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Unaudited interim results for the six months ended 31 March 2013
Fountainhead Property Trust Management Limited
(Registration number 1983/003324/06)
Shortname: FPT
Share code: FPT
ISIN: ZAE000097416
UNAUDITED INTERIM RESULTS
for the six months ended 31 March 2013
* Interim distribution of 26.11 cents per unit
* Market capitalisation up 11% to R10.4 billion
* Average cost of debt down to 7.5%
* 92.4% occupancy rate (97% on a financial basis)
* Gearing at 26%
* Bryanston Shopping Centre Phase 2 approved
The Directors of Fountainhead Property Trust Management Limited, the Manager of
Fountainhead Property Trust ("Fountainhead") submit herewith their report on the
unaudited results of Fountainhead for the six months ended March 2013.
STATEMENT OF FINANCIAL POSITION
Unaudited Audited Unaudited
as at as at as at
31 March 30 September 31 March
2013 2012 2012
R'000 R'000 R'000
ASSETS
Property assets 10 972 389 10 794 992 10 336 554
Investment properties 10 587 590 10 477 200 10 037 817
Straight-line lease accrual 384 799 317 792 298 737
Current assets 433 552 454 612 441 343
Trade and other receivables 91 250 93 653 59 858
Cash and cash equivalents 342 302 360 959 381 485
Total assets 11 405 941 11 249 604 10 777 897
UNITHOLDERS' FUNDS AND
LIABILITIES
Unitholders' funds 8 090 211 8 062 932 7 776 713
Capital of the fund 2 874 030 2 874 030 2 874 030
Capital reserve 629 579 609 810 575 778
Fair value reserve 4 208 280 4 261 240 4 028 108
Retained earnings 378 322 317 852 298 797
Non-current liabilities
Interest-bearing liability 2 117 777 1 983 205 1 142 887
Current liabilities 1 197 953 1 203 467 1 858 297
Trade and other payables 144 370 129 885 112 739
Interest-bearing liability 750 000 750 000 1 420 000
Unitholders for distribution 303 583 323 582 325 558
Total unitholders' funds and
liabilities 11 405 941 11 249 604 10 777 897
STATEMENT OF COMPREHENSIVE INCOME
Unaudited Audited Unaudited
six months to 12 months to six months to
31 March 30 September 31 March
2013 2012 2012
R'000 R'000 R'000
Income 619 415 1 074 471 498 550
Contractual rental income 558 945 1 042 217 485 351
Straight-line lease adjustment 60 470 32 254 13 199
Expenses (161 017) (261 998) (120 007)
Administrative expenses (44 157) (59 564) (26 634)
Property operating expenses (116 860) (202 434) (93 373)
Operating profit 458 398 812 473 378 543
Net finance costs (94 345) (131 079) (39 786)
Interest received 10 898 23 750 11 486
Interest paid (105 243) (154 829) (51 272)
Profit on disposal of investment
properties 49 11 786
Fair value adjustments to
investment properties (33 240) 242 179 (13 199)
Profit for the period 330 862 935 359 325 558
Total comprehensive income for
the period 330 862 935 359 325 558
Basic earnings per unit (cents) 28.46 80.45 28.00
Headline earnings and distribution
income reconciliation
Profit for the period 330 862 935 359 325 558
Adjust for:
Profit on disposal of investment
properties (49) (11 786)
Fair value adjustments to investment
properties 33 240 (242 179) 13 199
Headline earnings 364 053 681 394 338 757
Less: straight-line lease adjustment (60 470) (32 254) (13 199)
Distribution income 303 583 649 140 325 558
Headline earnings per unit (cents) 31.31 58.60 29.14
Distribution per unit (cents) 26.11 55.83 28.00
Interim distribution per unit (cents) 26.11 28.00 28.00
Final distribution per unit (cents) 27.83
Units in issue 1 162 709 748 1 162 709 748 1 162 709 748
STATEMENT OF CASH FLOWS
Unaudited Audited Unaudited
six months to 12 months to six months to
31 March 30 September 31 March
2013 2012 2012
R'000 R'000 R'000
Cash effects from operating
activities
Profit for the period 330 862 935 359 325 558
Adjustments for:
Straight-line lease adjustment (60 470) (32 254) (13 199)
Interest received (10 898) (23 750) (11 486)
Interest paid 105 243 154 829 51 272
Profit on disposal of investment
properties (49) (11 786)
Fair value adjustments to investment
properties 33 240 (242 179) 13 199
Operating profit before changes
in working capital 397 928 780 219 365 344
Trade and other receivables decreased/
(increased) 2 403 (23 200) 10 595
Trade and other payables Increased/
(decreased) 14 486 6 102 (11 044)
Cash generated from the operations 414 817 763 121 364 895
Interest received 10 898 23 750 11 486
Interest paid (105 243) (154 829) (51 272)
Income distributions (323 582) (646 001) (320 443)
Cash (outflows)/inflows from
operating activities (3 110) (13 959) 4 666
Cash effects from investing
activities
Additions to investment properties (180 368) (1 741 205) (1 523 683)
Proceeds from disposal of investment
properties 30 249 47 749 2 446
Cash outflows from investing
activities (150 119) (1 693 456) (1 521 237)
Cash effects from financing
activities
Long-term loan raised 134 572 1 684 265 1 513 947
Cash inflows from financing
activities 134 572 1 684 265 1 513 947
Net decrease in cash and cash
equivalents (18 657) (23 150) (2 624)
Cash and cash equivalents at
beginning of period 360 959 384 109 384 109
Cash and cash equivalents at end
of the period 342 302 360 959 381 485
STATEMENT OF CHANGES IN UNITHOLDERS' FUNDS
Total
Capital of Capital Fair value Retained unitholders'
(R'000) the fund reserve reserve earnings funds
Balance at 1 October 2011 2 874 030 574 903 4 042 182 285 598 7 776 713
Total comprehensive income for the period
Profit and total comprehensive income for the period 325 558 325 558
Transactions with unitholders, recorded directly in equity
Profit and fair value reserve realised on sale of property transferred to capital reserve 875 (875)
Fair value adjustment on investment properties transferred to fair value reserve (13 199) 13 199
Income distributions (325 558) (325 558)
Total transactions with unitholders 875 (14 074) (312 359) (325 558)
Balance at 31 March 2012 2 874 030 575 778 4 028 108 298 797 7 776 713
Balance at 1 October 2012 2 874 030 609 810 4 261 240 317 852 8 062 932
Total comprehensive income for the period
Profit and total comprehensive income for the period 330 862 330 862
Transactions with unitholders, recorded directly in equity
Profit and fair value reserve realised on sale of property transferred to capital reserve 19 769 (19 720) (49)
Fair value adjustment on investment properties transferred to fair value reserve (33 240) 33 240
Income distributions (303 583) (303 583)
Total transactions with unitholders 19 769 (52 960) (270 392) (303 583)
Balance at 31 March 2013 2 874 030 629 579 4 208 280 378 322 8 090 211
COMMENTARY
1. INCOME DISTRIBUTION PER UNIT
Fountainhead has declared a distribution of 26.11 cents per unit for the six months ended 31 March
2013. The distribution is 6.8% below the comparable period last year. The reduction in distribution
is mainly due to the expensing of advisory costs in relation to the proposals to acquire the assets of
the trust, the dilutive effect of expensing the interest on the development of Blue Route Mall, the
short-term dilution on the acquisition of 25% of Centurion Mall, the non-recurring income relating to
municipal refunds received in the prior year, and the increase in the service fee paid to the manager as
a result of the significant appreciation of the unit price. The portfolio excluding properties acquired,
properties disposed of, and properties under development showed income growth of 3.74%.
2. FUNDING
At 31 March 2013, Fountainhead's borrowings of R2.9 billion represented 26% of the value of the
property portfolio. The average cost of funding is 7.5%. Interest rates are fixed on 30% of borrowings
for an average period of two years.
Fountainhead's strategy is to diversify providers and sources of funding and, when appropriate, seek a
credit rating with the view to broadening its funding sources to the debt capital market.
Negotiations are currently underway to increase the level of interest rate fixing to a minimum of 65%
by 30 September 2014.
3. PORTFOLIO VALUATIONS
The composition of Fountainhead Property Trust's portfolio, as valued by the independent valuer, Rode
and Associates CC, at 31 March 2013, is as follows:
Mar 2013 Sept 2012 2013 % of portfolio
Sector Value (Rm) Value (Rm) FEY (%) 2013 2012
Retail 8 452 8 226 7.6 77 76
Office 1 640 1 680 9.6 15 16
Industrial 527 541 12.7 5 5
Specialised 353 348 10.1 3 3
Total property 10 972 10 795 8.2 100 100
Net current assets 433
Net current liabilities (447)
Interest-
bearing liability (2 868)
Net asset value 8 090
4. MAJOR CAPITAL PROJECTS
Blue Route Mall
The mall was opened on 29 March 2012 and is currently fully let. The mall is generally trading well
and has been well received by tenants and shoppers. There has been a notable increase in footcount
since the recent completion of the external access slipways. The on-grade facilities for an additional
2 000 parking bays has been completed, and final completion of the total project is expected to be
achieved by July 2013.
Bryanston Shopping Centre
The Bryanston Shopping Centre is undergoing a R94 million refurbishment, which is due for completion
in May 2014. The project entails an extension of retail space for Checkers from its existing 2 200 m2 to
4 000 m2, as well as the construction of a new parking deck and a new entrance on the upper ground
level. The Checkers extension will be earnings accretive but the overall project will be marginally dilutive
to earnings due to the essential defensive spend on the parking deck construction.
The Bryanston Woolworths already trades extremely well and the Checkers extension will ensure that
the centre retains its entrenched attraction in a very competitive market. In addition, the project will
allow for the tenant mix to be reviewed and fine-tuned for the Bryanston market.
Centurion Mall
The revamp of the spine area of the Centurion Mall has created a fresh new look and feel which has
attracted potential new tenants and continues to draw positive attention from shoppers. The spine
area revamp has allowed for the introduction of brands such as Guess, Aldo, Charles and Keith, Typo,
Cotton On and Fabiani. The refurbishment has added significant value to the centre, to the tenants and
to the overall shopping experience.
5. ACQUISITIONS AND DISPOSALS
Fountainhead did not acquire any properties during the review period.
Essex Park, sold during the prior financial year, was transferred during the review period. The selling
price was R30.2 million (valuation R30.2 million).
6. SEGMENTAL INFORMATION
Mar 2013 Sep 2012 Mar 2012
six months 12 months six months
Net Net Net
Revenue income % of Revenue income % of Revenue income % of
Rm Rm Total Rm Rm Total Rm Rm Total
Retail 403 314 104 735 583 90 335 267 82
Office 97 80 26 186 156 24 90 75 23
Industrial 42 33 11 88 70 11 44 34 11
Specialised 17 17 6 33 33 5 16 16 5
Corporate (141) (47) (192) (30) (67) (21)
Total 559 303 100 1 042 650 100 485 325 100
7. LETTING ACTIVITY
Retail Offices Industrial
% of % of % of
Area year-end Area year-end Area year-end
(m2) area (m2) area (m2) area
Vacant at 30 September 2012 13 092 3.0 27 721 16.5 13 489 8.0
Sold (310) (0.2)
Vacated 2 189 0.5 704 0.4 18 575 11.1
New leases (3 530) (0.8) (1 760) (1.3) (9 106) (5.4)
Vacant at 31 March 2013 11 751 2.7 26 355 15.4 22 958 13.7
*The retail and office vacancy as at 30 September 2012 has been restated to more accurately account for vacant
office area at the retail centres.
Vacancy levels
Mar 2013 Sep 2012 Mar 2012
Sector % % %
Retail 2.7 3.0 2.0
Office 15.4 16.5 17.7
Industrial 13.7 8.0 7.1
Specialised
Total 7.6 6.7 5.6
Vacancy levels in terms of rentable area were as follows:
By value, the vacancies equated to 3% of the rent roll for March 2013, compared with 3.5% at 31
September 2012.
The retail component has a vacancy of 2.7% which is primarily in The Brightwater Commons
and Dekema Mall.
The office component has a vacancy of 15.4% which is primarily in Centurion Mall offices, Grayston
Ridge and AMR Office Park.
The industrial component has a vacancy of 13.7% which is primarily in Supreme Industrial Park and the
Jet Park mini-units.
8. PROSPECTS
Based on the Board of Director's ("the Board") assessment of difficult trading
conditions being experienced, expensing of the transaction advisory costs,
the temporary dilution of Blue Route Mall and the effect of hedging the debt
to an acceptable level, it is anticipated that distributions for the year ending 30
September 2013 will be marginally below the distribution for the year ended
30 September 2012. This forecast has not been reviewed or reported on by
Fountainhead's auditor.
9. CHANGES TO THE BOARD OF DIRECTORS
Mr Aaron Suckerman has been appointed as Financial Director of Fountainhead
with immediate effect, subject to approval by the Financial Services Board.
10. PROPOSALS TO ACQUIRE THE ASSETS OF THE TRUST
Fountainhead received competing proposals for all or the majority of its
underlying assets from Redefine Properties Limited ("Redefine") ("Redefine
Proposal") and Growthpoint Properties Limited ("Growthpoint") ("Growthpoint
Proposal") on 1 October 2012 and 23 October 2012, respectively. Collectively,
"the proposals".
The Board of Fountainhead Property Trust Management Limited ("Fountainhead
Manco") then constituted an independent sub-committee ("Independent
Committee") which, together with its advisors, considered both the proposals
and the updated changes to these proposals as received by the Board. The
Independent Committee appointed Rand Merchant Bank ("RMB"), a division of
FirstRand Bank Limited, Bowman Gilfillan Inc and Questco Proprietary Limited
to assist it with the evaluation and fairness of the proposals. Based on all the
facts at its disposal, the Independent Committee took a decision to progress
both the competing proposals with a view of putting the proposals to a vote by
unitholders of Fountainhead ("Unitholders").
Whilst progressing on this basis, Redefine withdrew its proposal and announced
that it had acquired 18% of the Fountainhead units as at 11 March 2013 and
that it intended, on an accelerated basis, to acquire an additional 15% on
the terms set out in its announcement on that date. On 25 March 2013, the
Chairman of the Board of Fountainhead Manco received a letter from Redefine,
advising that Redefine held 45.6% of the Fountainhead units.
In light of this fact and based on advice that the Independent Committee
received at the time, it resolved to terminate its engagement with Growthpoint
in relation to the Growthpoint Proposal. The primary reason for this was that
without sufficient comfort regarding Growthpoint's ability to implement the
Growthpoint Proposal without amendments to the Trust Deed or the ability to
preclude Redefine from voting its units in respect of the Growthpoint Proposal,
the Independent Committee indicated that it did not believe that it was in the
interests of Unitholders to progress the Growthpoint Proposal given that, in all
likelihood, such proposal would not be approved.
In response to the decision taken by the Independent Committee, Growthpoint
released an announcement on 17 April 2013 in which it reiterated its commitment
to acquire all of the assets of Fountainhead. To ensure its proposal would get in
front of Unitholders, Growthpoint requested a formal ruling from the JSE that
Redefine be precluded from voting on all resolutions, including the vote required
to amend the Trust Deed.
It came to the attention of the Independent Committee that the JSE had
notified Growthpoint in writing on Friday, 19 April 2013 that it had declined
Growthpoint's ruling request and based on this ruling, the Independent
Committee announced that it remains of the view that Growthpoint's Proposal, if
taken to the Unitholders, would, in all likelihood, not be approved and therefore
shall continue to not engage with Growthpoint.
11. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The unaudited interim results have been prepared in accordance with
International Financial Reporting Standards (IFRS), the AC500 series issued by
the Accounting Practices Board, the requirements of the Collective Investment
Schemes Control Act and the JSE Limited ("JSE") Listings Requirements. The
accounting policies are consistent in all material respects with those applied
in prior years. The interim results have been prepared under the supervision of
Aaron Suckerman, ACCA (UK).
12. INCOME DISTRIBUTION ANNOUNCEMENT
Notice is hereby given of distribution No. 60 of 26.11 cents per unit for the six
months ended 31 March 2013. The source of the distribution is net income from
property rentals. The distribution is not regarded as a dividend and therefore no
dividend withholding tax is payable on the distribution amount.
The last date to trade cum distribution will be Friday, 24 May 2013. The units of
Fountainhead Property Trust will commence trading ex-distribution on Monday,
27 May 2013 and the record date will be Friday, 31 May 2013. The distribution
will be paid on Monday, 3 June 2013.
Unit certificates may not be dematerialised or rematerialised between Monday,
27 May 2013 and Friday, 31 May 2013, both dates inclusive.
BY ORDER OF THE BOARD
Fountainhead Property Trust Management Limited
(Registration number 1983/003324/06)
8 May 2013
Transfer secretaries:
Computershare Investor Services (Pty) Limited
70 Marshall Street, Johannesburg, 2001
(PO Box 61051, Marshalltown, 2107)
Secretary:
Broll Property Group (Pty) Limited, Broll House
27 Fricker Road, Illovo, Johannesburg, 2196
(PO Box 1455, Saxonwold, 2132)
Registered office:
Redefine Place, 2 Arnold Road, Rosebank
Johannesburg (PO Box 1731, Parklands, 2121)
Directors:
WM Kirchmann (Chairman), VA Christian, AJ Konig, HY Laher, B Nackan, JD Rainier, DS Savage
Chief Executive Officer: MA Phakathi
Sponsor: Standard Bank
Website: www.fountainheadproperty.co.za
Date: 09/05/2013 12:52:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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