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.