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VIVIDEND INCOME FUND LIMITED - Unaudited results for the six months ended 28 February 2013

Release Date: 05/04/2013 16:34
Code(s): VIF     PDF:  
Wrap Text
Unaudited results for the six months ended 28 February 2013

Vividend Income Fund Limited
(Incorporated in the Republic of South Africa under registration number 2010/003232/06)
JSE code: VIF          ISIN: ZAE000150918
(Vividend or the company)

UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2013

Highlights

 10% distribution growth to 27,00 cents per linked unit
 Property portfolio increased by 197% to R1,54 billion  
 Revenue increased by 158% to R94 million
 Acquisition pipeline of R483 million
 Redevelopment pipeline of R30 million 
 94,5% occupancy rate
 Loan to value ratio of 34,43%
 Net asset value per linked unit, excluding deferred taxation liability, increased by 3% to 511 cents

Statement of comprehensive income
                                                                                         Unaudited 
                                                	              Unaudited           Restated          Audited 
                                                                     Six months         Six months        12 months
                                                                    28 February        29 February        31 August
                                                                           2013               2012             2012
                                                             Notes        R000              R000            R000

Revenue, excluding straight-line lease income adjustment                 94 045             36 513          127 194 
Straight-line lease income adjustment                                     4 562              2 593            7 405 
Revenue                                                                  98 607             39 106          134 599 
Property expenses                                                       (19 099)            (8 095)         (37 952) 
Net property income                                                      79 508             31 011           96 647 
Other operating expenses                                                 (7 410)            (4 206)          (8 537) 
Operating profit                                                         72 098             26 805           88 110 
Fair value adjustments                                                    7 597              8 195           19 819 
Finance costs                                                           (18 242)                           (12 147) 
Capital costs                                                              (125)            (2 327)          (2 761) 
Investment income                                                         1 866              1 419            6 323 
Profit before debenture interest and taxation                            63 194             34 092           99 344 
Debenture interest                                                      (51 590)           (25 631)         (75 311) 
Profit before taxation                                                   11 604              8 461           24 033 
Deferred taxation charge                                                 (2 271)            (3 865)          (5 638) 
Total comprehensive income                                                9 333              4 596           18 395 
Distribution per linked unit (cents)                                      27,00              24,50            50,50 
Interim                                                                   27,00              24,50            24,50 
Final                                                                                                       26,00 
Basic earnings and diluted earnings per share                    2         4,88               4,37            12,33

DISTRIBUTION PER LINKED UNIT				
Calculation of distributable earnings				
Profit before debenture interest and taxation                            63 194             34 092           99 344 
Adjusted for:				
Straight-line lease income adjustment                                    (4 562)            (2 593)          (7 405) 
Fair value adjustment  Investment property                              (5 853)            (8 195)	    (28 520) 
Fair value adjustment  Financial instrument                             (1 744)                             8 701 
Amortisation of debenture discount                                          430                                430 
Capital costs                                                               125              2 327            2 761 
Distributable earnings                                                   51 590             25 631           75 311 
Distribution comprises:				
Debenture interest                                                      (51 590)           (25 631)         (75 311) 
Ordinary dividend                                                                                               -
Total distribution                                                      (51 590)           (25 631)         (75 311) 
Weighted average linked units in issue (000s)                          191 075            104 617          149 131 
Distribution to linked unitholders                                       51 590             25 631           75 311 
Interim                                                                  51 590             25 631           25 631 
Final                                                                                                      49 680 

		                                                          cents              cents            cents 
Distributable earnings per linked unit                                    27,00              24,50            50,50 
Distribution per linked unit                                              27,00              24,50            50,50
				
Reconciliation  earnings to distributable earnings 				
Earnings attributable to equity shareholders                              9 333              4 596           18 395 
Fair value adjustment investment property, net of 
deferred taxation                                                        (4 760)            (5 055)         (21 558) 
Amortisation of debenture discount                                          430                                430 
Headline earnings before debenture interest                               5 003               (459)          (2 733) 
Debenture interest                                                       51 590             25 631           75 311 
Headline earnings attributable to linked unitholders                     56 593             25 172           72 578 
Fair value adjustment of financial instruments, net of 
deferred taxation                                                        (1 418)                             6 265 
Straight-lining of lease adjustments, net of deferred taxation           (3 710)            (1 868)          (6 293) 
Capital costs                                                               125              2 327            2 761 
Distributable earnings attributable to linked unitholders                51 590             25 631           75 311 
Headline earnings per linked unit (cents)                        3        29,62              24,06            48,67

Statement of changes in equity 			
                                                                       Ordinary           Retained
                                                                  share capital           earnings            Total 
                                                                          R000              R000            R000

Balance at 31 August 2011                                                     1              3 243            3 244 
Shares issued                                                                 1                                  1 
Total comprehensive income                                                                  4 596            4 596 
Balance at 29 February 2012                                                   2              7 839            7 841 
Shares issued                                                                                                   
Total comprehensive income                                                                 13 799           13 799 
Balance at 31 August 2012                                                     2             21 638           21 640 
Shares issued                                                                                                    
Total comprehensive income                                                                  9 333            9 333 
Balance at 28 February 2013                                                   2             30 971           30 973

Statement of financial position	
                                                                                         Unaudited 
                                                	              Unaudited           Restated          Audited 
                                                                     Six months         Six months        12 months
                                                                    28 February        29 February        31 August
                                                                           2013               2012             2012
                                                                          R000              R000            R000
ASSETS			
Non-current assets                                                    1 536 008            531 254        1 360 662 
Fair value of investment property for accounting purposes             1 521 148            525 768        1 350 364 
Straight-line lease income adjustment                                    14 860              5 486           10 298 
			
Current assets                                                           86 522            465 364           95 264 
Trade and other receivables                                              20 185              6 270           14 069 
Cash and cash equivalents                                                66 337            459 094           81 195 
Total assets                                                          1 622 530            996 618        1 455 926 

EQUITY AND LIABILITIES			
Shareholders interest                                                   30 973              7 841           21 640 
Ordinary share capital                                                        2                  2                2 
Retained income                                                          30 971              7 839           21 638 
Non-current liabilities  debentures                                    932 303            931 444          931 874 
Linked unitholders interest                                            963 276            939 285          953 514 
Other non-current liabilities                                           570 503             16 873          413 149 
Other non-current financial liabilities                                 556 868              7 282          401 785 
Deferred taxation liability                                              13 635              9 591           11 364 
Current liabilities                                                      88 751             40 460           89 263 
Trade and other payables                                                 35 669             14 829           38 268 
Current portion of other non-current financial liabilities                1 492                              1 315 
Taxation payable                                                                                                
Linked unitholders interest                                              51 590             25 631           49 680 
			
Total equity and liabilities                                          1 622 530            996 618        1 455 926 
Linked units in issue (000s)                                           191 075            191 075          191 075 

                                                                          cents              cents            cents 
Net asset value per linked unit	                                            504                492              499 
Net asset value per linked unit, excluding deferred taxation 
liability                                                                   511                497              505

Statement of cash flows			
                                                                                         Unaudited 
                                                	              Unaudited           Restated          Audited 
                                                                     Six months         Six months        12 months
                                                                    28 February        29 February        31 August
                                                                           2013               2012             2012
                                                                          R000              R000            R000
Cash flows from operating activities			
Cash received from tenants                                              132 834             53 294          161 930 
Cash paid to suppliers                                                  (71 788)           (24 427)         (61 424) 
Cash generated from operations                                           61 046             28 867          100 506 
Investment income                                                         1 866              1 419            6 323 
Finance costs                                                           (18 242)                           (12 147) 
Distribution to unitholders                                             (49 680)           (24 364)         (49 995) 
Net cash (outflow)/inflow from operating activities                      (5 010)             5 922           44 687 
Cash flows from investing activities			
Investment in investment property                                        (9 831)            (2 436)          (5 512) 
New acquisitions of business undertakings                              (155 100)                          (800 950) 
Net cash outflow from investing activities                             (164 931)            (2 436)        (806 462) 
Cash flows from financing activities			
Non-current loans raised                                                155 083                            386 047 
Current loans raised                                                                                        1 315 
Repayment of other non-current financial liabilities                                                             
Proceeds from issue of linked units                                                       408 360          415 000 
Expenses on issue of linked units                                                                          (6 640) 
Net cash inflow from financing activities                               155 083            408 360          795 722 
Net increase/(decrease) in cash and cash equivalents                    (14 858)           411 846           33 947 
Cash acquired on acquisition of business undertaking                                                            
Cash and cash equivalents at the beginning of the year                   81 195             47 248           47 248 
Cash and cash equivalents at the end of the year                         66 337            459 094           81 195

Segmental analysis				
	                                                                 Retail         Commercial      Head office         Total 
                                                                          R000              R000            R000         R000
Statement of comprehensive income  February 2013				
Revenue, excluding straight-line lease income adjustment                 48 061             45 984                        94 045 
Straight-line lease income adjustment                                     2 485              2 077                         4 562 
Total revenue                                                            50 546             48 061                        98 607 
Net property income                                                      35 617             43 891                        79 508 
Assets 				
Investment property                                                     705 448            815 700                     1 521 148
Straight-line lease income adjustment                                    10 151              4 709                        14 860
Other assets                                                              9 375             10 254           66 893        86 522 
Total assets                                                            724 974            830 663           66 893     1 622 530 
Total liabilities                                                       (16 994)           (17 696)      (1 556 867)   (1 591 557) 

Statement of comprehensive income  February 2012				
Revenue, excluding straight-line lease income adjustment                 20 222             16 291                        36 513 
Straight-line lease income adjustment                                     1 672                921                         2 593 
Total revenue                                                            21 894             17 212                        39 106 
Net property income                                                      15 912             15 099                        31 011
Assets 				
Investment property                                                     279 860            245 354              554       525 768 
Straight-line lease income adjustment                                     3 340              2 146                         5 486 
Other assets                                                              5 895              2 874          456 595       465 364 
Total assets                                                            289 095            250 374          457 149       996 618 
Total liabilities                                                       (10 827)           (10 496)        (967 454)     (988 777)

Analysis by usage 	                                                 Retail	        Commercial 	      Total	
Number of properties                                                         12                  9               21	
Vacant GLA                                                                7 915              3 244           11 159 	
GLA occupied by A Tenants                                                78 654             68 774          147 428 	
GLA occupied by B Tenants                                                 4 135              2 506            6 641 	
GLA occupied by C Tenants                                                26 015             13 093           39 108 	
GLA available                                                           116 719             87 617          204 336 	

Lease expiry profile to 31 August (GLA)	                                 Retail         Commercial            Total    % of total 
Vacant                                                                    7 915              3 244           11 159           5,5
Month to month                                                            4 274              4 635            8 909           4,4
2013                                                                      4 826             11 165           15 991           7,8
2014                                                                     20 224             12 615           32 839          16,0
2015                                                                     25 659             11 309           36 968          18,1
2016                                                                     25 853             42 226           68 079          33,3
>2016                                                                    27 968              2 423           30 391          14,9
Total                                                                   116 719             87 617          204 336         100,0

Reconciliation of vacant GLA                                             Retail         Commercial            Total 	
Vacant as at 1 September 2012                                             3 706                680            4 386 	
Expired during the period                                                11 054             16 948           28 002 	
Re-let during the period                                                 (2 382)            (2 724)          (5 106) 	
Tenanted during the period                                               (4 463)           (11 660)         (16 123) 	
GLA vacant as at 28 February 2013                                         7 915              3 244           11 159 	
Weighted average lease duration (years)                                    2,94               1,99             2,52 	
Weighted average lease escalation (%)                                      7,20               7,86             7,49	
Weighted average gross rental per month (m2)                              63,07             116,09            86,22	

Notes to the financial statements

1. Basis of preparation

   The interim consolidated financial statements have not been reviewed or audited by the companys independent external auditors. These condensed consolidated 
   financial statements have been prepared in accordance with the measurement and recognition requirements of International Financial Reporting Standards (IFRS), 
   the presentation and disclosure requirements of IAS 34: Interim Financial Reporting, the AC 500 Financial Reporting Guides as issued by the Accounting Practices 
   Board, the Companies Act 2008, as amended, and the JSE Listings Requirements. This report was compiled under the supervision of Robert Amoils CA(SA), the financial 
   director. The companys accounting policies as set out in the audited financial statements for the year ended 31 August 2012 have been consistently applied. 

2. Basic, diluted and headline earnings per share

   The directors are of the view that the disclosure of earnings per share, while obligatory in terms of IAS 33: Earnings per Share, and the JSE Listings Requirements, 
   is not meaningful to investors as the shares are traded as part of a linked unit and all the revenue earnings are distributed in the form of debenture interest. 
	
   In addition, headline earnings include fair value adjustments for financial liabilities and accounting adjustments required to account for lease income on a 
   straight-line basis, as well as other non-cash accounting adjustments that do not affect distributable earnings. The calculation of distributable earnings and the 
   distribution per linked unit as set out above is more meaningful.

3. Headline earnings per linked unit

   In terms of Circular 3/2012, issued by SAICA, the fair value adjustments on investment property are added back in the calculation of headline earnings per linked 
   unit. The Circular does not make provision for the fair value adjustment on other non-current financial liabilities to be added back.

4. Prior year reclassification

   To align itself with prevailing best practice disclosure, the company has reclassified certain items within its statement of comprehensive income for the year 
   ended 31 August 2012. The impact of this reclassification as at 29 February 2012 is as follows:

                                                                     Difference            Retail        Commercial 
                                                                          R000             R000             R000
   Revenue, excluding straight-line lease income adjustment              (7 973)           (2 415)           (5 558)
   Property expenses                                                      7 973             2 415             5 558
   Net property income                                                                                          

   The above had no effect on the statement of financial position.

5. Subsequent events

   Linked unitholders are referred to the announcement released on SENS on Friday, 1 March 2013, advising linked unitholders that various agreements had been entered 
   into (the Access Park Acquisition Agreements), which if successfully concluded, would result in Vividend acquiring 90% of the property known as Access Park 
   Kenilworth (the Access Park Property) for a purchase consideration of R483,4 million, escalating at R158 920 per day from 1 July 2013 to the date of transfer 
   (the Access Park Acquisition). In terms of the Access Park Acquisition Agreements, the effective date of the Access Park Acquisition shall be the date of transfer
   of the Access Park Property into the name of Vividend, which, subject to the fulfilment of the applicable conditions precedent, is expected on or about 1 May 2013.
	
   The company will fund the purchase consideration applicable to the Access Park Acquisition from a combination of a) debt secured from local banking partners b) a 
   combined underwritten (54,1%) claw-back offer and rights offer, in terms of which 99 817 808 new linked units (the Claw-back Offer and Rights Offer 
   Linked Units) will be offered to linked unitholders recorded in the register at the applicable record date to be determined (the Claw-back Offer and Rights Offer),
   at a subscription price of 540 cents per Claw-back Offer and Rights Offer Linked Unit, in the ratio of 52,24 Claw-back Offer and Rights Offer Linked Units for every 
   100 Linked Units held at the close of trade on the applicable record date to be determined.  
	
   Full details of the Access Park Acquisition, including the authority to issue the Claw-back Offer and Rights Offer Linked Units, are contained in a circular that 
   has been posted to linked unitholders on Friday, 22 March 2013 while full details of the combined Claw-back Offer and Rights Offer, including its impact on the company, 
   will be announced on SENS and set out in a separate circular to be sent to linked unitholders in due course.

Directors commentary 

INTRODUCTION

Vividend is a property loan stock company listed on the JSE Limited (JSE) under Financial  Real Estate Holdings, with a market capitalisation at 28 February 2013 of 
R1 070 million and a portfolio of 21 directly owned properties valued at R1 536 million. 

The companys primary objective is to identify value and value enhancing opportunities within target sectors of the South African property market by using defined 
investment strategies that have a goal of creating a diverse and stable portfolio of assets capable of generating secure, consistent and continually escalating free 
cash flows. Linked unitholders are entitled, through the debenture portion of their linked units, to the after-taxation profits of the company, excluding capital 
profits and losses and after adjusting for all non-cash items. The interest entitlement is calculated and accrues to linked unitholders on the last days of February 
and August of each year and is payable within 90 days of accrual date, or such shorter period as prescribed in the JSE Listings Requirements. The company does not 
distribute capital profits. 

HIGHLIGHTS FOR THE PERIOD

Growth in distribution 

The distribution per linked unit for the six-month period ended 28 February 2013 increased 10,2% relative to the comparable six-month period ended 29 February 2012 
and is a) consistent with the forecasted distribution per linked unit published by the company in the Circular dated 27 January 2012 and b) 3,9% higher than the 
distribution per linked unit for the immediately preceding six-month period ended 31 August 2012. 

The distribution of 27,00 cents per linked unit accounts for an annualised income yield of 9,5%.

Net property income

The increase in revenue was due to a) the growth in the property portfolio and b) contractual rental escalations within the property portfolio. Earnings from properties 
acquired were in line with expectations, both at the date of transfer and for the six-month period ended 28 February 2013.

The ratio of property expenses to revenue decreased from 21% to 19% due to a) the inclusion of two additional triple-net leases into the property portfolio b) various 
cost-saving initiatives implemented within the property portfolio relating to common area utility consumption and c) a temporary deceleration of repairs and maintenance 
expenditure applicable to the property portfolio. Other operating expenses decreased from 11% to 8% of revenue due to administration efficiencies associated with a 
larger property portfolio.
 
Fair value adjustments

Revaluation of the property portfolio, as at 28 February 2013, resulted in an upward revision of R10,4 million to R1 536 million. Interest-bearing borrowings were fair 
valued downwards by R1,7 million, using the yield curve as applied to the applicable swaps, as at 28 February 2013.

Finance costs

Finance costs increased by 100% to R18,2 million (February 2012: Rnil). This was due to the introduction of bank facilities secured by the company to facilitate the 
growth in the property portfolio. 

Arrears

At 28 February 2013 tenant arrears amounted to R6 million (February 2012: R3,7 million) with a provision of R2 million (February 2012: R1,4 million) having been raised 
for potential bad debts. For the six-month period ended 28 February 2013, the total bad debts expense amounted to R0,12 million (29 February 2012: Rnil).

Vacancy levels 

The companys vacancy levels, as a percentage of gross lettable area (GLA) are:

                                                                         Retail %	 Commercial %	  Total %
28 February 2013                                                              3,9                 1,6         5,5
31 August 2012                                                                2,0                 0,4         2,4

Acquisitions, disposals and commitments 

Vividend concluded the Sasol Kent Street Acquisition on 10 December 2012 for a total purchase consideration of R155,1 million, which added 15 912 m2 of GLA to the Property 
Portfolio. No other property acquisitions were concluded by the company during the reporting period. In addition, the company has capital commitments outstanding in respect 
of approved redevelopment expenditure, as at 28 February 2013, of R30 million. These commitments will be financed from available cash resources and existing bank facilities. 

The company disposed of no properties during the reporting period.
 
In terms of the Asset Management Agreement concluded on 27 October 2010, the company is committed to acquiring the Asset Manager on 18 November 2015 for an amount equivalent 
to 4% of the enterprise value of the company.

Borrowings 

As at 28 February 2013, the loan to value ratio (LTV) of the company, which is measured by dividing the nominal value of interest-bearing borrowings (net of cash not allocated 
to linked unitholders at 28 February 2013) by the fair value of property assets was 34,4% (29 February 2012: 0%). The increase in gearing is a result of bank facilities secured
by the company to facilitate the growth in the property portfolio. 

Share and debenture capital 

The authorised share capital of the company is R50 000, divided into 5 000 000 000 ordinary shares of R0,00001 each. Each ordinary share is linked to a variable rate debenture 
of R4,99999 each. The ordinary shares and debentures trade as linked units on the JSE. In terms of the debenture trust deed, the interest payable on the debenture component of 
the linked unit is equal to after-taxation profits of the company, excluding capital profits and losses and after adjusting for all non-cash items. 

Net asset value 

The net asset value per linked unit, excluding the deferred taxation liability (NTAV) increased by 3% to 511 cents. The increase in NTAV was due to the upward revaluation of the 
property portfolio. 

Prospects

While the company remains confident that its existing property portfolio will perform in line with published forecast expectations to 31 August 2013, linked unitholders are 
referred to the SENS announcement dated 1 March 2013 in which linked unitholders were advised that the Access Park Acquisition would have a dilutionary effect on distributions per 
linked unit. Full details of this dilution, including revised listings particulars encompassing a two-year forecast, will be announced on SENS and set out in a separate circular 
to be sent to linked unitholders in due course. 

Real estate investment trust (REIT) legislation introduced in South Africa 

In February 2013 the REIT taxation laws were promulgated into South African law. The favourable taxation dispensation will be applicable to current listed property investment 
companies and property unit trusts that elect and qualify to be listed as REITs on the JSE's securities exchange on or after 1 April 2013. The directors of the company 
will endeavour to ensure that the company will be ready to list as an REIT on 1 September 2013, the start of the companys taxation year. Information will be provided to unitholders 
relating to the conversion process in due course. 

Declaration of interest distribution number 5 

Notice is hereby given that interest of 27, 00 cents per linked unit has been declared, in accordance with the debenture trust deed, for the period 1 September 2012 to 
28 February 2013, payable to linked unitholders recorded in the register of the company on Friday, 26 April 2013. The last day to trade cum distribution will be Friday, 
19 April 2013, and trading will commence ex distribution on Monday, 22 April 2013.

In respect of dematerialised linked unitholders, the distribution will be transferred to the Central Securities Depository Participant accounts or broker accounts on Monday, 
29 April 2013. Certificated linked unitholder distribution payments will be posted on or about 29 April 2013. No dematerialisation or rematerialisation of linked units may take 
place between Monday, 22 April 2013, and Friday, 26 April 2013, both days inclusive. 

By order of the board

Vividend Income Fund Limited

4 April 2013

Directors 
KK Combi (Chairman)#, A Jacobson (Chief Executive Officer), R Amoils (Financial Director), A Witt, B Rubenstein, M Sandak-Lewin*, M Jacobson*, G Rabinowitz*, S Slom#, B Bank# 
* Non-executive  # Independent

Registered office
Unit 6 Rozenhof Office Court
20 Kloof Street, Gardens, Cape Town 8001
Postnet Suite 137, Private Bag X1, Vlaeberg 8018

Transfer secretaries
Link Market Services South Africa Proprietary Limited

Asset manager
Vividend Management Group Proprietary Limited

Sponsor
PSG Capital Proprietary Limited

www.vividend.co.za


Date: 05/04/2013 04:34:00 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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