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Unaudited interim results for the six months ended 31 March 2013 and declaration of distribution
ARROWHEAD PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2011/000308/06)
JSE code for A-linked units: AWA
ISIN for A-linked units: ZAE000158101
JSE code for B-linked units: AWB
ISIN for B-linked units: ZAE000158119
(“Arrowhead” or “the company”, “the Fund” or “the group”)
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2013 AND
DECLARATION OF DISTRIBUTION
- Distribution of 28,04 cents per combined A and B linked unit for the
quarter ended 31 March 2013.
- Distribution growth of 13,6% for the quarter ended 31 March 2013
compared to the quarter ended 31 March 2012.
- Acquisitions amounting to R525 million implemented during the period.
- Total return of 23% on the A linked unit for the period.
- Total return of 35% on the B linked unit for the period.
NATURE OF BUSINESS
Arrowhead is a property loan stock company holding a diverse portfolio of
properties in secondary locations throughout South Africa. Its main focus
is paying growing income returns to its investors. This will be achieved
through escalating rentals in terms of leases with tenants, satisfactory
renewal of leases with existing tenants, renting of vacant space within
the property portfolio, managing and where possible, reducing costs
associated with the property portfolio and by acquiring revenue enhancing
properties.
UNAUDITED FINANCIAL PERFORMANCE FOR THE SIX MONTHS ENDED 31 MARCH 2013
Unaudited Unaudited
31 March 31 March
2013 2012
R’000 R’000
Revenue (excluding straight line rental 193 844 108 835
income)
Property expenses (65 333) (31 532)
Administration and corporate costs (8 089) (6 699)
Finance cost (24 861) (21 181)
Finance income 8 561 495
Distributable income 104 122 49 918
Property expenses to revenue 34% 29%
Distributable income payable to Redefine Pro- - 21 220
perties Limited for October and November 2011
Distributable income for the quarter ended 31 48 781 7 085
December 2012 (2011 - month of December)
Distributable income for the quarter ended 31 55 341 21 614
March 2013 / 2012
Total distributable income for the 6 months 104 122 49 919
ended 31 March 2013/2012
Summary of financial performance
Distribution for the quarter ended 31 December
2012 (2011 month of December)
- A linked unit (cents) 15,00 5,00
- B linked unit (cents) 12,10 3,09
27,10 8,09
Distribution for the quarter ended 31 March
2013 / 2012
- A linked unit (cents) 15,00 15,00
- B linked unit (cents) 13,04 9,68
28,04 24,68
A and B linked units in issue
31 December 2012 180 010 420 87 561 123
31 March 2013 197 395 479 87 561 123
Net asset value per combined A and B unit 1 113,91 916,30
(cents) excluding deferred taxation
Net asset value per combined A and B 1 066,43 875,28
units(cents)
Gearing ratio 21% 42%
* Net asset value includes total equity attributable to equity holders and
linked debentures.
**The gearing ratio is calculated by dividing interest-bearing
liabilities, excluding linked debenture liabilities, by investment
properties. Surplus cash is deposited into the company’s access debt
facilities. At 31 March 2013, Arrowhead`s net borrowings of R575 million
translate to a gearing ratio of 21% with an average interest rate of 8,28%
during the period.
Arrowhead's units in issue comprise A and B linked units, with A-linked
units earning the greater of 50% of the distributable income or 15 cents
per quarter, whilst the B-linked units receive the balance of the
distributable income.
Arrowhead owns a diversified property portfolio of properties located
throughout South Africa. The properties are spread across the retail,
commercial and industrial portfolios with representation in all provinces
in South Africa. Arrowhead listed with an initial portfolio of 89
properties and at present owns 112 properties.
Rental income has increased during the current period as a result of
annual escalations in rentals and the implementation of the acquisitions
comprising Kolbenco, Crownwood Office Park, Transforum, Bridge on Bond,
Selby, The District and Kwela Logistics amounting to R525 million, which
in turn resulted in increased municipal expenses, recoveries and property
expenses.
These acquisitions have been partly funded by way of a capital raising
exercise undertaken during March 2013 in terms of which Arrowhead has
issued 17 123 288 A and B linked units for an aggregate subscription value
of R250 million. This has resulted in the loan to value ratio at 31 March
2013 of 21%.
The increased ratio of property expenses to income to that achieved at the
prior interim period end is due to the conversion during the prior period
to an internal electricity administration process, in terms of which
Arrowhead through its property managers, JHI, now recovers electricity
usage directly from its tenants, resulting in higher recoveries and higher
property expenditure.
Administrative and corporate expenses have increased in line with the
increased portfolio and size of the company.
The management of Arrowhead is pleased with the performance of the
property portfolio for the six months ended 31 March 2013. The overall
letting performance is set out in the table below:
SIX MONTH LETTING REPORT AS AT 31 MARCH 2013
Total m2 Let m2 vacant m2 Let % Vacant %
At 1 October 2012 429 543 375 101 54 442 87.33% 12.67%
Acquisitions 78 564 76 961 1 603 97.96% 2.04%
Disposals (14 510) (10 132) (4 378) 69.83% 30.17%
Space amendments 730 368 362 - -
SUB TOTAL 494 327 442 298 52 029 89.47% 10.53%
Net gain for letting - 3 581 (3 581) - -
period
At 31 March 2013 494 327 445 879 48 448 90.20% 9.80%
Finance income includes antecedent interest, resulting from the issue of
new Arrowhead units to fund acquisitions during the financial period and
in respect of which income had not been earned for a full period, interest
received from tenants and call accounts and interest received from the
participants of the Arrowhead Unit Purchase Trust.
As previously communicated, Arrowhead has agreed to purchase Indite
Property Fund, which will be managed by a 100% black owned entity, and
into which Arrowhead’s government tenanted properties will be transferred.
This demonstrates Arrowhead’s commitment to meet the provisions of the
property charter in the areas of ownership, executive management,
procurement, transfer of skills and enterprise development.
The Arrowhead A linked unit price per unit has increased from R6,50 at
30 September 2012 to R7,72 at 31 March 2013, which together with the
distribution of 30 cents for the six months ended 31 March 2013, equates
to a total return of 23% for the six months ended 31 March 2013.
The Arrowhead B linked unit price per unit has increased from R5,85 at
30 September 2012 to R7,60 at 31 March 2013, which together with the
distribution of 25,14 cents for the six months ended 31 March 2013,
equates to a total return of 35% for the six months ended 31 March 2013.
Arrowhead Properties Charitable Trust.
At a general meeting held on 24 April 2013 the requisite majority of
Arrowhead unitholders approved the issue of 9 million A and B linked units
to the Arrowhead Charitable Trust at a combined price of R14,89.
PROSPECTS
Arrowhead is confident that it will meet the distribution guidance
communicated at previous year-end per combined A and B linked units for
the year ended 30 September 2013 and that it will have implemented an
additional R300 million of property acquisitions before the end of year.
Currently a further R300 million of potential acquisitions is under due
diligence.
UNAUDITED RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2013
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
31 March 31 March 30 September
2013 2012 2012
R’000 R’000 R’000
Rental income 193 844 108 835 259 735
Straight line rental income 9 774 5 502 10 491
Total revenue 203 618 114 337 270 226
Property expenses (65 333) (31 531) (92 568)
Administration and corporate (8 089) (6 699) (14 311)
costs
Net operating profit 130 196 76 107 163 348
Sign on bonuses - (13 545) (13 546)
Changes in fair value (9 774) - 231 377
Profit from operations 120 422 62 562 381 179
Net finance income/(charges) 4 094 (24 322) (6 151)
Loan facility interest (24 861) (21 182) (50 109)
Shareholders interest - (3 637) (3 637)
Amortisation of debenture 20 394 - 21 841
premium
Finance income/Antecedent 8 561 495 25 784
interest
Profit before 124 516 38 238 375 057
debenture interest and
taxation
Debenture interest (104 122) (49 919) (128 532)
Profit /(Loss) before 20 394 246 526
taxation (11 681)
Taxation - - (58 023)
Profit/(Loss) for the period 20 394 (11 681) 188 503
after taxation attributable
to equity holders
Total comprehensive 20 394 (11 681) (188 503)
income/(loss) for the period
attributable to equity
holders
Reconciliation of 20 394 (11 681) 188 503
Earnings /(loss) , headline
earnings /(loss)and
distributable
earnings (loss)/profit for
the year attributable to
equity holders
Debenture interest 104 122 49 919 128 532
Earnings 124 515 38 238 317 035
Changes in fair value of 9 774 - (187 971)
properties (net of deferred
taxation)
Changes in fair value of 9 774 - (231 377)
properties
Deferred taxation - - 43 406
Deferred taxation – CGT rate - - 12 138
adjustment
Headline earnings
attributable to linked unit- 134 289 38 238 141 202
holders
Straight-line rental income (9 774) (5 501) (7 553)
accrual(net of deferred
taxation)
Deferred taxation - other - - (459)
adjustment
Sign on bonuses - 13 545 13 546
Finance charges on finance - 3 637 3 637
lease liability
Amortisation of debenture (20 394) - (21 841)
premium
Distributable earnings 104 122 49 919 128 532
attributable to linked unit
holders
Number of A linked units in 197 395 478 87 561 123 170 562 166
issue
Number of B linked units in 197 395 478 87 561 123 170 562 166
issue
Total number of linked units 394 790 958 175 122 246 341 124 332
Weighted average number of A 178 898 154 86 200 399 92 317 055
linked units.
Weighted average number of B 178 898 154 86 200 399 92 317 055
linked units
Basic earnings per A 37,85 25,85 182,49
linked unit (cents)
Basic earnings per B 31,75 18,51 160,93
linked unit (cents)
Headline earnings per 40,82 25,85 78,44*
A linked unit
Headline earnings per 34,25 18,51 67,65*
B linked unit
Distributable earnings - 21 220 21 220
payable to Redefine
Properties
Limited for the months
of October and November 2011
Distributable earnings 48 780 7 085 7 085
payable to Arrowhead linked
unit holders pursuant to the
unbundling for the quarter
ended
December 2012/2011
A linked units (cents) 15 5 5
B linked units (cents) 12,10 3,09 3,09
27,10 8,09 8,09
Distribution for the quarter 55 341 21 614 21 614
Ended 31 March 2013 / 2012
A linked units (cents) 15 15 15
B linked units (cents) 13,04 9,68 9,68
28,04 24,68 24,68
* Whilst the headline earnings for the year ended 30 September 2012 was calculated
correctly, the headline earnings per A and B linked unit was incorrectly disclosed and
has been corrected.
CONDENSED STATEMENTS OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 March 31 March 30 September
2013 2012 2012
ASSETS R’000 R’000 R’000
Non-current assets 2 822 699 1 474 684 2 228 916
Investment property 2 761 570 1 465 457 2 222 210
Fair value of property portfolio 2 741 305 1 465 457 2 211 719
Straight line rental income accrual 20 264 - 10 490
Property, Plant and Equipment 665 817 833
Loans to Directors 60 463 8 410 5 873
Current assets 74 463 31 468 216 696
Trade and other receivables 10 413 16 808 26 559
Cash and cash equivalents 64 049 14 660 190 137
Non-current assets held for sale - - 13 952
Total assets 2 897 163 1 506 152 2 459 564
EQUITY AND LIABILITIES
Shareholders interest 210 662 (1 789) 190 269
Stated capital - - -
Share based payment - 8 127 -
Reserves 210 662 (9 916) 190 268
Non-current liabilities - 1 914 819 - 1 460 145
Debentures
Linked unit holders interest 2 125 481 768 186 1 650 414
Other non-current liabilities 668 815 652 105 539 420
Secured financial liabilities 575 092 616 177 445 698
Deferred taxation 93 722 35 928 93 722
Current liabilities 102 867 87 649 269 730
Trade and other payables 47 530 37 730 57 853
Secured financial liabilities - - 167 495
Unit holders for distribution 55 341 49 919 44 382
Total equity and liabilities 2 897 163 1 506 152 2 459 564
Net asset value per A and B linked 1 066 875 1 022
unit (cents)
Net asset value per B and B linked 1 114 916 968
unit excluding deferred taxation
(cents)
CONDENSED STATEMENTS OF CHANGES IN EQUITY
Stated
Capital Reserves Total
R’000 R’000 R’000
Balance at 5 January 2011 - - -
Issue of shares - - -
Total comprehensive income for - 1 765 1765
the period
Balance at 30 September 2011 - 1 765 1 765
Total comprehensive income for - 188 503 188 503
the year
Balance at 30 September 2012 - 190 268 190 268
Total comprehensive income for - 20 394 20 394
The period
Balance at 31 March 2013 - 210 662 210 662
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited Unaudited Audited
Quarter ended Quarter Year ended
ended
31 March 31 March 30 September
2013 2012 2012
R’000 R’000 R’000
Cash flows from operating 16 947 65 554 65 928
activities
Cash flow from investing (359 089) (20 428) (307 551)
activities
Cash flow from financing 216 055 (32 272) (429 953)
activities
Cash and cash equivalents at 190 137 1 807 1 807
the beginning of the period
Cash and cash equivalent at the 64 050 14 660 190 137
end of the period
BASIS OF PREPARATION
The results for the six months ended 31 March 2013 has not been reviewed
or reported on by the company`s independent auditors, PKF Jhb Inc. The
financial statements have been prepared in accordance with the
requirements of International Financial Reporting Standards, the SAICA
Financial Reporting Guides as issued by the Accounting Practices
Committee, IAS 34: Interim Financial Reporting, the JSE Listings
Requirements and the requirements of the South African Companies Act,
2008. These results have been prepared under the supervision of Imraan
Suleman CA(SA), Arrowhead’s Chief Financial Officer.
The accounting policies adopted are consistent with those applied in the
prior period.
In line with the accounting policy in respect of revaluing investment
properties annually, investment properties will be re-valued at year end.
PAYMENT OF DISTRIBUTIONS FOR THE QUARTER ENDED 31 MARCH 2013
The Board has approved and notice is hereby given of the cash interest
distributions (distribution number 6) of 15,00 cents per A linked unit and
13,04 cents per B linked unit for the quarter ended 31 March 2013 in
accordance with the abbreviated timetable set out below:
2013
Last date to trade cum distribution Friday, 24 May
Linked units trade ex distribution Monday, 27 May
Record date Friday, 31 May
Payment date Monday, 3 June
The interest distributions are not subject to withholding tax.
Linked unit certificates may not be dematerialised or rematerialised
between Monday, 27 May 2013 and Friday, 31 May 2013, both days inclusive.
By order of the Board
8 May 2013
Directors: T Adler* (Chairperson), G Leissner (CEO), I Suleman(CFO),
M Kaplan (COO), M Nell*, S Noik*, E Stroebel*
* Independent non-executive
Registered office: 42 Wierda Road West, Wierda Valley, 2196
Transfer secretaries: Computershare Investor Services Proprietary Limited
Sponsor: Java Capital
Company secretary: Probity Business Services Proprietary Limited
Website: www.arrowheadproperties.co.za
Date: 08/05/2013 11:13:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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