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Condensed audited consolidated financial statements for the year ended 31 December 2012
Resilient Property Income Fund Limited
Incorporated in the Republic of South Africa
Reg no 2002/016851/06
Share code RES
ISIN ZAE000043642
(“Resilient” or “the group”)
Condensed audited consolidated financial statements for the year
ended 31 December 2012
Directors’ commentary
Total distributions for 2012 were 255,67 cents per linked unit, an
increase of 10,82% over the distributions for the previous financial year.
The distribution for the six month period to December 2012 was 134,93
cents and that of the interim period was 120,74 cents.
This pleasing performance was achieved mainly due to the strong
performance of Resilient’s property portfolio. Turnover rentals received
increased from R16,4 million to R22,1 million which reflects increasing
trading densities being achieved. This bodes well for rental escalations
in the future. Resilient continued to benefit from the reduction in the
cost of borrowings as a result of the expiring interest rate swaps being
replaced by new interest rate swaps at lower rates. The group’s equity
investments also performed ahead of budget, particularly the investment in
New Europe Property Investments plc (“Nepi”) where the Rand depreciated
against the Euro from the budgeted rate of R10,00. Resilient does not
hedge its currency exposure.
The best performing malls were Brits Mall, Diamond Pavilion, The Grove,
Village Mall Kathu and Mall of the North, all of which achieved
significant growth in footcount and increases in trading densities. Brits
Mall and Mall of the North are relatively new centres and have continued
to establish dominance in their markets. Tzaneng Mall and Jabulani Mall
achieved limited growth. Tzaneng Mall was affected by the increased
dominance of Mall of the North and similarly Jabulani Mall by the opening
of Protea Glen, a new mall in Soweto.
1 PROPERTY DEVELOPMENTS
Secunda Mall
Following the approval of additional rights and due to strong tenant
demand, the size of the development was increased to a GLA of 54 000m2
compared with the 45 000m2 initially planned. The mall will be anchored by
Checkers Hypermarket, Edgars, Game, Pick ‘n Pay and Woolworths and will
include all major national clothing retailers. The mall is scheduled to
open in October 2013 and is on target to achieve a yield of 9% on the cost
of R262 million for Resilient’s portion. Resilient has a 40% interest in
the property and Sasol Pension Fund and local consortiums own 40% and 20%
respectively.
Soshanguve Crossing
Resilient has a 55% interest in this retail property in Soshanguve, north
of Pretoria. The proposed 35 000m2 mall will have four anchors namely
Edgars, Game, Shoprite and Spar and is projected to yield 8% on a budgeted
cost of R261 million for Resilient’s portion. Earthworks are nearing
completion and the mall is scheduled to open in April 2014. The board has
agreed to a reduced initial yield to accommodate a fourth anchor ensuring
dominance in the mall’s target market.
Sterkspruit Plaza
This 10 700m2 retail centre anchored by Shoprite opened on schedule in
October 2012 at its projected return of 8%. The centre performed well
during November and December and a second phase will be considered should
this performance continue. Resilient owns 82% of the property with local
partners owning the balance.
Tubatse Crossing
The construction of this 44 500m2 GLA regional mall commenced in May 2012
and the first phase is scheduled to open in May 2013. The mall will be
anchored by Edgars, Game, Pick ‘n Pay and Shoprite and will include all
major national clothing retailers. The development is projected to achieve
a yield of 9% at a cost of R580 million. After losing an application for
an interdict against Resilient with costs, the litigation by a competing
developer has not yet proceeded.
2 PROPERTY EXTENSIONS
Circus Triangle Mthatha
A 7 100m2 GLA extension to the mall to accommodate Edgars and the expansion
of Shoprite and a number of the national clothing retailers commenced in
July 2012 and is on schedule to open in May 2013. As the extension
involves building structured parking, a yield of 8% is projected on the
cost of R155 million. In addition to increasing its offering, the
expansion will significantly improve both the horizontal and vertical
reticulation of the mall.
The Grove
An 11 600m2 extension to The Grove to introduce additional entertainment
(including 8 cinemas and an ice rink) has commenced and is scheduled for
completion in November 2013. The extension is budgeted to achieve a
dilutionary yield of 6%. It is anticipated that the increased
entertainment offering will result in a significant increase in footcount
and that the resulting higher trading densities will compensate for the
initial low yield.
Highveld Mall
The phased extension to Highveld Mall opened on schedule in November 2012
within budget at a yield of 9%. Game, HiFi Corporation and a number of
leading fashion brands were introduced. Incredible Connection has been
relocated and expanded and the @Home was expanded to an @HomeLivingSpace
concept store. A number of new brands including Earthchild, Factorie,
Forever New, Fabiani, Guess and Levisons were introduced. A further
extension to increase the size of Edgars and Truworths has commenced and
is scheduled for opening in July 2013. This extension is also projected to
yield 9%. Resilient has a 60% interest in Highveld Mall.
Jabulani Mall
Construction of a 2 350m2 GLA extension to Jabulani Mall has commenced and
is scheduled for completion in November 2013. This extension is budgeted
to cost R12 million for Resilient’s 55% interest and to achieve a yield of
11%.
Northam Plaza
An 8 300m2 GLA extension to accommodate Game has been approved at a
projected yield of 8% on a cost of R103 million. Construction has
commenced and is scheduled for completion in October 2013.
Village Mall Kathu
Construction of the 7 300m2 GLA extension to introduce Game as a further
anchor has commenced. Completion is scheduled for November 2013 at a
projected cost of R110 million and a yield of 7%.
Rivonia Village
The 2 200m2 GLA extension to the centre to accommodate Checkers commenced
in November 2012 and is due for completion in November 2013. A yield of 7%
is projected on the cost of R53 million, however, this excludes income
from the additional 64 parking bays being created. The extension will
introduce a second anchor and will improve vertical reticulation.
3 RESILIENT AFRICA
The board has committed R600 million to this initiative with Standard Bank
and Shoprite Checkers as partners. Considerable progress has been made in
establishing the necessary legal structures in Mauritius and Nigeria to
enable the partnership to commence operations. Resilient Africa has
entered into memoranda of understanding with five Nigerian land owners.
4 INVESTMENTS
Dec 2012 Dec 2011
Number Carrying Number Carrying
of units/ value of units/ value
Investment shares (R’000) shares (R’000)
Capital (CPL) 181 300 000 1 916 341 208 000 000 1 830 400
Fortress B (FFB) 63 000 000 441 000 63 000 000 318 150
Nepi (NEP) 21 517 635 1 140 434 19 100 000 620 750
Rockcastle (ROC) 22 000 000 222 200 – –
3 719 975 2 769 300
Subsequent to the financial year end, Resilient sold the management
company of its ETF business, PropTrax, to Grindrod Bank Limited for
R4 million. Resilient will no longer be involved in the management of the
business but will retain a 50% economic interest. The sale is subject to
suspensive conditions.
5 VACANCIES
Vacancies improved from 1,9% at December 2011 to 1,7% at December 2012.
Apart from The Galleria and Arbour Crossing, most of the vacancies are
planned vacancies to accommodate extensions and redevelopments.
6 BORROWINGS
Five year secured facilities of R965 million and R800 million were
accepted from Standard Bank and RMB respectively to repay expiring
facilities and fund the development pipeline.
Resilient has utilised R1,804 billion of its R2 billion unsecured DMTN
programme. The intention is to finance 50% of Resilient’s borrowings on an
unsecured basis and the board has approved the increase of the DMTN
programme from the current R2 billion to R3 billion.
7 PROSPECTS
The board is confident that growth in distributions of approximately 10%
will be achieved for the 2013 financial year. The growth is based on the
assumptions that a stable macro-economic environment will prevail, no
major corporate failures will occur and that tenants will be able to
absorb the recovery of rising utility costs. Budgeted rental income was
based on contractual escalations and market related renewals. This
forecast has not been audited or reviewed by Resilient’s auditors.
By order of the board
Des de Beer Nick Hanekom
Managing director Financial director
Johannesburg
6 February 2013
Consolidated statement of financial position
Audited Audited
Dec 2012 Dec 2011
R’000 R'000
ASSETS
Non-current assets 15 810 690 13 063 400
Investment property 9 896 272 8 759 377
Straight-lining of rental revenue adjustment 173 474 122 359
Investment property under development 824 660 346 376
Investments 3 719 975 2 769 300
Intangible asset 26 422 26 422
Resilient Unit Purchase Trust loans 374 587 420 320
Loans to employees to acquire Capital units 245 897 279 249
Loans to BEE partners 415 947 221 632
Loans to development partners 133 456 118 365
Current assets 87 840 47 068
Loans to development partners 4 302 6 885
Trade and other receivables 82 412 36 357
Cash and cash equivalents 1 126 3 826
Total assets 15 898 530 13 110 468
EQUITY AND LIABILITIES
Total equity attributable to equity holders 8 006 714 6 573 956
Share capital 2 749 2 697
Share premium 2 712 168 2 490 931
Non-distributable reserves 5 291 797 4 080 328
Retained earnings – –
Total liabilities 7 891 816 6 536 512
Non-current liabilities 5 677 981 4 680 213
Linked debentures 1 319 680 1 294 681
Interest-bearing borrowings 2 954 973 2 690 016
BEE instrument 337 640 150 350
Deferred tax 1 065 688 545 166
Current liabilities 2 213 835 1 856 299
Trade and other payables 359 021 220 905
Linked debenture interest payable 370 967 327 312
Income tax payable 1 318 876
Interest-bearing borrowings 1 482 529 1 307 206
Total equity and liabilities 15 898 530 13 110 468
Consolidated statement of comprehensive income
Audited Audited
for the year for the year
ended ended
Dec 2012 Dec 2011
R’000 R'000
Net rental and related revenue 793 777 603 423
Recoveries and contractual rental revenue 1 140 230 843 738
Straight-lining of rental revenue adjustment 51 115 32 761
Rental revenue 1 191 345 876 499
Property operating expenses (397 568) (273 076)
Distributable income from investments 210 718 181 283
Fair value gain on investment property
and investments 1 955 550 933 326
Fair value gain on investment property 1 061 731 568 696
Adjustment resulting from straight-lining
of rental revenue (51 115) (32 761)
Fair value gain on investments 944 934 397 391
Fair value loss on BEE instrument (187 290) (31 450)
Management fees received from PFM 79 065 63 609
Administrative expenses (78 616) (71 353)
Distributable income from associate – 13 959
Profit before net finance costs 2 773 204 1 692 797
Net finance costs (1 036 608) (788 702)
Finance income 93 479 99 793
Interest from loans 75 975 70 935
Fair value adjustment on interest rate
derivatives 13 910 8 064
Interest on linked units issued cum
distribution 3 594 20 794
Finance costs (1 130 087) (888 495)
Interest on borrowings (365 137) (289 089)
Capitalised interest 37 697 43 396
Fair value adjustment on interest rate
derivatives (106 014) (42 491)
Interest to linked debenture holders
– interim (325 666) (272 999)
– final (370 967) (327 312)
Profit before income tax expense 1 736 596 904 095
Income tax expense (525 127) (133 955)
Profit for the year attributable
to equity holders 1 211 469 770 140
Total comprehensive income for the year 1 211 469 770 140
Basic earnings per share (cents) 444,85 296,57
Basic earnings per linked unit (cents) 700,66 527,75
Diluted earnings per share (cents) 427,87 284,72
Diluted earnings per linked unit (cents) 673,91 506,65
Consolidated statement of changes in equity
Non-
Share Share distributable Retained
capital premium reserves earnings Total
Audited R’000 R'000 R'000 R'000 R'000
Balance at
31 December 2010 2 471 1 904 106 3 310 188 – 5 216 765
Issue of units 226 586 825 587 051
Total comprehensive
income for the year 770 140 770 140
Transfer to
non-distributable
reserves 770 140 (770 140) –
Balance at
31 December 2011 2 697 2 490 931 4 080 328 – 6 573 956
Issue of 5 208 000
units on
2 October 2012 52 221 237 221 289
Total comprehensive
income for
the year 1 211 469 1 211 469
Transfer to
non-distributable
reserves 1 211 469 (1 211 469) –
Balance at
31 December 2012 2 749 2 712 168 5 291 797 – 8 006 714
Non-distributable reserves comprise those profits and losses that are not
distributable to unitholders and are made up of revaluation adjustments on
investment property, investment property held for sale and investments, the
share of post-acquisition reserves of associates, straight-lining adjustments
and other non-distributable balances.
Reconciliation of profit for the year to headline earnings and distributable
income
Audited Audited
for the year for the year
ended ended
Dec 2012 Dec 2011
R’000 R'000
Basic earnings (shares) – profit for the
year attributable to equity holders 1 211 469 770 140
– interest to linked debenture holders 696 633 600 311
Basic earnings (linked units) 1 908 102 1 370 451
Adjusted for: (661 218) (451 076)
– fair value gain on investment property (1 010 616) (535 935)
– income tax effect 349 398 84 859
Headline earnings (linked units) 1 246 884 919 375
Straight-lining of rental revenue adjustment (51 115) (32 761)
Fair value gain on investments (944 934) (397 391)
Fair value loss on BEE instrument 187 290 31 450
Fair value adjustment on interest rate
derivatives 92 104 34 427
Interest paid by BEE SPV 18 315 21 057
Income received by BEE SPV (27 640) (24 942)
Income tax effect 175 729 49 096
Distributable income 696 633 600 311
Less: distribution declared (696 633) (600 311)
Income not distributed – –
Headline earnings per share (cents) 202,05 122,87
Headline earnings per linked unit (cents) 457,86 354,04
Diluted headline earnings per share (cents) 194,34 117,96
Diluted headline earnings per linked unit (cents) 440,38 339,89
Basic earnings per share, basic earnings per linked unit, headline
earnings per share and headline earnings per linked unit are based on the
weighted average of 272 329 259 (2011: 259 679 640) shares/linked units in
issue during the year.
Diluted earnings per share, diluted earnings per linked unit, diluted
headline earnings per share and diluted headline earnings per linked unit
are based on the weighted average of 283 140 070 (2011: 270 490 451)
shares/linked units in issue during the year.
Abridged consolidated statement of cash flows
Audited Audited
for the year for the year
ended ended
Dec 2012 Dec 2011
R’000 R'000
Cash inflow from operating activities 11 209 47 414
Cash outflow from investing activities (704 071) (1 680 926)
Cash inflow from financing activities 690 162 1 632 906
Decrease in cash and cash equivalents (2 700) (606)
Cash and cash equivalents at beginning of year 3 826 4 432
Cash and cash equivalents at end of year 1 126 3 826
Cash and cash equivalents consist of:
Current accounts 1 126 3 826
Notes
1 PREPARATION, ACCOUNTING POLICIES AND AUDIT OPINION
The condensed audited consolidated financial statements have been prepared
in accordance with the measurement and recognition requirements of IFRS
and its interpretations adopted by the Independent Accounting Standards
Board, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Reporting Pronouncements as issued by
the Financial Reporting Standards Council, the requirements of IAS 34:
Interim Financial Reporting, the JSE Listings Requirements and the
requirements of the South African Companies Act.
This report was compiled under the supervision of Nick Hanekom CA(SA), the
financial director.
The accounting policies adopted are consistent with those applied in the
prior periods.
The directors are not aware of any matters or circumstances arising
subsequent to 31 December 2012 that require any additional disclosure or
adjustment to the financial statements.
Deloitte & Touche have issued their unmodified opinion on the group
financial statements for the year ended 31 December 2012. These condensed
financial statements have been derived from the group financial statements
and are, in all material respects, consistent with the group financial
statements. A copy of their audit report is available for inspection at
Resilient’s registered address.
2 SUMMARY OF FINANCIAL PERFORMANCE
Dec 2012 Jun 2012 Dec 2011 Jun 2011
Distribution per
linked unit (cents) 134,93 120,74 121,35 109,36
Units in issue 285 744 070 280 536 070 280 536 070 260 444 832
Property operations
Net asset value* R34,51 R30,55 R29,32 R26,80
Gearing ratio** 26,6% 28,3% 28,8% 27,7%
Units in issue 285 744 070 280 536 070 280 536 070 260 444 832
Consolidated
Net asset value* R33,92 R30,13 R29,17 R26,67
Gearing ratio** 27,9% 29,9% 30,5% 29,7%
Units in issue 274 933 259 269 725 259 269 725 259 249 634 021
*Net asset value includes total equity attributable to equity holders and
linked debentures.
**The gearing ratio is calculated by dividing the total interest-bearing
borrowings by the total assets.
2.1 To comply with financial reporting requirements the group will
account for entities that do not form part of its operations, do not
operate under its operating policies and whose businesses, risk profiles
and debt levels are not comparable with its own. Disclosure under
“Property operations” excludes Eagle’s Eye Investments Proprietary Limited
(“BEE SPV”).
2.2 On 27 June 2006 10 810 811 linked units were issued to BEE SPV and
Resilient is standing surety for the funding obligations of BEE SPV in
acquiring these units. In terms of IFRS the issue did not take place and
the essence of the transaction was that the BEE shareholders received a
right/option to acquire linked units in Resilient at a future date at a
predetermined price. As a consequence the issue of linked units has been
eliminated in the preparation of these financial statements. The
right/option the BEE shareholders have acquired has a value of
R337 640 000 (2011: R150 350 000). The value of this right/option will be
considered on an ongoing basis and changes in its fair value are accounted
for through profit and loss.
The following table indicates the effect of the BEE transaction on the
group financial statements (the column “Property operations” indicates
Resilient’s results had the BEE transaction been accounted for as an issue
for value):
Property
Consolidated BEE SPV operations
Dec 2012 R’000 R’000 R’000
Statement of comprehensive income
Fair value loss on BEE instrument (187 290) 187 290 –
Finance costs
– Interest on borrowings (365 137) 18 315 (346 822)
– Interest to linked debenture
holders (696 633) (27 640) (724 273)
Income tax expense (525 127) 228 (524 899)
Statement of financial position
Current assets
– Trade and other receivables 82 412 (1 751) 80 661
Share capital 2 749 108 2 857
Share premium 2 712 168 142 270 2 854 438
Non-distributable reserves 5 291 797 341 788 5 633 585
Non-current liabilities
– Linked debentures 1 319 680 51 892 1 371 572
– Interest-bearing borrowings
(non-current and current) 4 437 502 (214 420) 4 223 082
BEE instrument 337 640 (337 640) –
Current liabilities
– Trade and other payables 359 021 (336) 358 685
– Linked debenture interest payable 370 967 14 587 385 554
2.3 The intangible asset relates to the management contract of PFM, the
management company of Capital, and is carried at cost.
3 FACILITIES AND INTEREST RATE DERIVATIVES
Average
Amount margin
Facility expiry R’million over Jibar
2013 1 555 1,02%
2014 575 1,51%
2015 165 1,45%
2016 1 221 1,62%
2017 959 1,80%
2018 1 253 1,65%
2019 327 1,61%
6 055 1,48%
Amount Average
Interest rate swaps expiry R’million swap rate
2013 300 7,04%
2014 650 7,42%
2015 600 7,71%
2016 600 7,42%
2017 600 7,80%
2018 600 7,44%
2019 600 6,80%
2020 120 6,53%
4 070 7,38%
Amount Average
Interest rate caps expiry R’million cap rate
2013 50 11,55%
2017 400 5,90%
450 6,52%
The all-in weighted average cost of funding of Resilient was 8,62% at
31 December 2012.
4 LEASE EXPIRY PROFILE (unaudited)
Based on
Based on contractual
rentable rental
Lease expiry area revenue
Vacant 1,7% –
Dec 2013 17,2% 16,9%
Dec 2014 15,3% 17,2%
Dec 2015 12,4% 15,5%
Dec 2016 15,8% 17,0%
Dec 2017 10,7% 13,9%
>Dec 2017 26,9% 19,5%
Total 100,0% 100,0%
5 SEGMENTAL ANALYSIS
Dec 2012 Dec 2011
Rental revenue R’000 R’000
Retail 1 191 345 876 499
Dec 2012 Dec 2011
Profit before net finance costs R’000 R’000
Retail 1 804 393 1 139 358
Corporate 968 811 553 439
Total 2 773 204 1 692 797
6 PAYMENT OF FINAL DISTRIBUTION
The board has approved and notice is hereby given of a cash final
interest distribution (distribution no 20) of 134,93 cents per linked
unit for the six months ended 31 December 2012. This interest
distribution is not subject to dividend withholding tax.
The last date to trade linked units cum distribution will be Friday, 22
February 2013 and trading will commence ex distribution on Monday, 25
February 2013. The record date to participate in the distribution will be
Friday, 1 March 2013.
Linked unit certificates may not be dematerialised or rematerialised
between Monday, 25 February 2013 and Friday, 1 March 2013, both days
inclusive.
Payment of the distribution will be made to linked unitholders on Monday,
4 March 2013. In respect of dematerialised linked unitholders, the
distribution will be transferred to the Central Securities Depository
Participant accounts/broker accounts on Monday, 4 March 2013.
Certificated linked unitholders’ distribution payments will be posted on
or about Monday, 4 March 2013.
Directors
JJ Njeke (chairman); Des de Beer*; Thembi Chagonda; Jorge da Costa;
Andries de Lange*; Marthin Greyling; Nick Hanekom*; Bryan Hopkins;
Johann Kriek*; David Lewis*; Phumelele Msweli; Spiro Noussis; Umsha Reddy;
Barry van Wyk
(*executive director)
Company secretary
Rajeshree Sookdeyu
Business address
4th Floor, Rivonia Village, Rivonia Boulevard, Rivonia 2191
Transfer office
Link Market Services South Africa Proprietary Limited
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein 2001
Sponsor
Java Capital
Date: 06/02/2013 02:17:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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