Wrap Text
Reviewed condensed financial results for the year ended 31 August 2013
VIVIDEND INCOME FUND LIMITED
(Incorporated in the Republic of South Africa under registration number 2010/003232/06)
JSE code: VIF
ISIN: ZAE000150918
REVIEWED CONDENSED FINANCIAL RESULTS FOR THE YEAR ENDED 31 AUGUST 2013
Highlights
- 50,00 cents per linked unit full year distribution above forecast expectations
- R2,0 billion property portfolio
- R401 million capital raised via Combined Claw-back and Rights Offer
- R649 million investment in new properties during the year
- 33,32% loan to value ratio
- REIT Successful REIT conversion as from 1 September 2013
Statement of comprehensive income
2013 2012
Notes R'000 R'000
Revenue, excluding straight-line lease income adjustment 190 616 127 194
Straight-line lease income adjustment 8 086 7 405
Revenue 198 702 134 599
Property expenses (41 706) (37 952)
Net property income 156 996 96 647
Other operating expenses (12 460) (8 537)
Operating profit 144 536 88 110
Fair value adjustments 7 018 19 819
Finance costs (40 428) (12 147)
Capital costs (2 095) (2 761)
Investment income 9 749 6 323
Profit before debenture interest and taxation 118 780 99 344
Debenture interest (106 417) (75 311)
Profit before taxation 12 363 24 033
Taxation 11 295 (5 638)
Total comprehensive income 23 658 18 395
Distribution per linked unit (cents) 50,00 50,50
Interim 27,00 24,50
Final 23,00 26,00
Basic earnings and diluted earnings per share (cents) 2 10,97 12,33
DISTRIBUTION PER LINKED UNIT
Calculation of distributable earnings
Profit before debenture interest and taxation 118 780 99 344
Adjusted for:
Straight-line lease income adjustment (8 086) (7 405)
Fair value adjustment - investment property (1 944) (28 520)
Fair value adjustment - financial instruments (5 074) 8 701
Amortisation of debenture discount/premium 646 430
Capital costs 2 095 2 761
Distributable earnings 106 417 75 311
Distribution comprises:
Debenture interest (106 417) (75 311)
Ordinary dividend - -
Total distribution (106 417) (75 311)
Linked units in issue (000's) 267 678 191 075
Weighted average linked units in issue (000's) 215 586 149 131
Distribution to linked unitholders 106 417 75 311
Interim 51 590 25 631
Final 54 827 49 680
cents cents
Distributable earnings per linked unit 50,00 50,50
Distribution per linked unit 50,00 50,50
Reconciliation - earnings to distributable earnings
Basic earnings are reconciled to headline earnings as follows:
Earnings attributable to equity shareholders 23 658 18 395
Fair value adjustment - investment property, net of deferred taxation (13 824) (21 558)
Amortisation of debenture discount/premium 646 430
Headline earnings before debenture interest 10 480 (2 733)
Debenture interest 106 417 75 311
Headline earnings attributable to linked unitholders 116 897 72 578
Fair value adjustment - financial instruments, net of deferred taxation (2 567) 6 265
Straight-line lease income adjustment, net of deferred taxation (10 008) (6 293)
Capital costs 2 095 2 761
Distributable earnings attributable to linked unitholders 106 417 75 311
Headline earnings per linked unit (cents) 2,3 54,22 48,67
Statement of changes in equity
Ordinary
share Retained
capital earnings Total
R'000 R'000 R'000
Balance at 1 September 2011 1 3 243 3 244
Shares issued 1 - 1
Total comprehensive income - 18 395 18 395
Balance at 31 August 2012 2 21 638 21 640
Shares issued 1 - 1
Total comprehensive income - 23 658 23 658
Balance at 31 August 2013 3 45 296 45 299
Statement of financial position
2013 2012
R'000 R'000
ASSETS
Non-current assets 2 035 854 1 360 662
Investment property 2 029 741 1 360 662
Fair value of investment property for accounting purposes 2 011 357 1 350 364
Straight-line lease income adjustment 18 384 10 298
Other non-current assets 6 113 -
Current assets 240 346 95 264
Trade and other receivables 68 543 14 069
Cash and cash equivalents 171 803 81 195
Total assets 2 276 200 1 455 926
EQUITY AND LIABILITIES
Shareholders' interest 45 299 21 640
Ordinary share capital 3 2
Retained income 45 296 21 638
Non-current liabilities - debentures 1 334 036 931 874
Linked unitholders' interest 1 379 335 953 514
Other non-current liabilities 751 908 413 149
Other non-current financial liabilities 751 839 401 785
Deferred taxation liability 69 11 364
Current liabilities 144 957 89 263
Trade and other payables 34 216 38 268
Current portion of other non-current financial liabilities 49 175 1 315
Linked unitholders for interest 61 566 49 680
Total equity and liabilities 2 276 200 1 455 926
Linked units in issue (000's) 267 768 191 075
cents cents
Net asset value per linked unit 515 499
Net asset value per linked unit, excluding deferred tax liability 515 505
Statement of cash flows
2013 2012
R'000 R'000
Cash flows from operating activities
Cash received from tenants 223 124 161 930
Cash paid to suppliers (146 648) (61 424)
Cash generated from operations 76 476 100 506
Investment income 9 749 6 323
Finance costs (40 428) (12 147)
Distributions to linked unitholders (94 531) (49 995)
Net cash (outflow)/inflow from operating activities (48 734) 44 687
Cash flows from investing activities
Investment in investment property (25 986) (5 512)
Disposal of investment property 16 251 -
New acquisitions of business undertakings (649 314) (800 950)
Net cash outflow from investing activities (659 049) (806 462)
Cash flows from financing activities
Non-current loans raised 349 014 386 047
Current loans raised 47 860 1 315
Proceeds from the issue of linked units 401 517 415 000
Expenses on issue of linked units - (6 640)
Net cash inflow from financing activities 798 391 795 722
Net increase in cash and cash equivalents 90 608 33 947
Cash and cash equivalents at the beginning of the year 81 195 47 248
Cash and cash equivalents at the end of the year 171 803 81 195
Segmental analysis
Retail Commercial Head office Total
R'000 R'000 R'000 R'000
Statement of comprehensive income August 2013
Revenue, excluding straight-line lease income adjustment 97 225 93 391 - 190 616
Straight-line lease income adjustment 4 528 3 558 - 8 086
Total revenue 101 753 96 949 - 198 702
Net property income 71 493 85 503 - 156 996
Assets
Investment property 1 207 872 803 485 - 2 011 357
Straight-line lease income adjustment 10 940 7 444 - 18 384
Other assets 10 144 9 642 226 673 246 459
Total assets 1 228 956 820 571 226 673 2 276 200
Total liabilities (13 778) (22 828) (2 194 295) (2 230 901)
Statement of comprehensive income August 2012
Revenue, excluding straight-line lease income adjustment 72 579 54 615 - 127 194
Straight-line lease income adjustment 4 744 2 661 - 7 405
Total revenue 77 323 57 276 - 134 599
Net property income 53 500 43 147 - 96 647
Assets
Investment property 685 529 664 835 - 1 350 364
Straight-line lease income adjustment 6 412 3 886 - 10 298
Other assets 5 052 6 628 83 584 95 264
Total assets 696 993 675 349 83 584 1 455 926
Total liabilities (16 667) (19 519) (1 398 100) (1 434 286)
Analysis by usage Retail Commercial Total % of total
Number of properties 12 9 21
Vacant GLA 6 630 12 073 18 703 9
GLA occupied by A tenants 77 635 58 923 136 558 63
GLA occupied by B tenants 14 911 3 428 18 339 8
GLA occupied by C tenants 29 210 13 120 42 330 20
GLA available 128 386 87 544 215 930 100
Lease expiry profile to 31 August (GLA) Retail Commercial Total % of total
Vacant 6 630 12 073 18 703 9
Month to month 5 435 7 180 12 615 6
2014 20 676 9 320 29 996 14
2015 29 325 11 750 41 075 19
2016 33 195 44 744 77 939 36
2017 10 628 846 11 474 5
>2017 22 496 1 632 24 128 11
Total 128 385 87 545 215 930 100
Weighted average lease duration (years) 2,98 2,62 2,84
Weighted average lease escalation (%) 7,47 7,63 7,53
Reconciliation of vacant GLA Retail Commercial Total
Vacant as at 1 September 2012 3 706 680 4 386
Acquired during the period - - -
Expired during the period 19 647 17 592 37 239
Re-let during the period (9 061) (1 318) (10 379)
Tenanted during the period (7 662) (4 880) (12 542)
GLA vacant as at 31 August 2013 6 630 12 074 18 704
Analysis by m2 Retail Commercial Total
Gross rental per m2 per month 83,78 85,24 84,34
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 31 August 2013
of R1 330 million and a portfolio of 21 directly owned properties valued at R2 029 million.
The company's 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-tax 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
Financial results
The distribution per linked unit for the year ended 31 August 2013, being 50,00 cents, is a) 1% higher than the forecasted distribution per linked unit, being
49,5 cents, published in Forecast A of Appendix 2 of the Combined Claw-back and Rights Issue Circular dated 13 May 2013 ("the Rights Issue Circular"), Forecast A of
the Rights Issue Circular being the appropriate forecast to apply given the results of the Combined Claw-back and Rights Issue b) 1% lower than the actual
distribution for the comparable period ended 31 August 2012, being 50,50 cents.
Net property income
The increase in revenue was due, in most part, to a) the inclusion of revenue from the Sasol Kent Street Properties which transferred into the name of the company
on 10 December 2012 and b) contractual rental escalations within the property portfolio, which were 7,53% as at 31 August 2013. Earnings associated with the property
portfolio were below forecast expectations due to a) the delay in the transfer of the Access Park Property and b) the sale of the George Metro Property. This
underperformance was offset by additional investment income derived from surplus cash holdings obtained, in most part, from the Combined Claw-back and
Rights Issue ("the Rights Issue").
The ratio of property expenses to revenue decreased from 28,2% to 21,0% due to a) the inclusion of two material triple-net leases into the property portfolio, being
the Sasol Kent Street Properties b) various cost-saving initiatives implemented within the property portfolio relating to common area utility consumption and c) a
deceleration of repairs and maintenance expenditure within the property portfolio. Other operating expenses were maintained at 6,3% of revenue.
Fair value adjustments
Revaluation of the property portfolio at 31 August 2013 resulted in an upward revision of R10 million to R2 029 million. Interest-bearing borrowings were fair
valued downwards by R8,9 million using the yield curve, as applied to the applicable swaps, at 31 August 2013 while the introduction of a put and call option over
the 10% of the Access Park Property not owned by Vividend at 31 August 2013 resulted in a net option liability of R3,87 million.
Finance costs
Finance costs increased by 233% to R40,43 million (2012: R12,46 million). This was due to the introduction of bank facilities secured by the company to facilitate
the growth in the property portfolio.
Arrears
At 31 August 2013, tenant arrears amounted to R5,0 million (2012: R4,1 million) with a provision of R3,0 million (2012: R2,0 million) having been raised for
potential bad debts. For the year ended 31 August 2013, the bad debts expense amounted to R0,2 million (2012: R1,8 million).
Vacancy levels
The company's vacancy levels, as a percentage of total gross lettable area (GLA), as at 31 August, were:
Retail % Commercial % Total %
2012 2,0 0,4 2,4
2013 3,1 5,6 8,7
The increase in the vacancy levels within the property portfolio were due, in most part, to a) the expiry of a material lease within the Owl Street Milpark Property
on 1 May 2013 and b) the expiry of the head lease provided by the Vendors of the Vusani Property Portfolio on 31 August 2012.
Acquisitions, disposals and commitments
Vividend concluded a) the Sasol Kent Street Acquisition on 10 December 2012 for a total purchase consideration of R155 million, which added 15 872 m2 of Commercial
GLA to the property portfolio and b) the Access Park Acquisition on 27 August 2013 for a total purchase consideration of R494 million, which added 18 763 m2 of
Retail GLA to the property portfolio. No other property acquisitions were concluded by the company during the reporting period. The company disposed of the George
Metro Property on 29 July 2013 for a consideration of R16,7 million, which eliminated 7 097 m2 of Retail GLA from the property portfolio.
As at 31 August 2013, the company has capital commitments outstanding in respect of approved redevelopment expenditure of R46,7 million. These commitments will be
financed from available cash resources and existing bank facilities.
In terms of the Asset Management Agreement concluded on 27 October 2010, the company is committed to acquire the Asset Manager on 18 November 2015 for an amount
equivalent to 4% of the enterprise value of the company.
Borrowings
As at 31 August 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 31 August 2013) by the fair value of property assets was 33,32% (2012: 26,67%). The increase in gearing is a result of bank
facilities secured by the company to facilitate the growth in the property portfolio. The company's unutilised bank facilities as at 31 August 2013 amounted
to R27,9 million.
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-tax profits of the company, excluding capital profits and losses and after adjusting for all non-cash items.
Rights issue
In terms of the Rights Issue Circular, the company issued a) 54 004 710 linked units to Joint Underwriters on 26 April 2013 at R5,30 per linked unit and
b) 22 597 461 linked units to unitholders other than the Joint Underwriters on 3 June 2013 at R5,40 per linked unit. Post the Rights Issue there are 267 677 607
linked units in issue (2012: 191 075 436).
Net asset value
The net asset value per linked unit increased by 2,0% to R5,15 (2012: R5,05) due to a) the upward revaluation of the property portfolio as at 31 August 2013 and
b) an Issue Price of R5,40 applicable to the Rights Issue. The Tangible Net Asset Value per linked unit increased by 3,2% to R5,15 (2012: R4,99) due to a) the upward
revaluation of the property portfolio as at 31 August 2013 b) an Issue Price of R5,40 applicable to Rights Issue and c) favourable tax dispensations applicable to
gains made by Real Estate Investment Trusts on the sale of investment property which resulted in the elimination of deferred taxation liabilities applicable to the
revaluation of property assets above their base cost.
Prospects
Should a) existing economic conditions continue to prevail and b) the property portfolio perform in line with current forecast expectations, the distribution per
linked unit for the year ended 31 August 2014 is expected to be in line with Forecast A in Appendix 2 of the Rights Issue Circular, being 50,00 cents per
linked unit.
Declaration of interest distribution number 6
Notice is hereby given that interest of 23,00 cents per linked unit has been declared, in accordance with the debenture trust deed, for the period 1 March 2013 to
31 August 2013, payable to linked unitholders recorded in the register of the company on Friday, 15 November 2013. The last day to trade cum distribution will be
Friday, 8 November 2013 and trading will commence ex distribution on Monday, 11 November 2013.
In respect of dematerialised linked unitholders, the distribution will be transferred to the Central Security Depository Participant accounts or brokers' accounts
on Monday, 18 November 2013. Certificated linked unitholder distribution payments will be posted on or about Monday, 18 November 2013. No dematerialisation or
rematerialisation of linked units may take place between Monday, 11 November 2013, and Friday, 15 November 2013, both days inclusive.
By order of the board
Vividend Income Fund Limited
23 October 2013
Notes to the financial statements
1. Basis of preparation
The reviewed condensed results have been prepared in accordance with the measurement and recognition requirements of International Financial Reporting Standards
(IFRS), the SAICA Financial Reporting Guide as issued by the Accounting Practices Committee, the Financial Reporting Pronouncements as issued by the Financial
Reporting Standards Council, the presentation and disclosure requirements of IAS 34: Interim Financial Reporting, the requirements of 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.
Baker Tilly SVG has issued an unqualified opinion on the reviewed financial results for the year ended 31 August 2013. Their report is available for inspection at the
company's registered office.
The company's accounting policies as set out in the audited financial statements for the year ended 31 August 2012 have been consistently applied in the current year.
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 instruments 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 assets and liabilities.
4. Subsequent events
Linked unitholders are referred to the announcement released on SENS on Monday, 22 July 2013, advising linked unitholders that the company had entered into an
acquisition agreement ("the BEKA Industrial Parks Acquisition Agreement"), which, if successfully concluded, would result in Vividend acquiring the properties and
associated letting enterprises commonly known as BEKA Industrial Parks ("the BEKA Industrial Parks Properties") situated in Clayville Gauteng, Penral Park Durban and
Hilton Township Bloemfontein ("the BEKA Industrial Parks Acquisition") for a purchase consideration of R145 million. In terms of the BEKA Industrial Acquisition
Agreement, the effective date of the BEKA Industrial Parks Acquisition shall be the date of transfer of the BEKA Industrial Parks Properties into the name of the
company, which, subject to fulfilment of the conditions precedent, is currently expected on or about 1 January 2014.
In addition, linked unitholders are referred to the announcement released on SENS on Monday, 24 June 2013, advising linked unitholders that Vividend's application to
the JSE Limited (JSE) for Real Estate Investment Trust (REIT) status was approved by the JSE. Accordingly, Vividend will qualify as a REIT with effect from the
commencement of its next financial year, being 1 September 2013.
Directors
KK Combi (Chairman)#, A Jacobson (Chief Executive Officer), R Amoils (Financial Director), A Witt, AB 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: 23/10/2013 02:19:00 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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