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Condensed consolidated results for the 6 months ended 31 December 2012
FAIRVEST PROPERTY HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/005011/06)
("Fairvest" or "the company" or "the group")
Linked unit code: FVT ISIN: ZAE000034658
CONDENSED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2012
Unaudited
Unaudited Restated Audited
31 December 31 December 30 June
2012 2011 2012
R '000 R '000 R '000
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ASSETS
NON-CURRENT ASSETS 403,289 104,008 125,209
Investment property 356,737 97,372 97,079
Investment property under construction 41,040 4,673 27,768
Equipment 24 15 13
Operating lease asset 5,488 1,948 349
CURRENT ASSETS 38,237 45,530 31,728
Listed investments - 2,949 3,275
Trade and other receivables 8,462 2,407 3,591
Taxation - - 127
Cash and cash equivalents 29,775 40,174 24,735
Investment property held for sale - - 6,450
TOTAL ASSETS 441,526 149,538 163,387
EQUITY AND LIABILITIES
EQUITY AND RESERVES
Ordinary share capital 2,890 857 857
NON-CURRENT LIABILITIES 423,498 140,564 147,043
Linked unit debentures 386,862 138,377 143,331
Long term liabilities 28,461 - -
Deferred taxation 8,175 2,187 3,712
CURRENT LIABILITIES 15,138 8,117 15,487
Taxation 406 352 -
Trade and other payables 14,732 7,765 15,487
TOTAL EQUITY AND LIABILITIES 441,526 149,538 163,387
Unaudited
Unaudited Restated Audited
6 months to 6 months to 12 months to
31 December 31 December 30 June
2012 2011 2012
R '000 R '000 R '000
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
GROSS REVENUE 10,384 8,905 16,421
Rental income - contractual 10,313 9,469 18,928
- straight-line accrual 71 (564) (2,507)
OPERATING PROFIT 4,836 2,915 3,527
Fair value adjustment to listed investments 284 (29) 279
Fair value adjustment to investment properties 12,991 - 9,737
Fair value adjustment to debentures 4,436 (1,922) (6,876)
Profit on sale of investment property - 1,840 1,840
Finance cost (118) - -
Foreign exchange gains 42 629 624
Investment revenue 979 1,837 2,856
Dividends received - 325 353
PROFIT BEFORE DEBENTURE INTEREST 23,450 5,595 12,340
Debenture interest (5,551) (4,461) (9,867)
PROFIT AFTER DEBENTURE INTEREST 17,899 1,134 2,473
Capital raising expenses (12,900) - -
PROFIT BEFORE TAXATION 4,999 1,134 2,473
Taxation (4,999) (1,134) (2,473)
COMPREHENSIVE INCOME ATTRIBUTABLE TO SHAREHOLDERS - - -
Profit and total comprehensive income attributable to:
- Owners of the parent - - -
- Non controlling interest - - -
Reconciliation between profit attributable to shareholders
and headline earnings per linked unit
Shares are traded as part of linked units
Profit attributable to linked shareholders* - - -
Capital raising expenses 12,900 - -
Fair value adjustment to investment properties (net of taxation) (10,568) - (7,921)
Headline and diluted headline loss attributable to shareholders 2,332 - (7,921)
Fair value adjustment to debentures (4,436) 1,922 6,876
Debenture interest 5,551 4,461 9,867
Headline and diluted headline profit attributable to linked unitholders 3,447 6,383 8,822
DISTRIBUTION (DEBENTURE INTEREST)*
Special interest distribution per linked unit (cents) 3.71 - -
Interim interest distribution per linked unit (cents) 0.86 5.20 5.20
Final interest distribution per linked unit (cents) - - 6.30
Total interest distribution per linked unit (cents) 4.57 5.20 11.50
EARNINGS PER SHARE
Basic and diluted earnings per share (cents) ** - - -
Headline and diluted headline earning/(loss) per share (cents) ** 2.0 - (9.2)
Headline and diluted headline earnings per linked unit (cents) ** 3.0 7.4 10.3
Net asset value per linked unit and net tangible asset value per
linked unit (cents)*** 134.8 162.3 168.1
Linked unit statistics (excluding treasury shares)
Linked units in issue 289,048,021 85,795,988 85,795,988
Effective linked units in issue 288,974,019 85,721,986 85,721,986
Weighted average number of linked units 116,651,643 85,721,986 85,721,986
* Debenture interest is calculated on the capital at a variable rate equal to 99.9% of the net profit of the company before
taxation, but after adjusting for extraordinary income and expenditure, capital gains and losses, and capital expenditure.
** Headline earnings have been presented in accordance with IAS 33. The linked unit structure of the group whereby every shareholder
is a debenture holder, coupled with the terms of the Debenture Trust Deed which states that 99.9% of profits are attributable to
debenture holders, results in the benefits of improved trading which would be ordinarily attributable to shareholders being expensed
in the income statement as a fair value adjustment to debentures and debenture interest. This results in no profit being attributable
to ordinary shareholders.
*** Linked unit debentures are included in the net asset value and net tangible asset value calculation.
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
31 December 31 December 30 June
2012 2011 2012
R '000 R '000 R '000
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash (outflow)/inflow from operating activities (23,207) 2,122 4,358
Cash (outflow)/inflow to investing activities (250,214) 4,211 (13,464)
Cash inflow from financing activities 278,461 - -
Net increase/(decrease) in cash and cash equivalents 5,040 6,333 (9,106)
Cash and cash equivalents at beginning of period 24,735 33,841 33,841
Cash and cash equivalents at end of period 29,775 40,174 24,735
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share capital Retained Total income
R'000 R'000 R'000
Balance at 1 July 2011 857 - 857
Total comprehensive income for the period - - -
Balance at 31 December 2011 857 - 857
Total comprehensive income for the period - - -
Balance at 30 June 2012 857 - 857
Total comprehensive income for the period - - -
Shares issued 2,033 - 2,033
Balance at 31 December 2012 2,890 - 2,890
STATEMENTS OF CHANGES IN LINKED UNIT DEBENTURES
Linked unit Linked unit
debenture fair value Total
capital adjustment
R'000 R'000 R'000
Balance at 1 July 2011 857 132,378 133,235
Restatement - Early adoption of amendments to IAS12 - 3,220 3,220
Restated balance at 1 July 2011 857 135,598 136,455
Net fair value adjustment - 1,922 1,922
Balance at 31 December 2011 857 137,520 138,377
Net fair value adjustment - 4,954 4,954
Balance at 30 June 2012 857 142,474 143,331
Debentures issued 2,033 245,934 247,967
Net fair value adjustment (4,436) (4,436)
Balance at 31 December 2012 2,890 383,972 386,862
CONDENSED CONSOLIDATED SEGMENT REPORT
Reconciling
Eastern Free KwaZulu- Western items/
Cape State Gauteng Natal Cape (Eliminations) Total
R'000 R'000 R'000 R'000 R'000 R'000 R'000
FOR THE 6 MONTHS ENDED 31 DECEMBER 2012
Revenue - external customers 4,103 606 611 3,899 1,094 - 10,313
Intersegmental revenue - - - - 81 (81) -
Operating profit 3,319 414 201 2,431 736 (2,265) 4,836
Total assets 35,813 7,771 11,393 181,327 167,106 38,116 441,526
FOR THE 6 MONTHS ENDED 31 DECEMBER 2011
Revenue - external customers 4,053 569 788 4,059 - - 9 ,469
Intersegmental revenue - - - - 945 (945) -
Operating profit 2,702 369 (150) 2,334 - (2,340) 2,915
Total assets 33,611 6,415 18,400 46,688 - 44,424 149,538
FOR THE 12 MONTHS ENDED 30 JUNE 2012
Revenue - external customers 8,121 1,162 1,651 7,994 - - 18,928
Intersegmental revenue - - - - 2,264 (2,264) -
Operating profit 4,019 568 (5) 2,848 - (3,903) 3,527
Total assets 36,509 7 801 17,850 70,560 - 30,667 163,387
OTHER SEGMENTAL INFORMATION
Unaudited Unaudited Audited
31 December 31 December 30 June
2012 2011 2012
Regional profile based on leasable area
Eastern Cape 14.5% 25.7% 30.0%
Free State 4.4% 10.2% 9.1%
Gauteng 5.9% 21.2% 15.7%
KwaZulu-Natal 30.3% 42.9% 45.2%
Western Cape 44.9% - -
Vacancy profile based on gross lease area
Gross lease area in metres squared as at end of period * 44,169 21,436 21,436
Vacancy area in metres squared * 3,743 2,398 3,751
Vacancy area as % of gross lease area 8.5% 11.2% 17.5%
Regional profile of vacancy area
Eastern Cape - - -
Free State - 12.4% -
Gauteng 40.6% 67.2% 40.5%
KwaZulu-Natal - 20.4% 59.5%
Western Cape 59.4% - -
* Gross lease area and vacancy in the prior and current periods have been updated to exclude unlettable areas
Basis of preparation and accounting policies
The accounting policies applied in the preparation of these condensed consolidated results for the six months ended 31 December 2012,
are in accordance with International Financial Reporting Standards ("IFRS") and are consistent with those applied in the annual financial
statements for the year ended 30 June 2012, except for the adoption of new and amendments to IFRS and IFRIC interpretations, these did
not impact on the financial position or performance of the group but have resulted in additional disclosures. These condensed consolidated
results as set out in this report have been prepared in accordance and containing the information required by IAS 34 Interim Financial
Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Reporting Pronouncements
as issued by Financial Reporting Standards Council, the Companies Act of South Africa 71 of 2008, and the Listings Requirements of JSE Limited.
These condensed consolidated results for the six months ended 31 December 2012 have been prepared in accordance with the historic cost
basis, except for the measurement of investment properties, debentures and certain financial assets and financial liabilities which are
stated at fair value.
The financial results are presented in Rands, which is Fairvest's functional and presentation currency and have been prepared on a going
concern basis.
The condensed consolidated financial results have not been reviewed by the company's auditors, BDO South Africa Inc.
Restatement of comparatives
During the previous reporting period, the group early adopted the amended IAS 12 Income Taxes. This amendment is effective for annual
periods beginning on or after 1 January 2012. IAS 12 has been updated to include a rebuttable presumption that deferred tax on
investment property measured using the fair value model in IAS 40 should be determined on the basis that its carrying amount will
be recovered through sale. This resulted in a change to the rate of deferred taxation from 28% to the capital gains tax inclusion rate.
The effect of the changes are summarised as follows:
31 December
2011
R'000
Condensed consolidated statement of financial position
Increase in linked unit debentures 3,609
Decrease in deferred taxation (3,609)
Condensed consolidated statement of comprehensive income
Increase in fair value adjustment to debentures 389
Decrease in deferred taxation (389)
Earnings per share and headline earnings per share
Increase in headline and diluted headline earnings per linked unit (cents) 0.4
Increase in net asset value per linked unit and net tangible asset value per linked unit (cents) 4.2
Estimates and critical judgements
Except for the measurement of investment properties, debentures and certain financial assets and financial liabilities the
financial statements do not include any material estimates.
The investment in related shareblock company, which constitutes the commercial portion of a mixed used building is classified
as investment property and measured at fair value.
COMMENTARY
Introduction
Fairvest's objective is to build a retail focused property fund weighted toward non-metropolitan shopping centres and
including convenience, community and regional shopping centres servicing the lower LSM market in high-growth nodes close to
commuter networks.
Acquisitions and associated capital raising activities
Linked unitholders are referred to the company's circular, including revised listings particulars ("RLP"), issued on
5 October 2012 regarding the SA Corporate Real Estate Acquisition, the Put Option Acquisition and the Isolenu Acquisition.
Under the vendor consideration placement undertaken to part fund these acquisitions, the company limited the capital raised
to R250 million, raised through the issue of 203,252,033 new ordinary linked units at R1.23 per ordinary linked unit.
For the purposes of the forecasts set out in the RLP it had been assumed that the company would raise R300 million through
the issue of a combination of A linked units and ordinary linked units.
As a result of the company's capital structure differing from that assumed in the forecast set out in RLP, the projected
distribution for the 6 months ended 30 June 2013 is 5.99 cents per linked unit. All other key assumptions underlying the
forecast set out in the RLP remain unchanged.
The new linked units issued under the vendor consideration placement were issued and listed on the JSE on 3 December 2012.
Transfer of new properties
Properties transferred by 31 December 2012
Purchase
Price Valuation
Property Location R'000 R'000
Mkuze Corner KwaZulu Natal 15,000 14,100
Omniplace Western Cape 20,000 28,100
St George Square Western Cape 44,000 42,600
212 Church Street KwaZulu Natal 30,000 23,000
Tokai Junction Western Cape 84,900 94,600
210 Church Street KwaZulu Natal 19,556 21,900
Properties transferred after 31 December 2012
Purchase
Price Valuation
Property Location R'000 R'000
Zamdela Gauteng 13,867 12,300
Clubview Corner Gauteng 28,000 41,164
425 West Street KwaZulu Natal 54,500 71,800
Stretford Gauteng 9,509 10,014
Sharpeville Gauteng 6,914 6,174
Orange Farm Gauteng 15,781 18,80
The Ridge Shopping Centre Gauteng 30,000 25,536
Properties pending transfer
Purchase
Price Valuation
Property Location R'000 R'000
Score Nyanga Western Cape 8,427 7,400
Pick n Pay Vereeniging Gauteng 12,934 10,557
Initial portfolio
As at 31 December 2012 Fairvest has taken transfer of 6 of the 15 properties in the initial portfolio and at the
date of this report all but two smaller assets have transferred. Transfers of these assets are expected to register
by early April 2013. SA Corporate Real Estate exercised their option on one of the Put Option Properties and has until
31 March 2013 to exercise their option on the other.
Subsequent acquisitions
On 28 January 2013, Fairvest concluded an agreement for the acquisition of Nyanga Junction with Momentum Property
Investments Proprietary Limited. This acquisition is subject to the Passenger Rail Agency of South Africa consenting
to the assignment of the Notarial Lease. We are still awaiting the consent and expect the cession of the lease to be
no earlier than 1 July 2013.
On 6 February 2013, Fairvest concluded an agreement for the acquisition of Matsulu Centre with Huwani Projects
Proprietary Limited. After completion of the due diligence investigation, Fairvest has decided not to proceed with
this acquisition.
On 6 March 2013, Fairvest concluded an agreement for the acquisition of a 50% undivided share in Sebokeng Plaza from
Fortress Income 3 Proprietary Limited. This acquisition remains subject to the fulfilment of certain conditions
precedent and the expected date of transfer of the asset is on or about 1 June 2013.
Review of results
Fairvest board of directors are pleased to announce a distribution of 0.86 cents per linked unit for the one month
ended 31 December 2012 and further to the distribution of 3.71 cents declared for the 5 months to 30 November 2012.
The distribution for the one month ended 31 December 2012 is less than expected as a result of the delays in transfer
of the SA Corporate Real Estate Portfolio and the Isolenu Property Portfolio, also discussed above. However, favourable
renewals and conservative estimates in our initial forecasting assisted the company in reaching the 0.86 cent distribution.
Fairvest completed the development of the 3,336 m2 Chep Office in Westville during the period under review and the
project was completed on time and on budget. The 10 year lease commenced on 1 December 2012 and the asset was valued
at R58.3 million. The redevelopment of the Blue Heights Shopping Centre is also underway, with the centre estimated
to reopen by the end of April 2013. The centre is 94% pre let, with 80% to national tenants.
The total property portfolio increased from R131.3 million in June 2012 to R397.8 million in December 2012 as a
result of the 6 new assets acquired. Another R158.6 million assets transferred up to the date of this report, which
were externally valued at R185.8 million.
Fairvest sold the remainder of the Australian and South African listed property shares during the period under review
resulting in a realised gain of R0.98 million. The funds were utilised in the redevelopment currently under way.
Prospects
The forecast distribution for 6 months to 30 June 2013 of 5.99 cents per linked unit remains achievable, with the
potential of outperformance as a result of the yield enhancing acquisitions. These forecasts are the responsibility
of the board of Fairvest and have not been reviewed or reported on by the auditors.
We will continue to focus on growing the portfolio through strategic value-enhancing acquisitions, coupled with a
focus on improving the quality of the portfolio through the acquisition of larger centres that dominate in the area
in which they are located.
Looking forward, growth in distributions will be delivered through the implementation of strong operational controls,
tenant optimisation, rental escalations and the reduction of vacancies.
Interest distributions and dividends
Interest on debentures has been calculated in terms of the Debenture Trust Deed. An interim interest distribution
of 0.86 cents per linked unit is payable to linked unitholders registered in the linked unit register of the company
at the close of business on Friday, 26 April 2013. No dividend has been declared for the period in respect of the
linked units.
Last date to trade linked units cum interest payment Friday, 19 April 2013
Linked units commence trading ex interest payment Monday, 22 April 2013
Record date Friday, 26 April 2013
Payment date Monday, 29 April 2013
Linked units may not be dematerialised or rematerialised between Monday, 22 April 2013 and Friday, 26 April 2013,
both days inclusive.
Directorate
KR Moloko was appointed as an independent non-executive director on 1 February 2013.
Subsequent events
The directors of Fairvest are not aware of any other material matter or circumstance arising between 31 December 2012
and the date of this report which may materially affect the financial position of the group or the results of its operations.
Appreciation
We extend our appreciation to our directors, management and staff for their valued efforts as well as our advisers and
linked unitholders for their continuing belief in and support of Fairvest.
For and on behalf of the board
Fairvest Property Holdings Limited
27 March 2013
Cape Town
Executive
DM Wilder (Chief Executive Officer)
BJ Kriel (Chief Financial Officer)
AJ Marcus (Chief Operating Officer)
Non-executive
JF du Toit (Chairman)
PJ van der Merwe (Lead Independent Non-executive)#
LW Andrag #
M Epstein #
KR Moloko #
# independent
Company Secretary
SecCorp Secretarial Services Proprietary Limited
Registered office
1st Floor East Wing, The Palms, 145 Sir Lowry Road, Cape Town, 8001
PO Box 4083, Durbanville, 7551
Transfer secretaries
Computershare Investor Services Proprietary Limited
Ground Floor,70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Auditor
BDO South Africa Incorporated
Registered Auditors
Sponsor
PSG Capital Proprietary Limited
Preparer of financial statements
BJ Kriel
Date: 27/03/2013 04:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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