Wrap Text
Unaudited Results for the six months ended 28 February 2013
REDEFINE PROPERTIES LIMITED
(Redefine or the company or the group)
Registration number 1999/018591/06
- JSE share code: RDF - ISIN: ZAE000143178 - Bond code: RDFB01 - ISIN: ZAG00094228
- Bond Code: RDFB02 - ISIN: ZAG000103789 - Bond Code: RDFB03 - ISIN: ZAG000104316
- Bond Code: RDFC07 - ISIN: ZAG000103607 - Bond Code: RDFC08 - ISIN: ZAG000104324
Unaudited results for the six months ended 28 February 2013
- Interim distribution growth of 7% to 33,7 cents
- NAV up by 10,6% to R8,31
- Results at upper end of market guidance
- Acquisitions and developments of R3,1 billion concluded
- 45,6% of Fountainhead acquired
- Balance sheet simplified and strengthened
Condensed consolidated statements of comprehensive income
Unaudited Unaudited Audited
28 February 29 February 31 August
2013 2012 2012
R000 R000 R000
Revenue
Property portfolio 1 381 083 1 147 956 2 448 873
Contractual rental income 1 303 902 1 238 757 2 491 749
Straight-line rental income accrual 77 181 (90 801) (42 876)
Listed securities income 182 112 241 060 511 036
Fee income 129 227 72 080 162 741
Hotel income 156 598 133 750 286 266
Trading income 1 810 894 12 414
Total revenue 1 850 830 1 595 740 3 421 330
Operating costs (439 004) (447 377) (847 900)
Administration costs (90 112) (73 701) (166 016)
Net operating income 1 321 714 1 074 662 2 407 414
Changes in fair values of properties,
listed securities and financial instruments 236 739 316 066 1 772 064
Amortisation of intangibles (52 636) (50 485) (101 105)
Impairment of financial assets, property,
plant and equipment, and goodwill - - (38 666)
Equity accounted profits 73 271 9 340 738
Income from operations 1 579 088 1 349 583 4 040 445
Net interest (381 204) (327 605) (694 753)
Interest paid (404 242) (368 100) (771 006)
Interest received 23 038 40 495 76 253
Foreign exchange gain/(loss) 26 260 (8 256) (23 084)
Income before debenture interest 1 224 144 1 013 722 3 322 608
Debenture interest (930 287) (845 553) (1 742 715)
Profit before taxation 293 857 168 169 1 579 893
Taxation (74 225) (330 047) (506 282)
Profit /(Loss) for the period from
continuing operations 219 632 (161 878) 1 073 611
Profit /(Loss) from discontinued operations 939 668 (895 821) (1 840 462)
Profit/(Loss) for the period 1 159 300 (1 057 699) (766 851)
Redefine shareholders 1 159 463 (511 306) 342 079
Non-controlling interests (163) (546 393) (1 108 930)
Other comprehensive income (342 740) 205 920 451 351
Exchange differences on translation of
foreign continuing operations 29 976 17 213 68 930
Exchange differences on translation of
foreign discontinued operations - 188 707 382 421
Recycling of exchange differences on
translation on deemed disposal of foreign
subsidiary (372 716) - -
Total comprehensive income/(loss) for the
period 816 560 (851 779) (315 500)
Redefine shareholders 820 907 (375 245) 621 476
Non-controlling interests (4 347) (476 534) (936 976)
Condensed consolidated statements of financial position
Unaudited Unaudited Audited
28 February 29 February 31 August
2013 2012 2012
R000 R000 R000
ASSETS
Non-current assets 31 345 308 40 366 985 43 376 376
Investment properties 21 601 215 28 736 351 29 735 776
Fair value of investment properties
for accounting purposes 20 605 033 27 661 405 28 754 581
Straight-line rental income accrual 728 403 603 297 651 223
Properties under development 267 779 471 649 329 972
Listed securities 2 664 022 4 659 369 5 341 485
Goodwill 2 755 471 2 570 534 2 753 971
Intangible assets 1 853 825 1 244 574 1 905 363
Interest in associates and joint ventures 1 585 345 1 833 513 1 963 050
Loans receivable 737 946 1 222 077 1 527 301
Other financial assets - 6 303 5 349
Guarantee fees receivable 50 000 - 50 000
Property, plant and equipment 97 484 94 264 94 081
Current assets 428 411 1 342 919 1 245 426
Properties held-for-trading 27 338 29 109 25 833
Trade and other receivables 277 240 640 868 678 791
Guarantee fees receivable - 21 349 21 349
Loans receivable 12 988 51 822 12 546
Listed security income 61 491 146 931 155 574
Cash and cash equivalents 49 354 452 840 351 333
Non-current assets held-for-sale 3 377 582 2 066 825 2 134 453
Total assets 35 151 301 43 776 729 46 756 255
EQUITY AND LIABILITIES
Shareholders interest 16 061 116 13 804 203 15 250 599
Share capital and premium 11 660 936 11 165 049 11 660 936
Reserves 4 400 180 2 639 154 3 589 663
Non-current liabilities - debenture capital 4 791 714 4 659 443 4 791 714
Linked unitholders interest 20 852 830 18 463 646 20 042 313
Non-controlling interests (NCI) 45 842 1 719 413 1 301 316
Total unitholders interest 20 898 672 20 183 059 21 343 629
Non-current liabilities 11 895 482 15 493 591 15 259 932
Interest-bearing liabilities 9 380 964 13 465 872 12 648 732
Interest rate swaps 359 566 288 673 468 064
Other financial liabilities 54 814 15 170 62 767
Deferred taxation 2 100 138 1 723 876 2 080 369
Current liabilities 2 357 147 8 012 718 8 921 389
Trade and other payables 560 876 874 394 953 012
Interest-bearing liabilities 852 000 6 106 020 6 793 374
Interest rate swaps - 134 934 72 046
Other financial liabilities 8 606 6 323 15 948
Provision - - 161 769
Taxation payable 5 378 45 494 28 078
Linked unitholders for distribution 930 287 845 553 897 162
Non-current liabilities held-for-sale - 87 361 1 231 305
Total equity and liabilities 35 151 301 43 776 729 46 756 255
Net asset value per linked unit
(excluding deferred tax and NCI) (cents) 831,48 752,06 801,40
Net tangible asset value per linked unit
(excluding deferred tax and NCI) (cents) 664,51 609,93 632,62
Distributable income analysis
South African International Total
R000 R000 R000
Net property income
(excluding straight-line rental accrual) 1 030 270 - 1 030 270
Listed securities income 182 112 - 182 112
Trading income 1 810 - 1 810
Net hotel loss - (8 774) (8 774)
Fee income 66 231 62 996 129 227
Net operating income before administration costs 1 280 423 54 222 1 334 645
Administration costs (63 500) (26 612) (90 112)
Equity accounted profits - 73 271 73 271
Foreign exchange loss - (6) (6)
Net interest (379 275) (1 929) (381 204)
Net distributable profit before taxation 837 648 98 946 936 594
Taxation - 12 12
Net profit before distributable adjustments 837 648 98 958 936 606
Non-controlling interests 1 258 (1 095) 163
838 906 97 863 936 769
Distribution adjustments: 1 853 (8 335) (6 482)
Align consolidated foreign profits with
anticipated distributions - (8 335) (8 335)
Pre-acquisition listed securities income 1 853 - 1 853
Distributable income 840 759 89 528 930 287
Condensed consolidated statements of cash flow
Unaudited Unaudited Audited
28 February 29 February 31 August
2013 2012 2012
R000 R000 R000
Cash generated from operations 1 379 031 1 177 764 2 489 225
Net financing costs (381 204) (327 605) (586 882)
Linked unit distributions paid (897 162) (993 189) (1 838 742)
Payments to non-controlling interests (3 556) (892) (2 186)
Net cash inflow /(outflow) from operating activities
- continuing operations 97 109 (143 922) 61 415
Net cash outflow from operating activities
- discontinued operations - (125 012) (247 834)
Net cash outflow from investing activities
- continuing operations (1 292 127) (760 415) (2 322 531)
Net cash outflow from investing activities
- discontinued operations - (259 585) (267 814)
Net cash inflow from financing activities
- continuing operations 891 265 886 430 2 300 853
Net cash inflow from financing activities
- discontinued operations - 165 188 92 550
Net movement in cash and cash equivalents (303 753) (237 316) (383 361)
Cash and cash equivalents at beginning of period 351 333 660 148 660 148
Translation effects on cash and cash equivalents of
foreign operations 1 774 30 008 74 546
Cash and cash equivalents at end of period 49 354 452 840 351 333
Distributable income reconciliation
Unaudited Unaudited Audited
28 February 29 February 31 August
2013 2012 2012
R000 R000 R000
Profit/(Loss) for the period attributable to Redefine shareholders 1 159 463 (511 306) 342 079
Changes in fair values of properties (net of deferred taxation) (136 860) 688 578 1 249 136
Changes in fair value of properties (161 158) 459 067 948 293
Deferred taxation 24 298 229 511 300 843
Profit on deemed disposal of subsidiary (939 668) - -
Capital gains tax 21 136 38 347 35 206
Headline profit attributable to Redefine shareholders 104 071 215 619 1 626 421
Debenture interest 930 287 845 553 1 742 715
Headline earnings attributable to Redefine linked unitholders 1 034 358 1 061 172 3 369 136
Changes in fair values of listed securities and financial instruments
(net of deferred taxation) (49 626) (51 432) (985 969)
Changes in fair values of listed securities and financial instruments (75 581) (118 373) (1 175 371)
Deferred taxation 25 955 66 941 189 402
Fair value interest adjustment - 227 451 365 584
Amortisation of intangibles (net of deferred taxation) 55 484 50 485 83 505
Align consolidated foreign profits with anticipated distributions (8 335) 603 8 781
Straight-line rental income accrual (77 181) 90 801 42 876
Foreign exchange (gain)/loss (26 266) 17 179 36 656
Fair value adjustment of associates and non-controlling interests - (564 022) (1 163 292)
Fee income from foreign subsidiary - 8 312 8 312
Capital write offs included in administration costs - 5 004 (22 874)
Pre-acquisition listed securities income 1 853 - -
Distributable income 930 287 845 553 1 742 715
Six months ended 28 February 930 287 845 553 845 553
Six months ended 31 August - - 897 162
Total distributions 930 287 845 553 1 742 715
Actual number of linked units in issue (000) * 2 760 497 2 684 295 2 760 497
Weighted number of linked units in issue (000)* 2 760 497 2 684 295 2 694 914
Earnings and diluted^ earnings per linked units (cents) 75,70 12,45 77,36
Earnings from continuing operations per linked units (cents) 41,66 25,57 104,38
Earnings from discontinued operations per linked units (cents) 34,04 (13,12) (27,02)
Headline earnings and diluted^ headline earnings per linked units (cents) 37,47 39,53 125,02
Distribution per linked units (cents) 33,70 31,50 64,00
*Excludes 5 876 766 treasury units.
^No dilutionary instruments in issue.
Condensed consolidated statements of changes in equity
Unaudited Unaudited Audited
28 February 29 February 31 August
2013 2012 2012
R000 R000 R000
Opening balance 16 551 915 17 056 251 17 056 251
Issue of linked units - - 495 887
Deemed disposal and dilution of interest in subsidiary effect on NCI (1 177 188) - -
Unbundling - (623 252) (623 252)
Total comprehensive income/(loss) for the period 816 560 (851 779) (315 500)
Transactions with non-controlling interests (8 051) 8 014 11 763
Non-controlling interests on acquisition of subsidiaries (76 278) (65 618) (73 234)
Total share capital, reserves and non-controlling interests 16 106 958 15 523 616 16 551 915
Condensed segmental analysis
Office Retail Industrial Foreign Total
R000 R000 R000 R000 R000
Six months ended 28 February 2013
Contractual rental income 596 426 490 328 217 148 - 1 303 902
Hotel income - - - 156 598 156 598
Operating costs (129 750) (101 117) (42 765) (165 372)# (439 004)
Net property income 466 676 389 211 174 383 (8 774) 1 021 496
Investment property portfolio
(excluding development properties) 9 473 553 7 728 683 4 131 200 - 21 333 436
Six months ended 29 February 2012
Contractual rental income 612 492 456 973 169 292 - 1 238 757
Hotel income - - - 133 750 133 750
Operating costs (160 277) (111 473) (33 068) (142 559)# (447 377)
Net property income 452 215 345 500 136 224 (8 809) 925 130
Investment property portfolio
(excluding development properties) 9 351 279 6 895 041 2 659 702 9 358 680 28 264 702
Year ended 31 August 2012
Contractual rental income 1 220 335 907 009 364 405 - 2 491 749
Hotel income - - - 286 266 286 266
Operating costs (281 556) (198 374) (76 112) (291 858)# (847 900)
Net property income 938 779 708 635 288 293 (5 592) 1 930 115
Investment property portfolio
(excluding development properties) 9 522 696 7 602 649 3 953 621 8 326 838 29 405 804
Excluding straight-line rental income accrual.
#Hotel related operating costs.
Commentary
PROFILE
Redefine is a property loan stock company listed on the Johannesburg Stock Exchange (JSE), has a market capitalisation
of R30 billion and directly manages a diversified portfolio of property assets valued in excess of R29 billion.
Property assets under management comprise 244 directly held properties valued at R23 billion with a gross lettable area (GLA)
of 3,1 million m2 and a R6 billion portfolio of listed property securities (including those held for sale). Redefine is
diversified through its 49% holding in its JSE listed associate Redefine Properties International Limited (RIN) which
in turn holds 66% of London Stock Exchange listed subsidiary Redefine International P.L.C. (RI PLC).
Redefines primary objective is to provide sustained and growing income for investors. Underscoring this is Redefines
pursuit of revenue enhancing opportunities that will translate into increasing distributions and the prospect of
long-term capital appreciation for unitholders.
FINANCIAL RESULTS
Redefine has declared an interim distribution of 33,7 cents per linked unit for the six months ended 28 February 2013,
which is 7% ahead of the prior period and is at the upper end of market guidance. Notwithstanding the dilutive effect
of additional units in issue, distributable income grew by 10% in Rand terms for the comparable period. After adjusting
for the deemed disposal of RIN, which has arisen from the change in accounting treatment from a consolidated subsidiary
to an equity accounted associate, revenue from continuing operations increased by 16% compared to the 6 months ended 29
February 2012. The statement of financial position has changed significantly as a result of the deconsolidation resulting
in enhanced credit metrics.
Contractual rental income comprised 73,5% of total revenue (excluding straight-line rental income accrual), listed
securities income 10,3%, hotel income 8,8%, and trading and fee income 7,4%.
Operating costs represent 23,7% of total revenue (31 August 2012: 24,8%) due mainly to a combination of a strict focus
on local costs and the deconsolidation of RIN.
Redefines local operation contributed 90% of distributable income.
RIN together with Redefine International Fund Managers Limited (RIFM), the fund manager of RI PLC, contributed 3,4
cents per linked unit to the distribution for the period.
CHANGES IN FAIR VALUE
Changes in fair values of R237 million comprise mainly of the internal valuation of the property portfolio of
R161 million and the increase in value of the listed securities portfolio of R65 million.
LOCAL PROPERTY PROFILE
Portfolio split by tenant type
Single 33%
Multi 67%
Sectoral spread by GLA
Office 35%
Retail 31%
Industrial 34%
Geographical spread by GLA
Gauteng 63%
Western and Eastern Cape 18%
KwaZulu-Natal 11%
Other 8%
Letting activity: During the period leases totalling 259,489 m2 were renewed at an average rental increase of 7,2%. A
further 109,226 m2 (99,532 m2) was let across the portfolio and together with vacates, vacancies increased by 1,2% to
6,9%. Vacancies are set out below as a percentage of gross lettable area (GLA):
February 2013 August 2012
Office 8,7% 8,4%
Retail 4,9% 5,4%
Industrial 7,0% 3,4%
Total 6,9% 5,8%
Arrears amounted to R45 million (31 August 2012: R39 million) against which a provision for possible bad debts of R19
million (31 August 2012: R14 million) is held. Amounts due by Government amount to R22 million.
LOCAL PROPERTY PORTFOLIO STRATEGY
Redefine has continued to implement its strategy of improving the quality of the core property portfolio, and the
average value per property is now R83 million.
Acquisitions: Two properties with a GLA of 6 750 m² were acquired and transferred during the period for an aggregate
purchase consideration of R65 million at an initial yield of 8,6%. Agreements have been concluded with a number of
vendors for the acquisition of properties for an aggregate consideration of R1,5 billion, of which R1,1 billion has
transferred subsequent to the reporting period. Development agreements, for pre-let GLA of 95 000 m² totalling R1,6 billion have
been concluded subsequent to the period end. In addition to the above, the development pipeline totals R1,7 billion, of
which R1 billion is pre-let.
Disposals: During the period 11 properties with a GLA of 36 936 m², no longer meeting Redefines investment criteria,
were sold to various buyers for an aggregate consideration of R208 million at an average yield of 9,7%. Agreements for
an aggregate consideration of R116 million have been concluded with a number of buyers for the disposal of properties,
which are subject to the usual conditions precedent.
Government tenanted office portfolio: Agreement has been reached for the disposal of 24 government tenanted office
properties to a BEE led consortium for a total consideration of R2,5 billion. These properties will form the nucleus of a
company to be listed on the JSE.
LISTED SECURITIES PORTFOLIO
The listed securities portfolio comprises:
February 2013 August 2012
Value Interest held Value Interest held
R000 % R000 %
Arrowhead Properties Limited - A units 11 174 0,9 27 286 3,0
Arrowhead Properties Limited - B units 10 811 0,9 23 772 3,0
Cromwell Property Group 533 820 4,3 - -
Fountainhead Property Trust 157 604 1,6 - -
Hyprop Investments Limited 5 152 895* 29,6 5 287 983 30,4
5 866 304 5 339 041
*R3,2 billion is classified as held for sale - refer to Hyprop below.
Cromwell Property Group (Cromwell): Redefines direct investment in Cromwell, a listed Australian property trust,
was previously treated as an associate, but following the deconsolidation of RIN is now included in listed securities.
Fountainhead Property Trust (Fountainhead): It was Redefines stated intention to obtain a meaningful stake in
Fountainhead in the event of Redefines proposal to acquire the assets of Fountainhead not proceeding, to ensure alignment of
interests between Redefine and Fountainhead unitholders. As a result of Redefines withdrawal of its offer to acquire
the Fountainhead assets which was announced on 20 March 2013, it accordingly proceeded to acquire a stake in
Fountainhead. Subsequent to the review period, Redefine has acquired 529 707 453 Fountainhead units, representing 45,6% of
Fountainheads units in issue. The Fountainhead units were acquired for an aggregate consideration of R4,952 billion, comprising
Hyprop units, cash and Redefine units.
Hyprop: Consistent with the companys stated objective to exit its listed securities portfolio, 1,9 million Hyprop
units were sold during the period, resulting in the holding reducing by 0,8% to 29,6%. Subsequent to 28 February 2013, a
further 44,3 million units were swapped for Fountainhead units, reducing the holding to 11,4%. These units have been
classified as non-current assets held-for-sale.
INTERNATIONAL INVESTMENTS
RIN: The successful capital raising by RI PLC through a firm placing and open offer, in October 2012, realised gross
proceeds of £127,5 million and resulted in RINs holding in RI PLC decreasing from 71,7% to 65,7%.
In order for RIN to follow its rights in the RI PLC offer above, RIN undertook a R1 billion capital raise which was
oversubscribed. To broaden the RIN unitholder base, Redefine made available a portion of its new RIN units for placement
with third parties. This has resulted in Redefines beneficial interest in RIN decreasing by 4,6% to 49,3%, resulting in
RIN being equity accounted. A deemed profit of R940 million arose from the conversion of RIN from a subsidiary to an associate.
Redefines effective interest in RI PLC has similarly declined from 38,7% to 32,4%.
RIFM: During the period under review, Redefine increased its holding in RIFM by 13,95% to 90% for a consideration of
R73 million.
Distribution adjustment: It is Redefines policy to distribute its share of income from international investments to
the extent of distributions received. Accordingly, an adjustment of R8,3 million has been made to the companys
distributable earnings for the period to equate the equity accounted results from its international investments for the period to
the anticipated distributions.
FUNDING
Redefines local borrowings at 28 February 2013, of R10 billion, represented 34,8% of the value of its property and
listed securities portfolio. Redefines average cost of funding is 8,6% (August 2012: 8,9%) and the interest rates are
fixed on 66% of borrowings for an average period of four years. Redefine continues to grow its presence in the debt capital
market, raising R1,5 billion during March 2013 at favourable interest rates.
Redefine listed an additional 26,9 million and 63,9 million linked units during March and April 2013 respectively as
part of the Fountainhead accelerated offer. As a result of a heavily oversubscribed bookbuild undertaken during April
2013 whereby R800 million in capital was raised, a further 78,4 million linked units are expected to be issued on 3 May 2013. This
brings the total number of linked units ranking for distribution, excluding treasury units, to 2 929 701 503.
Moodys credit rating (refreshed 12 October 2012):
Global long term Baa3
Global short term P-3
National long term A3.za
National short term P-2.za
CONTINGENCIES
At 28 February 2013, Redefine had guarantees and suretyships in respect of its BEE initiatives and joint ventures
amounting to R256 million in place. Redefine has capital commitments outstanding amounting to R2,8 billion and committed
acquisitions of R1,5 billion.
CHANGES TO THE BOARD
Mike Flax (non-executive) resigned from the Board with effect from 31 January 2013 to focus on his personal property
interests.
PROSPECTS
The local trading environment remains challenging and is anticipated to remain subdued in the medium term. Redefines
core property portfolio is expected to continue to benefit from the ongoing implementation of the property strategy. A
strict focus on cost containment and sweating the assets will be maintained. Accordingly, distributable income is
anticipated to grow in the second half at a similar rate to the interim period. This forecast has not been reviewed or reported
on by the groups independent external auditors.
DEBENTURE INTEREST DISTRIBUTION
Unitholders are advised that interest distribution number 48 of 33,7 cents per linked unit has been declared for the
six months ended 28 February 2013. The interest distribution will not be subject to dividends tax in South Africa.
The distribution is payable to Redefine linked unitholders in accordance with the abbreviated timetable set out below:
2013
Last day to trade cum interest distribution Friday, 17 May
Linked units trade ex interest distribution Monday, 20 May
Record date Friday, 24 May
Payment date Monday, 27 May
There may be no dematerialisation or rematerialisation of linked units between Monday, 20 May 2013 and Friday, 24 May
2013, both days inclusive.
BASIS OF PREPARATION
The results for the six months ended 28 February 2013 have not been reviewed or audited by the groups independent
external auditors PKF (Jhb) Inc. These results have been prepared in accordance with International Financial Reporting
Standards, IAS 34 - Interim Financial Reporting, SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee, JSE Listings Requirements and the requirements of the South African Companies Act, 2008 (as amended). The
accounting policies adopted in the preparation of these unaudited results are consistent with those applied in the preparation
of the financial statements for the year ended 31 August 2012. The prior periods statement of comprehensive income,
cash flows and segmental analysis have been represented to reflect the deconsolidation of RIN as a discontinued operation
in terms of IFRS 5.
These financial results have been prepared under the supervision of Andrew Konig (CA)SA, Redefines financial
director.
By order of the board
Redefine Properties Limited
30 April 2013
Directors: D Gihwala (Chairman), M Wainer* (CEO), G J Heron, M K Khumalo, A J Konig* (FD), H K Mehta, B Nackan,
D Perton, R W Rees, D H Rice* (COO) *Executive British
Registered office: 3rd Floor, Redefine Place, 2 Arnold Road, Rosebank, 2196. (PO Box 1731, Parklands, 2121)
Transfer secretaries: Computershare Investor Services (Pty) Limited
Sponsor: Java Capital
Company secretary: Probity Business Services (Pty) Limited
www.redefine.co.za
A copy of our results presentation is available on our website.
Date: 02/05/2013 07:37:00 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
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