Wrap Text
Condensed consolidated results for the six months ended 31 December 2013
FAIRVEST PROPERTY HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number: 1998/005011/06)
Linked unit code: FVT
ISIN: ZAE000034658
(“Fairvest” or “the company” or “the group”)
Approved as a REIT by the JSE
CONDENSED CONSOLIDATED RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2013
- 6.9% reduction in vacancies, bringing the total vacancies to 8.4% of the total lettable GLA
- Achieved distribution of 6.75 cents per linked unit
- Conversion of Fairvest to a REIT approved by JSE with effect from 1 July 2013
- R235 million new equity raised in January 2014 through the Vukile acquisition
Condensed consolidated statements of financial position
Unaudited Unaudited Audited
31 December 31 December 30 June
2013 2012 2013
R’000 R’000 R’000
Assets
Non-current assets 799 716 403 289 774 810
Investment property 790 400 356 737 770 307
Investment property under construction – 41 040 –
Equipment 537 24 354
Operating lease asset 8 779 5 488 4 149
Current assets 17 931 38 237 10 269
Trade and other receivables 13 300 8 462 7 506
Taxation – – 59
Cash and cash equivalents 4 631 29 775 2 704
Total assets 817 647 441 526 785 079
Equity and liabilities
Equity and reserves
Ordinary share capital 3 598 2 890 3 598
Non-current liabilities 768 336 423 498 743 363
Linked unit debentures and premium 546 814 386 862 543 309
Interest-bearing borrowings 221 515 28 461 200 047
Deferred taxation 7 8 175 7
Current liabilities 45 713 15 138 38 118
Taxation 7 406 –
Trade and other payables 45 706 14 732 38 118
Total equity and liabilities 817 647 441 526 785 079
Condensed consolidated statements of comprehensive income
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
31 December 31 December 30 June
2013 2012 2013
R’000 R’000 R’000
Gross revenue 62 724 10 384 54 184
Rental income – contractual 57 871 10 313 50 376
– straight-line accrual 4 853 71 3 808
Operating profit 38 492 4 836 31 520
Fair value adjustment to listed investments – 284 284
Fair value adjustment to investment properties – 12 991 67 745
Fair value adjustment to debentures (3 505) 4 436 (57 407)
Finance cost (9 535) (118) (7 048)
Foreign exchange gains – 42 42
Investment revenue 354 979 4 998
Profit before debenture interest 25 806 23 450 40 134
Debenture interest (24 284) (5 551) (27 255)
Profit after debenture interest 1 522 17 899 12 879
Capital raising expenses (1 522) (12 900) (16 126)
Profit/(loss) before taxation – 4 999 (3 247)
Taxation – (4 999) 3 247
Comprehensive income attributable to shareholders – – –
Profit and total comprehensive income attributable to:
– Owners of the parent – – –
– Non-controlling interest – – –
Reconciliation between profit attributable to shareholders
and headline earnings per linked unit
Shares are traded as part of linked units
Profit attributable to linked shareholders* – – –
Capital raising expenses 1 522 12 900 16 126
Fair value adjustment to investment properties (net of taxation) – (10 568) (67 745)
Headline and diluted headline earnings/(loss)
attributable to shareholders 1 522 2 332 (51 619)
Fair value adjustment to debentures 3 505 (4 436) 57 407
Debenture interest 24 284 5 551 27 255
Headline and diluted headline profit
attributable to linked unitholders 29 311 3 447 33 043
Distribution (debenture interest)*
Special interest distribution per linked unit (cents) – 3.71 3.71
Interim interest distribution per linked unit (cents) 6.75 0.86 0.86
Final interest distribution per linked unit (cents) – – 6.00
Total interest distribution per linked unit (cents) 6.75 4.57 10.57
Earnings per share
Basic and diluted earnings per share (cents)** – – –
Headline and diluted headline earnings/(loss) per share (cents)** 0.4 2.0 (24.5)
Headline and diluted headline earnings per linked unit (cents)** 8.1 3.0 15.7
Net asset value per linked unit and net tangible
asset value per linked unit (cents)*** 153.0 134.8 151.9
Linked unit statistics (excluding treasury shares)
Linked units in issue 359 762 307 289 048 021 359 762 307
Effective linked units in issue 359 762 307 288 974 019 359 762 307
Weighted average number of linked units 359 762 307 116 651 643 210 840 698
* Debenture interest is calculated on the capital at a variable rate equal to 99.9% of the net profit of the company before taxation,
but after adjusting for extraordinary income and expenditure, capital gains and losses, and capital expenditure.
** Headline earnings have been presented in accordance with IAS 33. The linked unit structure of the group whereby every shareholder
is a debenture holder, coupled with the terms of the Debenture Trust Deed which states that 99.9% of profits are attributable to
debenture holders, results in the benefits of improved trading which would be ordinarily attributable to shareholders being expensed
in the income statement as a fair value adjustment to debentures and debenture interest. This results in no profit being attributable
to ordinary shareholders.
*** Linked unit debentures are included in the net asset value and net tangible asset value calculation.
Condensed consolidated statements of cash flows
Unaudited Unaudited Audited
6 months to 6 months to 12 months to
31 December 31 December 30 June
2013 2012 2013
R’000 R’000 R’000
Cash inflow/(outflow) from operating activities 552 (23 207) (1 859)
Cash outflow to investing activities (20 093) (250 214) (567 995)
Cash inflow from financing activities 21 468 278 461 547 823
Net increase/(decrease) in cash and cash equivalents 1 927 5 040 (22 031)
Cash and cash equivalents at beginning of period 2 704 24 735 24 735
Cash and cash equivalents at end of period 4 631 29 775 2 704
Condensed consolidated statements of changes in equity
Share Retained
capital income Total
R’000 R’000 R’000
Balance at 1 July 2012 857 – 857
Total comprehensive income for the period – – –
Linked units issued 2 033 – 2 033
Balance at 31 December 2012 2 890 – 2 890
Total comprehensive income for the period – – –
Disposal of treasury units 1 – 1
Linked units issued 707 – 707
Balance at 30 June 2013 3 598 – 3 598
Total comprehensive income for the period – – –
Balance at 31 December 2013 3 598 – 3 598
Statements of changes in linked unit debentures
Linked unit Linked unit
debenture debenture
capital premium Total
R’000 R’000 R’000
Balance at 1 July 2012 857 142 474 143 331
Net fair value adjustment – (4 436) (4 436)
Linked units issued 2 033 245 934 247 967
Balance at 31 December 2012 2 890 383 972 386 862
Net fair value adjustment – 61 843 61 843
Disposal of treasury units 1 – 1
Linked units issued 707 93 896 94 603
Balance at 30 June 2013 3 598 539 711 543 309
Net fair value adjustment – 3 505 3 505
Balance at 31 December 2013 3 598 543 216 546 814
Condensed consolidated segment report
Reconciling
Eastern Free KwaZulu- Western items/
Cape State Gauteng Natal Cape (Eliminations) Total
R’000 R’000 R’000 R’000 R’000 R’000 R’000
For the 6 months ended 31 December 2013
Revenue – external customers 4 502 1 539 14 955 17 292 19 583 – 57 871
Intersegmental revenue – – – – – – –
Operating profit 3 651 1 308 8 814 15 535 14 058 (4 874) 38 492
Total assets 39 989 18 822 187 575 308 085 250 241 12 935 817 647
For the 6 months ended 31 December 2012
Revenue – external customers 4 103 606 611 3 899 1 094 – 10 313
Intersegmental revenue – – – – 81 (81) –
Operating profit 3 319 414 201 2 431 736 (2 265) 4 836
Total assets 35 813 7 771 11 393 181 327 167 106 38 116 441 526
For the 12 months ended 30 June 2013
Revenue – external customers 8 345 1 283 9 228 17 496 14 024 – 50 376
Intersegmental revenue – – – – 191 (191) –
Operating profit 6 334 815 5 946 14 262 10 324 (6 161) 31 520
Total assets 38 872 8 452 195 849 290 114 243 820 7 972 785 079
Other segmental information
Unaudited Unaudited Audited
31 December 31 December 30 June
2013 2012 2013
Regional profile based on leasable area
Eastern Cape 6.3% 14.5% 6.4%
Free State 1.9% 4.4% 1.9%
Gauteng 32.1% 5.9% 28.8%
KwaZulu-Natal 29.1% 30.3% 32.0%
Western Cape 30.6% 44.9% 30.9%
Vacancy profile based on gross lease area
Gross lease area in metres squared as at end of period* 100 287 44 169 100 578
Properties held 28 18 28
Vacancy area in metres squared* 8 402 3 743 9 023
Vacancy area as % of gross lease area 8.4% 8.5% 9.0%
Regional vacancy profile
Eastern Cape – – –
Free State – – –
Gauteng 42.8% 40.6% 37.2%
KwaZulu-Natal 41.8% – 46.4%
Western Cape 15.4% 59.4% 16.4%
* Gross lease area and vacancy in the prior and current periods has been updated after the remeasurement of various properties and excludes
unlettable space.
Basis of preparation and accounting policies
The accounting policies applied in the preparation of these condensed consolidated results for the six months ended 31 December 2013,
which are based on reasonable judgements and estimates, are in accordance with International Financial Reporting Standards (“IFRS”) and
are consistent with those applied in the annual financial statements for the year ended 30 June 2013. Any other new and amendments to IFRS
and IFRIC interpretations did not impact on the financial position or performance of the company but has resulted in additional disclosures.
These condensed consolidated results as set out in this report have been prepared in accordance and containing the information required
by IAS 34 – Interim Financial Reporting, the SAICA Financial Reporting Guidelines as issued by the Accounting Practices Committee, the
Financial Pronouncements as issued by the Financial Reporting Standards Council, the Companies Act, 71 of 2008, and the Listings
Requirements of the JSE Limited.
These condensed consolidated results for the six months ended 31 December 2013 have been prepared in accordance with the historic cost basis,
except for the measurement of investment properties, debentures and certain financial assets and financial liabilities which are stated at
fair value.
The financial results are presented in rands, which is Fairvest’s functional and presentation currency and have been prepared on a going
concern basis.
These condensed consolidated results are unaudited and have not been reviewed or reported on by the company’s auditors,
BDO South Africa Inc.
Estimates and critical judgements
Except for the measurement of investment properties, debentures and certain financial assets and financial liabilities the financial
statements do not include any material estimates.
COMMENTARY
Introduction
Fairvest’s objective is to build a retail focused property fund weighted toward non-metropolitan shopping centres and including convenience,
community and regional shopping centres, servicing the lower LSM market in high-growth nodes close to commuter networks.
Fairvest’s application to the JSE Limited for Real Estate Investment Trust (“REIT”) status was approved on 3 July 2013. The conversion to
a REIT is effective from 1 July 2013.
Acquisitions and associated capital raising activities
Linked unitholders are referred to the company’s SENS announcement dated 31 January 2014, regarding the acquisition by the company from
Vukile Property Fund Limited and its subsidiary MICC Properties Proprietary Limited of a portfolio of four retail properties. This
transaction was implemented during January 2014 and all properties transferred to the company. 167 873 969 ordinary linked units were
issued to Vukile and MICC in terms of an acquisition issue at an issue price of R1.40 per ordinary linked unit.
Review of results
Fairvest’s board of directors is pleased to announce a distribution of 6.75 cents per linked unit for the six months ended 31 December 2013
which is in line with expectations.
Vacancies reduced from 9.0% to 8.4% during the period under review. Included in the vacancy percentage is 2.4% which relates to St Georges
Square and Clubview Corner which are currently being redeveloped and 3.0% to a vacant warehouse (Gingindlovu) currently under contract to
be disposed of, bringing the effective vacancy percentage to 3.0%. We expect positive letting from the assets currently being redeveloped
as the redevelopments complete.
Rentals across the portfolio have trended upwards over the six-month period by 9.1% annualised. A strong focus on renewals has seen tenant
retention levels of 99.6% maintained across the portfolio, with an average escalation on renewals of 10.2%. The weighted average lease term
for the portfolio is 3.6 years.
During the next 12 months, 20.0% of leases will expire. We do not foresee a material change in our tenant retention figures and anticipate
renewal escalations to be between 8% and 10%. This gives us the opportunity to extract further value and improve our overall tenant quality.
The total property portfolio increased from R770.3 million in June 2013 to R790.4 million. The increase is mainly as a result of the
acquisition of the Westville Junction and CHEP land, converting leasehold assets to freehold. All other assets are held at the 30 June 2013
valuation plus capital expenditure incurred.
Based on Based on
Lease expiry profile rentable area contractual revenue
Vacant 8.4% –
30 June 2014 15.4% 18.4%
30 June 2015 13.6% 17.0%
30 June 2016 14.0% 14.6%
30 June 2017 11.7% 13.2%
> 30 June 2018 36.9% 36.8%
New Developments and upgrades
Clubview Corner
The upgrade of the Spar was successfully completed within the period with turnover figures growing steadily. The balance of the centre
received a cosmetic upgrade to maximise the lettability of the vacancy and we remain confident that the majority of the space will be
let within the next 12 months.
Nyanga Junction
Phase 1 of the upgrade was successfully completed with Shoprite commencing trade in October 2013 after the successful negotiation with
Pick n Pay to terminate their lease. Phase 2 of the upgrade is currently underway and due for completion by June 2014. Rentals on renewal
have trended upwards at approximately 12%, with a continued focus being increasing the national tenant component within the building.
Deals House
The property has been rebranded SASSA House and Phase 1 of the upgrade completed, being the installation of new windows and the painting
of the facades. Phase 2 is currently underway which involves the replacement of the lifts and a new foyer to the property. This is due for
completion by May 2014.
Borrowings
The interest bearing debt to asset ratio remains low at 27.4% and will reduce further to 22.2% after the Vukile acquisition which was
funded through the issue of new equity. As at 31 December 2013 46.2% of the debt was fixed at a weighted average rate of 8.7%. The weighted
average all-in cost of funding is 8.3%, with a weighted average maturity of 37 months.
Following the announcement on 29 January 2014 of a 50 basis point increase in interest rates, the total weighted average cost of borrowings
has increased to 8.5%.
Prospects
The forecasted debenture interest distribution of 14.06 cents per linked unit for the 12 months to 30 June 2014, as reported to linked unit
holders in the company’s results for the year to 30 June 2013, has been updated to include the forecasted distribution on the Vukile
acquisition as per the circular sent to linked unit holders on 22 November 2013. The updated distribution for the full year to 30 June 2014
is 13.70 cents per linked unit and management is confident that this will be achievable. This forecast assumes that the current economic and
interest rate environment will remain stable, no major corporate failures will occur and tenants will be able to absorb increases in
municipal and utility costs. This forecast is the responsibility of the board of Fairvest and has not been reviewed or reported on by the
auditors.
Distribution
The board has approved and declared an interim gross distribution of 6.75 cents per linked unit for the 6 month period ended
31 December 2013, payable to linked unitholders registered as such at the close of business on Friday, 28 March 2014.
Last date to trade linked units cum distribution Thursday, 20 March 2014
Linked units commence trading ex distribution Monday, 24 March 2014
Record date Friday, 28 March 2014
Payment date Monday, 31 March 2014
Linked units may not be dematerialised or rematerialised between Monday, 24 March 2014 and Friday, 28 March 2014, both days inclusive.
In accordance with Fairvest’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, 58 of 1962 (“Income Tax Act”). Accordingly, qualifying
distributions received by local tax residents must be included in the gross income of such linked unitholders (as a non-exempt dividend
in terms of section 10(1)(k)(aa) of the Income Tax Act), with the effect that the qualifying distribution is taxable as income in the hands
of the linked unitholder. These qualifying 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 have provided the following forms to their
Central Securities Depository Participant (“CSDP”) or broker, as the case may be, in respect of uncertificated linked units, or the transfer
secretaries, 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 CSDP, broker or the Transfer Secretaries, 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 their CSDP,
broker or the transfer secretaries, 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.
Qualifying distributions received by non-resident linked unitholders will not be taxable as income and instead will be treated as ordinary
dividends but which are exempt in terms of the usual dividend exemptions per section 10(1)(k) of the Income Tax Act. It should be noted that
until 31 December 2013 qualifying distributions received by non-residents from a REIT were not subject to dividend withholding tax. From
1 January 2014, any qualifying 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 amount due to
non-resident linked unitholders will be 5.7375 cents per linked unit. A reduced dividend withholding tax rate in terms of the applicable
DTA, may only be relied on if the non-resident linked unitholder has provided the following forms to their CSDP or broker, as the case may
be, in respect of the uncertificated linked units, or the transfer secretaries, 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 their CSDP, broker or the Transfer Secretaries, 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 their CSDP, broker or the Transfer Secretaries, 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.
Local tax resident linked unitholders as well as non-resident linked unitholders are encouraged to consult their professional advisors
should they be in any doubt as to the appropriate action to take.
Linked units in issue at the date of declaration of interim distribution: 527 636 277
Fairvest income tax reference number 9205/066/06/1
Directorate
Martin Epstein resigned as a director with effect from 15 January 2014, having served on the board since January 2010. Martin was a valued
board member and the Board wishes him well in his future endeavours.
Subsequent events
Other than the Vukile acquisition which was implemented in January 2014 the directors of Fairvest are not aware of any other material
matter or circumstance arising between 31 December 2013 and this report which may materially affect the financial position of the group
or the results of its operations.
Appreciation
We extend our appreciation to our directors, management and staff for their valued efforts as well as our advisors and linked unitholders
for their continuing belief in and support of Fairvest.
For and on behalf of the board
Fairvest Property Holdings Limited
6 March 2014
Cape Town
Registered office
Office 18003, 18th Floor, Triangle House, 22 Riebeek Street, Cape Town, 8001, Postnet Suite 30, Private Bag X3, Roggebaai, 8012
Transfer secretaries
Computershare Investor Services Proprietary Limited, Ground Floor, 70 Marshall Street, Johannesburg, 2001, PO Box 61051, Marshalltown, 2107
Auditor
BDO South Africa Incorporated Registered Auditors
Sponsor
PSG Capital Proprietary Limited
Preparer of financial statements
BJ Kriel
Directors
Executive: DM Wilder (Chief Executive Officer), BJ Kriel (Chief Financial Officer), AJ Marcus (Chief Operating Officer)
Non-executive: JF du Toit (Chairman), PJ van der Merwe (Lead Independent Non-executive)#, LW Andrag#, KR Moloko#
# independent
Company secretary
SecCorp Secretarial Services Proprietary Limited
www.fairvest.co.za
Date: 06/03/2014 02:00:00 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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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.