred taxation – other adjustments (459) -
Amortisation of debenture premium (21 840) -
Sign on bonus for directors 13 545 -
Finance charges on finance lease liability 3 637 3 621
Professional services and consulting fees - 1 872
Distributable earnings attributable to linked unit
holders 128 531 -
Number of A-linked units in issue 170 562 -
Number of B-linked units in issue 170 562 -
Total number of linked units 341 124 -
Weighted average number of A-linked units in issue 92 317 -
Weighted average number of B-linked units in issue 92 317 -
Basic and diluted earnings per A- linked unit (cents) 182,49 -
Basic and diluted earnings per B- linked unit (cents) 160,93 -
Headline and diluted headline earnings per A- linked unit
(cents) 156,87 -
Headline and diluted headline earnings per B- linked unit
(cents) 135,31 -
CONDENSED STATEMENT OF FINANCIAL POSITION
Audited Audited
30 September 30 September
2012 2011
R'000 R'000
ASSETS
Non-current assets 2 228 916 1 440 630
Investment property 2 222 210 1 440 591
Property, Plant and Equipment 833 39
Loans to Directors 5 873 -
Current assets 216 695 21 233
Trade and other receivables 26 559 19 427
Cash and cash equivalents 190 136 1 806
Non-current assets held for sale 13 952
Total assets 2 459 563 1 461 863
EQUITY AND LIABILITIES
Shareholders interest 190 269 625 283
Stated capital - -
Units to be issued - 623 518
Reserves 190 269 1 765
Non-current liabilities-debentures and debenture
premium 1 460 145 -
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Secured financial liabilities 445 698 813 444
Deferred taxation 93 722
Current liabilities 269 729 836 580
Secured financial liabilities 167 494 -
Distributions payable 44 382
Other loan - -
Trade and other payables 57 853 23 135
Total equity and liabilities 2 459 563 1 461 863
Net asset value per A- and B-linked unit (cents) 511 -
Net asset value per A- and B-linked unit excluding
deferred taxation (cents) 484 -
CONDENSED STATEMENT OF CHANGES IN EQUITY
Stated capital
Reserves
R'000 R'000
Balance at 5 January 2011 - -
Total comprehensive income for the year - 1 765
Issue of Shares - -
Balance at 30 September 2011 - 1 765
Share based payments - -
Transfer to debenture capital - -
Total comprehensive income for the period - 188 503
Balance as at 30 September 2012 - 190 268
Total
R'000
Balance at 5 January 2011 -
Total comprehensive income for the year 1 765
Issue of Shares 100
Balance at 30 September 2011 1 765
Share based payments -
Transfer to debenture capital -
Total comprehensive income for the period 188 503
Balance as at 30 September 2012 190 268
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited
Year ended
30 September
2012
R'000
Cash flows from operating activities 65 928
Cash outflows from investing activities (307 550)
Cash inflows/(outflows) from financing activities 429 952
Net movement in cash and cash equivalents 188 330
Cash and cash equivalents at the beginning of the year 1 806
Cash and cash equivalents at the end of the year 190 136
{A404/00113020.DOC/ANNOUNCE/SJ}
Gauteng Kwazulu Natal Eastern Cape Other Total
R 000 R000 R000 R000 R000
Revenue 136 801 52 561 26 991 43 103 259 458
Straight line effect of lease 5 880 1 575 266 2 769 10 490
Other income 3 4 9 258 276
Property expenses (51 043) 17 862) (8 524) (42 992) (120 423)
Operating income 91 641 36 279 18 743 3 138 149 802
Finance income 285 144 20 25 333 25 784
Amortisation of debenture premium - - - 21 840 21 840
Finance cost (16) (5) (8) (53 716) (53 746)
Net operating income 91 909 36 418 18 755 3 403 143 680
Fair value adjustment 66 189 33 741 97 582 33 863 231 377
Reportable segment (loss) / profit 158 099 70 160 116 338 30 459 375 057
before debenture interest and tax
Debenture interest - - - (128 531) (128 531)
Taxation - - - (58 022) (58 022)
Reportable segment (loss) / profit 158 099 70 160 116 338 (156 094) 188 503
after debenture interest and tax
Reportable segment asset 1 352 283 407 781 295 072 404 425 2 459 563
Reportable segment liabilities (21 369) (9 988) (4 597) (2 233 340) (2 269 295)
By order of the Board
26 November 2012
Directors: T Adler* (Chairperson), G Leissner (CEO), I Suleman(CFO),
M Kaplan (COO), S Noik*, M Nell*, E Stroebel*
* Independent non-executive
All directors are South African
Registered office: 42 Wierda Road West, Wierda Valley, 2196
Transfer secretaries: Computershare Investor Services (Proprietary) Limited
Sponsor: Java Capital
Company secretary: Probity Business Services (Proprietary) Limited
Website: www.arrowheadproperties.co.za
{A404/00113020.DOC/ANNOUNCE/SJ}
Date: 26/11/2012 09:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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