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ASCENSION PROPERTIES LIMITED - Condensed unaudited consolidated interim financial statements for the 6 months ended 31 December 2013

Release Date: 03/02/2014 13:29
Code(s): AIA AIB     PDF:  
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Condensed unaudited consolidated interim financial statements for the 6 months ended 31 December 2013

Ascension Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2006/026141/06)
(A-linked units: JSE code: AIA     ISIN: ZAE000161881)
(B-linked units: JSE code: AIB     ISIN: ZAE000161899)
Approved as a REIT by the JSE
(“Ascension” or “the company” or “the group”)
Condensed unaudited consolidated interim financial statements
for the 6 months ended 31 December 2013
Directors’ Commentary
Introduction
Ascension is a black managed and substantially black owned Real
Estate Investment Trust (“REIT”). The company is a property income
fund focusing on centrally located commercial office buildings in
South Africa with a strong focus towards government and other
empowerment sensitive tenants.
The company has a dual linked unit structure consisting of A-linked
units and B-linked units. The A-linked unit has a preferential right
to distributions that escalate with 5% per annum for the first five
years and the lower of 5% and inflation thereafter. The B-linked
units are entitled to the residual distributable income after the
distribution on the A-linked units has been paid.
The company achieved distributable earnings of R100,6 million for
the 6 months ended 31 December 2013 in line with expectations. The
company will pay an interim distribution of 19.95 cents per A-linked
unit and 10.36 per B-linked unit as set out in note 7.
Property portfolio
During the 6 month period under review the transfers of Island
Centre, Game Building, Atterbury House, Riverpark and Riverview were
completed. Ascension also concluded agreements for the acquisition
of Surrey House for a total purchase consideration of R146,2
million. This acquisition is unconditional, but is awaiting
transfer.
At 31 December 2013 Ascension held 28 properties valued at R3,278
billion at an average value per building of R117 million. This
amounts to a total GLA of 301 432m of which 34 055 m was under
development. The company has signed leases for 27 375m and is in the
process of negotiating leases for the balance of the space.
Vacancies (excluding property re-developments referred to above) at
31 December 2013 was 6,6% of total GLA compared to 8.5% at 30 June
2013.
Borrowings
The company’s borrowings at 31 December 2013 amounted to R1,162
billion at a blended average rate of 7.51%. R483 million of
borrowings has been fixed at an all-in rate of 7.42% until December
2015. Subsequent to 31 December 2013 the company entered into a R500
million, 3-month JIBAR interest rate cap at 6.72%. The interest rate
cap expires on 13 January 2017.
Prospects
The company will continue to target portfolio growth through its
focused acquisition strategy of acquiring centrally located, larger
commercial office buildings at yield accretive prices.
Despite the recent increase of 50 basis points in the repo rate, the
board remains confident that Ascension will meet its previously
announced forecast distributions. All assumptions, notes,
explanatory statements and guidance are as stated in the pre-listing
statement issued on 31 May 2012 and as updated by various
acquisition announcements since listing remain unchanged. These
forecasts have not been reported on by the auditors.
In addition as set out above steps have been taken to hedge against
major interest rate increases over the next three years. The impact
of any such increase will be assessed over time and further
announcements in this regard will be made as and when appropriate.
Consolidated statement of profit or loss for the 6 months ended
December 2013
                              Unaudited       Audited
Unaudited
                              31-Dec-13     30-Jun-13       31-Dec-
12
                               6 months     12 months        6
months
                                  R’000         R’000
R’000
Revenue                         164 648       194 058           77
891
Contractual rental income       150 043       176 839           71
849
Straight-line of lease
income adjustment                14 605        17 219             6
042
Property operating expenses
(net of recoveries)             (15 426)      (23 329)       (22
261)
Net property and
related income                  149 222       170 729           55
630
Sundry income                       112           786
-
Asset management fees           (7 549)       (4 958)          (1
656)
Overhead expenses               (1 611)       (3 263)          (1
556)
Operating profit                140 174       163 294           52
418
Fair value adjustments         (16 389)       191 563         (6
042)
Fair value adjustment –
investment property            (14 605)       185 196          (6
042)
Fair value adjustment –
interest rate derivative        (1 784)         6 367
-
Finance income                    5 877        13 131             4
070
Interest received                  353        2 553         2
200
Interest on linked units
issued cum distribution           5 524     10 578          1
870
Finance cost                  (32 022)    (36 861)    (8
884)
Interest on non-current
borrowings & other interest   (30 826)    (34 734)    (7
847)
Amortisation of
debenture discount                (364)       (717)
(353)
Amortisation of bond
raising fees                      (832)    (1 410)
(684)
Net profit before
debenture interest               97 640    331 127     41
562
Debenture interest            (100 620)   (124 471)   (42
599)
Interest on A-debentures
linked units                  (61 618)    (61 206)    (18
291)
Interest on B-debentures
linked units                  (39 002)    (63 265)    (24
308)
Net profit/(loss) before
tax for the period              (2 980)    206 656    (1
037)
Income tax expense                   -         31 492
760
Deferred taxation                    -         31 492
760
(Loss)/Profit for the period
attributable to shareholders    (2 980)       238 148
(277)
Other comprehensive
income or (loss)                          -             -          -
Total comprehensive
income or (loss)
for the period                  (2 980)       238 148
(277)

Reconciliation between earnings, headline earnings and distributable
earnings
                               Unaudited      Audited
Unaudited
                               31-Dec-13    30-Jun-13       31-Dec-
12
                                6 months    12 months        6
months
                                   R’000        R’000
R’000
(Loss)/Profit for the period
attributable to shareholders     (2 980)      238 148
(277)
Adjusted for:
Amortisation of discount
on debentures                        364           716
353
Net fair value gain on
revaluation of investment
property net of deferred tax      14 605      (216 688)         5
282
Headline earnings attributable
to shareholders                   11 989         22 176         5
358
Adjusted for:
Debenture interest               100 620        124 471        42
599
Headline earnings attributable
to linked unitholders           112 609    146 647      47
957
Adjusted for:
Straight-line of lease income
adjustment (net of taxation)    (14 605)   (17 219)    (6
042)
Fair value adjustment –
interest rate derivative          1 784    (6 367)
-
Amortisation of bond
raising fees (net of taxation)      832      1 410
684
Distributable income
attributable to
linked unitholders              100 620    124 471      42
599
Less: distribution declared    (100 620)   (124 471)   (42
599)
Interest on A-debentures        (61 618)   (61 206)    (18
291)
Interest on B-debentures        (39 002)   (63 265)    (24
308)
Income not distributed                 -                  -
-
Basic and fully diluted (loss)
/ earnings per share (cents)       (0.47)          53.21
(0.08)
Basic and fully diluted
headline earnings
per share (cents)                   1.90             4.95
1.54
Basic and fully diluted
earnings per A-linked
unit (cents)                       23.83           99.56
23.49
Basic and fully diluted
earnings per B-linked
unit (cents)                        9.89           73.25
8.88
Headline-
and fully diluted
headline earnings per
A-linked unit (cents)              26.21           51.31
25.10
Headline-
and fully diluted headline
earnings per B-linked
unit (cents)                       12.27          25.00
10.49
Distribution per
A- and B- linked unit
Distribution per
A-linked unit (cents)               19.95          38.00
19.00
Distribution per
 B-linked unit (cents)              10.36          18.80
8.45
Number of A-linked units
at 31 December 2013          308 860 859    225 872 353       176 931
082
Number of B-linked units
at 31 December 2013          376 359 014    376 359 014       340 473
165
Weighted average number
of A-linked units in issue   253 522 172   132 040 285   77 607
889
Weighted average number of
B-linked units in issue      376 359 014   315 562 571   271 370
489
Consolidated statement of financial position at 31 December   2013
                                 Unaudited       Audited
Unaudited
                                 31-Dec-13     30-Jun-13      31-Dec-
12
                       Notes         R’000         R’000
R’000
Assets
Non-current assets               3 283 183     2 550 927      2 142
154
Investment properties            3 278 566     2 544 500      2 142
068
Property, plant
and equipment                           34            60
86
Interest rate derivative             4 583         6 367
-
Current assets                      83 991        71 477         33
070
Trade and
other receivables          3        47 129        44 762         24
651
Other current assets                      -             -            3
526
Cash and cash equivalents           36 862        26 715             4
893
Investment property
held for sale                           -             -          8 000
Total assets                     3 367 174     2 662 404      2 183
224
Equity and liabilities
Equity                             659 686       644 441        325
332
Stated capital                     322 606       304 381        223
697
Retained income                    337 080       340 060        101
635
Non-current liabilities
- Debentures                     1 403 451     1 071 962        858
380
Linked unitholders’
interest                          2 063 137    1 716 403   1 183
712
Other non-current
liabilities                       1 162 884      794 288    964
487
Interest bearing
liabilities              2        1 162 884      794 288    933
754
Deferred taxation                         -            -     30
733
Current liabilities                141 153       111 713     35
025
Interest bearing
liabilities                               -            -     11
989
Trade and other payables            40 482        29 852     12
470
Linked unitholders
accrued interest                   100 671        81 861     10
566
Total equity and
liabilities                       3 367 174    2 622 404   2 183
224
TNAV and NAV per
A-linked unit (cents)                 443.9        479.1
423.4
TNAV and NAV per
B-linked unit (cents)                 210.7        190.3
130.8
TNAV and NAV per A-linked unit

(excl deferred tax)(cents)            443.9        479.1
423.4
TNAV and NAV per B-linked
unit (excl deferred tax)(cents)       210.7        190.3
139.8

Consolidated statement of cash flows for the 6 months
ended 31 December 2013
                                 Unaudited       Audited
Unaudited
                                 31-Dec-13    30-Jun-13      31-Dec-
12
                                 6 months     12 months       6
months
                                     R’000         R’000
R’000
Cash flow from
operating activities
Cash generated from operations    133 858        132 644          32
487
Finance income                       5 877        13 131            4
070
Finance costs                    (30 826)       (36 144)       (7
847)
Net cash inflow from
operating activities              108 909        109 631          28
710
Cash flow from investing
activities
Purchase of investment
properties
and cost of improvements         (734 066)   (1 743 669)   (1 543
651)
Proceeds from disposal of
Investment property
held for sale                           -          8 000
-
Net cash outflow from
investing activities             (734 066)   (1 735 669)   (1 543
651)
Cash generated from
financing activities
Proceeds from the issue
of linked units                  349 350        888 352        594
448
Net proceeds from/
(repayment of)
interest bearing loans           367 764        613 044        763
452
Distributions paid               (81 810)     (50 978)        (40
401)
Net cash inflow from
financing activities               635 323   1 450 418   1 317
499
Net increase in cash and cash
equivalents for the period         10 166    (175 620)   (197
442)
Cash and cash equivalents at the
beginning of the period            26 715      202 335    202
335
Cash and cash equivalents at
the end of the period              36 862       26 715          4
893
Consolidated statement of changes in equity for the 6 months
ended 31 December 2013
                               Stated        Retained           Total
                                capital         income
equity
                                 R’000           R’000
R’000
Balance at
30 June 2012 (audited)         106 451         101 912         208
363
Issue of linked units
net of transaction costs       197 930               -         197
930
Total comprehensive
income for the year                  -         238 148         238
148
Balance at
30 June 2013 (audited)         304 381         340 060         644
441
Issue of linked units
net of transaction costs        18 225               -         18
225
Total comprehensive loss
for the period                       -         (2 980)         (2
980)
Balance at
31 December 2013 (unaudited)   322 606         337 080
659 686

Notes
1. Basis of preparation and accounting policies
The condensed unaudited consolidated interim financial statements
have been prepared in accordance with the measurement and
recognition requirements of International Financial Reporting
Standards (‘IFRS’) and its interpretations adopted by the
Independent Accounting Standards Board, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and
Financial Reporting Pronouncements as issued by the Financial
Reporting Standards Council, the information contained in 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 Financial Director,
Henry Dednam CA(SA).
The accounting policies adopted are consistent with those applied in
the prior year.
The directors are not aware of any matters or circumstances arising
subsequent to 31 December 2013 that require any additional
disclosure or adjustment to the financial statements, other than as
disclosed in this announcement.
Grant Thornton, the company’s external auditor, has not reviewed or
audited the financial information set out in this report.
2. Non-current borrowings
Borrowings expiry profile                        R
‘million
December 2014
-
December 2015
834
December 2016
286
December 2017
-
December 2018
45
Unamortised borrowing cost                                   -
3
Total borrowings                                         1
162
3. Trade and other receivables
                        Unaudited     Audited
Unaudited
                        31-Dec-13    30-Jun-13       31-Dec-
12
                             R’000       R’000
R’000
Trade receivables
(net of impairment
provisions)                 16 816      14 411           7
130
Debtor accruals
(including consumption
charges not yet invoiced) 21 724        10 443
-
Amounts due on acquisition
adjustment accounts          6 175       1 381           9
651
Deposits                     1 481        978            1
127
Acquisition and development
costs paid in advance            -      17 026
-
Sundry debtors,
prepayments and VAT           933              523                 6
743
                           47 129            44 762               24
651
4. Lease expiry profile
                                                          Based on GLA
Vacant
6.6%
June 2014
12.8%
June 2015
15.5%
June 2016
29.9%
June 2017
4.5%
June 2018
12.3%
> June 2018
18.4%
Total
100.0%
5. Tenants: Government vs. non-government
                                                        Based on monthly
                            Based on GLA              contracted
revenue
Government                          58.7%
61.4%
Non-Government                      41.3%
38.6%
Total                               100.0%
100.0%
6. Operating segments
The group classifies segments based on the type of property i.e.
Commercial, Retail, Industrial and Other. Properties can be mixed
use properties. In this instance the property will be classified
according to its principle use.
Accordingly, the group only has one reporting segment, namely
Commercial property as the principle use of all properties in the
portfolio is for commercial office space. Most of the buildings do
have a small retail component (normally at street level), but seldom
exceeds 10% of the total GLA per building.
7. Payment of interim distribution
The board has approved and hereby give notice of an interim
distribution (distribution no 4) of 19.95 cents per A-linked unit
and 10.36 cents per B-linked unit in respect of the period 1 July
2013 to 31 December 2013.
In accordance with Ascension’s status as a REIT, linked unitholders
are advised that the distribution meets the requirements of a
“qualifying distribution” for the purposes of section 25BB of the
Income Tax Act, No. 58 of 1962 (“Income Tax Act”). The distributions
on the linked units will be deemed to be dividends, for South
African tax purposes, in terms of section 25BB of the Income Tax
Act.
The distributions received by or accrued to South African tax
residents must be included in the gross income of such linked
unitholders and will not be exempt from income tax (in terms of the
exclusion to the general dividend exemption, contained in paragraph
(aa) of section 10(1)(k)(i) of the Income Tax Act) because they are
dividends distributed by a REIT. These distributions are, however,
exempt from dividend withholding tax in the hands of South African
tax resident linked unitholders, provided that the South African
resident linked unitholders provided the following forms to the
Central Securities Depository Participant or broker, as the case may
be, in respect of uncertificated linked units, or the company, in
respect of certificated linked units:
a) a declaration that the distribution is exempt from dividends tax;
and
b) a written undertaking to inform the Central Securities Depository
Participant, broker or the company, as the case may be, should the
circumstances affecting the exemption change or the beneficial owner
cease to be the beneficial owner,
both in the form prescribed by the Commissioner for the South
African Revenue Service. Linked unitholders are advised to contact
the Central Securities Depository Participant, broker or the
company, as the case may be, to arrange for the abovementioned
documents to be submitted prior to payment of the distribution, if
such documents have not already been submitted.
Distributions received by non-resident linked unitholders will not
be taxable as income and instead will be treated as ordinary
dividends which are exempt from income tax in terms of the general
dividend exemption in section 10(1)(k)(i) of the Income Tax Act. It
should be noted that up to 31 December 2013 distributions received
by non-residents from a REIT were not subject to dividend
withholding tax. From 1 January 2014, any distribution received by a
non-resident from a REIT will be subject to dividend withholding tax
at 15%, unless the rate is reduced in terms of any applicable
agreement for the avoidance of double taxation (“DTA”) between South
Africa and the country of residence of the linked unitholder.
Assuming dividend withholding tax will be withheld at a rate of 15%,
the net dividend amount due to non-resident linked unitholders is
16.9575 cents per A-linked unit and 8.8060 cents per B-linked unit. A
reduced dividend withholding rate in terms of the applicable DTA,
may only be relied on if the non-resident linked unitholder has
provided the following forms to the Central Securities Depository
Participant or broker, as the case may be, in respect of
uncertificated linked units, or the company, in respect of
certificated linked units:
a) a declaration that the dividend is subject to a reduced rate as a
result of the application of a DTA; and
b) a written undertaking to inform the Central Securities Depository
Participant, broker or the company, as the case may be, should the
circumstances affecting the reduced rate change or the beneficial
owner cease to be the beneficial owner,
both in the form prescribed by the Commissioner for the South
African Revenue Service. Non-resident linked unitholders are
advised to contact the Central Securities Depository Participant,
broker or the company, as the case may be, to arrange for the
abovementioned documents to be submitted prior to payment of the
distribution if such documents have not already been submitted, if
applicable.
The distribution is payable to Ascension linked unitholders as
follows:
The last date to trade in linked units cum distribution will be 14
February 2014 and trading will commence ex distribution on Monday 17
February 2014. The record date to participate in the distribution
will be Friday, 21 February 2014.
Linked unit certificates may not be dematerialised or rematerialised
between Monday, 17 February 2014 and Friday, 21 February 2014, both
days inclusive.
Payment of the distribution will be made to linked unitholders on
Monday, 3 March 2014. In respect of dematerialised linked
unitholders, the distribution will be transferred to the Central
Securities Depository Participant accounts/ broker accounts on
Monday, 3 March 2014. Certificated linked unitholders’ distribution
payments will be posted on or about Monday, 3 March 2014.
A-linked units in issue at the date of declaration of interim
distribution: 308 860 859
B-linked units in issue at the date of declaration of interim
distribution: 376 359 014
Ascension income tax reference number: 9 368 910 155
Cape Town
3 February 2014
Directors
AC Nissen (chairman) / AM Mohamed * / SL Rai * / FW Arendse * /
HB Dednam * J de Villiers (alternate to SL Rai) * / M Burton /
B Bayvel / H Takolia
* (executive director)

There were no changes to the board of directors during the year.
Company secretary
J de Villiers
Business address
5th Floor, 14 Long Street, Cape Town, 8001
Transfer secretaries
Computershare Investor Services Proprietary Limited,
70 Marshall Street, Johannesburg, 2001
Sponsor
Java Capital, 2 Arnold Road, Rosebank, 2196

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