ANNUITY PROPERTIES LTD - Condensed Audited Financial Results for the year ended 31 March 2014

Release Date: 20/06/2014 17:41
Code(s): ANP
 
Wrap Text
Condensed Audited Financial Results for the year ended 31 March 2014

Annuity Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 2011/145994/06)
Share code: ANP
ISIN no: ZAE000165643 ("Annuity" or "the Company")

CONDENSED AUDITED FINANCIAL RESULTS FOR THE YEAR ENDED 31 MARCH 2014


1.  Introduction

    Annuity listed on the Real Estate – Real Estate Holdings and Development sector of the Johannesburg Stock Exchange
    ("JSE") on 4 May 2012 and transferred to the Real Estate Investment Trust sector of the JSE on 23 September 2013. The
    Company's property portfolio at 31 March 2014 consisted of eighteen properties, diversified between the retail, commercial,
    special and light industrial sectors. The Company is a variable loan stock company and distributes all its distributable
    earnings, as calculated in terms of its debenture trust deed, to its linked unit holders on a semi-annual basis.

2.  Results
    The following table reflects the financial results for the twelve months ended 31 March 2014.

    CONDENSED STATEMENT OF COMPREHENSIVE INCOME
                                                                                           Audited         Audited
                                                                                          31 March        31 March
                                                                                              2014            2013
                                                                                                 R               R
    Revenue
    Property portfolio                                                                 178 706 367      88 927 644
    Contractual rental income                                                          149 096 045      69 909 932
    Straight-line rental income accrual                                                 29 610 322      19 017 712
    Recoveries and other property income                                                50 877 473      19 734 723
    Total revenue                                                                      229 583 840     108 662 367
    Property expenses                                                                 (60 735 161)    (25 429 963)
    Administration and corporate costs                                                (10 762 934)     (5 882 092)
    Net operating profit                                                               158 085 745      77 350 312
    Investment and other income                                                         15 821 169      13 408 617
    Gain on bargain purchase                                                             3 300 000      31 623 832
    Property acquisition costs                                                         (7 114 944)    (17 069 572)
    Goodwill impairment charge                                                        (12 762 553)               -
    Changes in fair values                                                              18 885 675      32 053 060
    Net profit before finance costs, interest on linked units and                      
    taxation                                                                           176 215 092     137 366 249
    Finance costs                                                                     (45 400 303)    (18 693 232)
    Net profit before interest on linked units and taxation                            130 814 789     118 673 017
    Interest on linked units                                                         (105 666 139)    (58 574 648)
    Profit before taxation                                                              25 148 650      60 098 369
    Taxation                                                                            11 986 706    (11 721 067)
    Total comprehensive income for the year                                             37 135 356      48 377 302
    
                                                 
    
    EARNINGS, HEADLINE EARNINGS AND DISTRIBUTABLE EARNINGS
                                                                                           Audited        Audited
                                                                                          31 March       31 March
                                                                                              2014           2013
                                                                                                 R              R
    
    Number of linked units in issue used at year end                                   236 572 769    189 132 917
    Weighted average number of linked units in issue used for the
    calculation of earnings and headline earnings per linked unit                      213 195 827    114 998 290
    Weighted average number of linked units in issue adjusted for potential
    dilutive effects of the options used for the calculation of diluted earnings
    and headline earnings per linked unit                                              213 665 976    115 533 809
    Reconciliation of earnings, headline earnings and distributable earnings
    Profit for the financial period attributable to equity holders                      37 135 356     48 377 302
    Adjusted for interest on linked units                                              105 666 139     58 574 648
    Earnings attributable to linked unitholders                                        142 801 495    106 951 950
    Deduct fair value adjustments and gains on bargain purchases                      (15 011 692)   (57 909 908)
    
    Gains on bargain purchases (net of deferred taxation)                              (3 300 000)   (31 153 422)
    
    Fair value adjustments (2013: net of deferred taxation)                           (11 711 692)   (26 756 486)
    
    
    Add back Goodwill impairment loss                                                   12 762 553              -
    
    
    Headline earnings attributable to linked unitholders                               140 552 356     49 042 042
    
    Fair value adjustments on derivative instruments (net of deferred
    taxation)                                                                          (5 165 268)        611 296   
    Straight line rental income accrual (2013: net of deferred taxation)              (29 610 322)   (13 692 752)
    Amortisation of debt transaction costs                                               2 547 710      1 108 067
    Interest on other borrowings – IFRS adjustment                                       3 361 290      3 552 758
      Reversal of previously raised deferred taxation on capital gains tax
    timing differences not to be incurred in future as a result of REIT status        (12 963 938)              -
    obtained by the company as from 1 April 2013.
    Deferred taxation resulting from utilisation of estimated taxation loss
    and accrued income                                                                 (1 031 483)         17 826
    Change in fair value of executives linked unit options                               1 072 606        983 222
    Once off property acquisition costs                                                  7 114 944     17 069 572
    
      Available for distribution to linked unitholders                                 105 877 895     58 692 031
    
    
    
    Distribution declared:
    Debenture interest                                                                 105 666 139     58 574 648
    Ordinary dividend                                                                      211 756        117 383
    Total distribution                                                                 105 877 895     58 692 031
    Interim six months ended 30 September                                               51 449 497     17 872 180                                                                                    
    Final six months ended 31 March                                                     54 428 398     40 819 851
                                                                                        
    
    
    Basic earnings per share (cents)                                      17.42   42.07
    Diluted earnings per share (cents)                                    17.38   41.87
    Headline earnings per share (cents)                                   16.36  (8.29)
    Diluted headline earnings per share (cents)                           16.33  (8.25)
    Basic earnings per linked unit (cents)                                66.98   93.00
    Diluted earnings per linked unit (cents)                              66.83   92.57
    Headline earnings per linked unit (cents)                             65.93   42.65
    Diluted headline earnings per linked unit (cents)                     65.78   42.45
    Distribution per linked unit (cents)                                  45.15   40.91
    Interim six months ended 30 September                                 22.14   19.15
    Final six months ended 31 March                                       23.01   21.76
    
    
    
    CONDENSED STATEMENT OF FINANCIAL POSITION
                                                              Audited           Audited
                                                        31 March 2014     31 March 2013
                                                                    R                 R
    Assets
    Non-current assets                                  1 904 479 961     1 415 100 000
    Investment property                                 1 898 155 000     1 415 100 000
    Fair value of property portfolio                    1 849 413 180     1 395 968 502
    Straight-line rental adjustment                        48 741 820        19 131 498
    Derivative instruments                                  6 324 961                 -
    
    
    Current assets                                         36 033 277        40 810 888
    Trade and other receivables                            20 358 186        17 481 192
    Taxation                                                   14 280            14 280
    Cash and cash equivalents                              15 660 811        23 315 416
    
    
    Total assets                                        1 940 513 238     1 455 910 888
    
    
    Equity and Liabilities
    Equity                                                 95 069 844        56 552 672
    Stated capital                                          2 327 567         1 833 850
    Share based payment reserve                             2 055 828           983 222
    Accumulated profit                                     90 686 449        53 735 600
    
    
    Non-current liabilities                             1 701 717 224     1 337 828 022
    Debentures                                          1 162 736 644       930 956 392
    Financial liabilities                                 538 224 530       393 279 853
    Derivative instruments                                          -           849 022
    Deferred taxation                                         756 050        12 742 755
    
    
    Current liabilities                                   143 726 170        61 530 194
    Trade and other payables                               28 492 637        20 791 978
    Current portion of financial liabilities               60 913 992                 -
    Linked unitholders for distribution                    54 319 541        40 738 216
    
    
    Total equity and liabilities                        1 940 513 238     1 455 910 888
    
    
    Number of linked units in issue                       236 572 769       189 132 917
    Net asset value per linked unit (R)                          5.32              5.22
    Net tangible asset value per linked unit (R)                 5.32              5.22
    
    
    CONDENSED STATEMENT OF CHANGES IN EQUITY
                                                               Stated       Accumulated       Share based           Total      
                                                              Capital            profit           payment                      
                                                                                                  reserve                      
                                                                    R                 R                 R               R      
    Balance at 31 March 2012                                       10         5 394 048                 -       5 394 058      
    Issue of linked units                                   1 833 840                 -                 -       1 833 840      
    Total comprehensive income for the period                       -        48 377 302                 -      48 377 302      
    Share based payment                                             -                 -           983 222         983 222      
    Dividends declared during the year                              -          (35 750)                 -        (35 750)      
    Balance at 31 March 2013                                1 833 850        53 735 600           983 222      56 552 672      
    Issue of linked units                                     493 717                 -                 -         493 717      
    Total comprehensive income for the period                       -        37 135 356                 -      37 135 356      
    Share based payment                                             -                 -         1 072 606       1 072 606      
    Dividends declared during the year                              -         (184 507)                 -       (184 507)      
    Balance at 31 March 2014                                2 327 567        90 686 449         2 055 828      95 069 844      
    
    
    CONDENSED STATEMENT OF CASH FLOW
                                                                               Audited            Audited
                                                                         31 March 2014      31 March 2013
                                                                                     R                  R
    Net cash generated from operating activities                             7 276 690         23 910 018
    Cash generated from operations                                         126 577 430         45 973 027
    Interest received                                                       12 459 883          9 855 858
    Finance charges                                                       (39 491 302)       (14 032 407)
    Taxation paid                                                                    -           (14 280)
    Distribution paid to linked unitholders                               (92 269 321)       (17 872 180)
    Net cash utilised in investing activities                            (436 653 014)    (1 135 883 446)
    Acquisition of businesses (net of cash acquired)                     (445 233 233)    (1 089 774 240)
    Capital expenditure, tenant installations and lease
    commissions                                                            (5 282 986)          (309 206)
    Loans raised / (repaid)                                                 13 863 205       (45 800 000)
    Net cash generated from financing activities                           421 721 719      1 135 288 486
    Proceeds from issue of linked units                                    231 601 547        831 809 866
    Increase in secured borrowings                                         203 983 377        303 975 492
    Repayment of unsecured borrowings                                     (13 863 205)          (496 872)
    
    
    Net movement in cash and cash equivalents                              (7 654 605)         23 315 058
    Cash and cash equivalents at the beginning of the year                  23 315 416                358
    Cash and cash equivalents at the end of the year                        15 660 811         23 315 416
    
    
    
    SEGMENTAL REPORT
                                                                                                            Light
    Financial year ended                             Total           Retail              Office        Industrial           Special              Admin
    31 March 2014 (Audited)                              R                R                   R                 R                 R                  R
    
    REVENUE
    
    Property portfolio                         178 706 367       71 977 119          83 479 550         14 897 701        8 351 997                  -
    Contractual rental
    income                                     149 096 045       62 717 380          68 814 292         12 421 356        5 143 016                  -
    Straight-line rental
    income accrual                              29 610 322        9 259 739          14 665 258          2 476 345        3 208 981                  -
    Recoveries and other
    property income                             50 877 473       28 895 848          17 527 194          2 834 147        1 620 284                  -
    
    Total revenue                              229 583 840      100 872 966         101 006 744         17 731 848        9 972 281                  -
    
    Property expenses                         (60 735 161)     (32 987 746)        (22 373 989)        (3 491 009)      (1 882 417)                  -
    Administration and
    corporate costs                           (10 762 934)                -                   -                 -                 -       (10 762 934)

    Net operating profit                       158 085 745       67 885 220          78 632 756         14 240 839        8 089 863       (10 762 934)
    Investment and other
    income                                      15 821 169                -                   -                  -                -         15 821 169
    Gain on bargain 
    purchase                                     3 300 000          612 500                   -                  -        2 687 500                  -
    Property acquisition
    costs                                      (7 114 944)      (2 117 104)           (549 283)        (2 565 440)      (1 416 156)          (466 960)
    
    Goodwill impairment loss                  (12 762 553)      (7 207 936)           (923 603)        (4 631 014)                -                  -
    
    Changes in fair values                      18 885 675       22 649 457        (14 992 246)          4 087 325         (32 844)          7 173 983
    Net profit before finance
    cost, interest on linked
    units and taxation                         176 215 092       81 822 137          62 167 624         11 131 710        9 328 363         11 765 258
    
    Finance costs                             (45 400 303)                -                   -                  -                -       (45 400 303)
    Net profit before interest
    on linked units and
    taxation                                   130 814 789       81 822 137          62 167 624         11 131 710        9 328 363       (33 635 045)
    
    Interest on linked units                 (105 666 139)                -                   -                  -                -      (105 666 139)
    Segment profit / (loss)
    before taxation                             25 148 650       81 822 137          62 167 624         11 131 710        9 328 363      (139 301 184)
    
    Investment property                      1 898 155 000      823 381 941         757 730 000        211 074 387      105 968 671                  -
    
    Other assets                                42 358 238       14 923 412           2 699 160          1 202 946          718 634         22 814 087
    
    Total assets                             1 940 513 238      838 305 353         760 429 160        212 277 333      106 687 305         22 814 087
    
    Total liabilities                        1 845 443 394      202 639 642         210 525 969        109 988 884       98 130 298      1 224 158 601
    
    SEGMENTAL REPORT
    
                                                                                                            Light
    Financial year ended                             Total            Retail            Office         Industrial         Special               Admin
    31 March 2013 (Audited)                              R                 R                 R                  R               R                   R
    
    Revenue
    Property portfolio                          88 927 644        30 303 649        58 044 482            579 513               -                   -
    Contractual rental income                   69 909 932        24 915 071        44 418 074            576 787               -                   -
    Straight-line rental income
    accrual                                     19 017 712         5 388 578        13 626 408              2 726               -                   -
    Recoveries                                  19 734 723        11 405 198         8 309 692             19 833               -                   -
    Total revenue                              108 662 367        41 708 847        66 354 174            599 346               -                   -
    Property expenses                         (25 429 963)      (13 056 902)      (11 957 461)          (223 994)               -           (191 606)
    Administration and
    corporate costs                            (5 882 092)                 -                 -                  -               -         (5 882 092)
    Net operating profit                        77 350 312        28 651 945        54 396 713            375 352               -         (6 073 698)
    Investment and other
    income                                      13 408 617                 -                 -                  -               -          13 408 617
    Gains on bargain purchases                  31 623 832        11 075 876        18 452 832          2 095 124                                   -
    Property acquisition costs                (17 069 572)       (8 424 965)       (7 578 066)          (586 479)               -           (480 062)
    Changes in fair values                      32 053 060        12 037 741        28 195 757            (1 662)               -         (8 178 776)
    Net profit before interest on
    linked units and taxation                  137 366 249        43 340 597        93 467 236          1 882 335               -         (1 323 919)
    Finance costs                             (18 693 232)                 -                 -                 -                -        (18 693 232)
    Net profit before interest on                                               
    linked units and taxation                  118 673 017        43 340 597        93 467 236          1 882 335               -        (20 017 151)
    Interest on linked units                  (58 574 648)                 -                 -                  -               -        (58 574 648)
    Segment profit before
    taxation                                    60 098 369        43 340 597        93 467 236          1 882 335               -        (78 591 799)
    
    Investment property                      1 415 100 000       644 649 964       727 500 000         42 950 036               -                   -
    Other assets                                40 810 888         7 916 616         3 240 096            359 373               -          29 294 803
    Total assets                             1 455 910 888       652 566 580       730 740 096         43 309 409               -          29 294 803
    Total liabilities                        1 399 358 216       193 167 690       166 819 848          5 046 688               -       1 034 323 990

3.  Acquisitions and Commitments

    The company acquired a hundred percent interest in all the assets and some liabilities of eight letting enterprises during the financial year ending 31 March 2014.
    The letting enterprises were acquired as going concerns and were paid for in cash.

    Details of the net assets acquired are as follows:

                                                               31 March 2014     31 March 2013
                                                                           R                 R
    
    Fair value of the investment properties at acquision         436 450 000     1 218 871 000
    Gains on bargain purchases                                   (3 300 000)      (31 771 000)
    Goodwill recognised                                           12 762 553           147 168
    Present value adjustment of vendor loan finance                        -        11 477 591
    Investment property at acquisition price                     445 912 553     1,198,724,759
    Trade and other payables                                       (679 320)       (1 784 398)
    Trade and other receivables                                            -            91 470
    Purchase consideration                                       445 233 233     1 197 031 831
    Portion settled in linked units                                        -      (49 980 000)
    Portion settled through vendor finance                                 -      (57 277 591)
    Purchase consideration settled in cash                       445 233 233     1 089 774 240
    
    Annuity took transfer of four properties during the first six months of the financial year, whilst a further four properties
    transferred during the second six months. Annuity acquired the newly developed Virgin Active – Bryanston letting enterprise
    ("the Virgin Active Building") on the intersection of William Nicol Drive and Main Road, Bryanston, which consists of a Virgin
    Active gym and a retail component, at a purchase price of R119 million on 19 August 2013. A light industrial property with an
    office component ("the Aveng Building") was acquired on 8 August 2013 at an acquisition price of R63,6 million. The letting
    enterprise is located in the Stormill industrial area and occupied by Alpret Control Specialists, a subsidiary of the JSE-listed
    Aveng Limited. Three properties, a warehouse in the Ormonde industrial area ("the Clarins Modulus Road Property") and a
    small office building in Gardens, Cape Town ("the Clarins Dunkley House Property"), as well as Clarins Head Office, situated
    in Scott Street, Waverley ("the Clarins Scott Street Property"), were acquired on 16 September 2013, 27 September 2013 and
    4 December 2013 respectively. The acquisition price for the three properties amounted to R37,3 million. The three properties
    are all tenanted by Clarins South Africa.
                                                                               
    The Company also acquired the "Coricraft Distribution Centre", a 19,369m light industrial property situated in Stormill,
    Johannesburg, occupied by the Coricraft Group. This property transferred into Annuity's name on 7 October 2013. Thereafter
    two further properties were acquired namely "Unitrans Nissan Clearwater property", tenanted by Unitrans and the "McCarthy
    Audi Clearwater property", anchored by McCarthy. These two retail dealerships are located in Constantia Kloof, on the West
    Rand of Johannesburg, and transferred into Annuity's name on 4 February 2014 and 25 February 2014 respectively.
    
    The Virgin Active Building, Aveng Building and the Clarins Scott Street Property were funded from Annuity's debt facilities
    whilst the Clarins Modulus Road Property, the Clarins Dunkley House Property, the Coricraft Distribution Centre and the
    Unitrans Nissan Clearwater Property were paid for in cash through funding by way of an issue of linked units on 20 September
    2013. The McCarthy Audi Clearwater Property was paid for in cash funded through a combination of debt and equity.
    
    The investment properties were recognised at their fair values of R436,5 million (2013: R1,2 billion) resulting in a gain on
    bargain purchase of R3,3 million (2013: R31,7 million) and goodwill of R12,8 million (2013: nil). The goodwill arose as a result
    of the purchase prices exceeding the fair value of the properties on date of recognition.
    
    The Company earned rental income (excluding the straight-lining income accrual) of R17,7 million (2013: R57,4 million) from
    these letting enterprises during the year. Based on rental income which the Company earned during the year, it would have
    earned rental income of R41,2 million (2013: R115,4 million) had it owned all eight of these letting enterprises for the full year.
    
    The net operating income (excluding the straight-lining of income accrual) earned by the Company from these letting
    enterprises were R16,6 million (2013: R49,4 million). Based on the net operating income which the Company earned during
    the year, it would have earned R38,9 million had the Company owned all eight letting enterprises for the entire year.
    
    As at 31 March 2014 the Company was committed to acquire a further letting enterprise, namely the Warich Close Office
    Park, for a total purchase consideration of R49,1 million. Details of the transactions are set out in the SENS announcement
    dated 29 July 2013.

4.  Goodwill

                                31 March 2014     31 March 2013
                                            R                 R
    Additions                      12 762 553                 -
    Impairment loss              (12 762 553)                 -
                                            -                 -

    The goodwill asset arose from the acquisition of seven letting enterprises, namely the Aveng Building, Clarins Modulus Road
    Property, Clarins Dunkley House Property, Clarins Scott Street Property, Coricraft Distribution Centre, Unitrans Nissan
    Clearwater Property and McCarthy Audi Clearwater Property. The asset was reduced to nil, after the goodwill was assessed
    against the total market value of the Company in relation to its net asset value.

5.  Related party transactions

    The company paid transaction fees of R4,5 million and asset management fees of R6,4 million to Annuity Asset Managers
    Proprietary Limited and property management fees and letting commission of R5,8 million to Annuity Property Managers
    Proprietary Limited, which two entities are considered to be related parties to Annuity, during the financial year.

    At the time of acquiring the Sasfin Head Office in May 2012, the Company granted an option to Sasfin Private Equity Fund
    Managers Proprietary Limited ("Sasfin Private Equity"), which is a twenty five percent shareholder in Annuity Asset Managers
    Proprietary Limited, to sell to the Company, its shareholding in, and claims against Annuity Asset Managers Proprietary
    Limited at a price to be determined which is 0,875% of the Company's enterprise value, being the market capitalisation plus
    debt, less trade creditors and cash. The shares and claims so acquired, in the event that Sasfin Private Equity should
    exercise the option, shall subsequently be purchased and cancelled by Annuity Asset Managers Proprietary Limited in
    consideration for a reduction in the annual asset management fee charged to the Company, which has the effect of making
    the transaction non-dilutionary to earnings during the term of the asset management contract. At the reporting date, Sasfin
    Private Equity has not exercised this option. Based on the Company's enterprise value as at 31 March 2014 the price at
    which Sasfin Private Equity could sell the shares to the company at this date would be R15,3 million.

6.  Property Portfolio (not audited)

    Geographical Profile                                    Western Cape           Gauteng   Kwazulu Natal          Total
                                                                                                                    
    By revenue (R)                                            52 491 599        86 261 504      10 342 942    149 096 045
                         
    By rentable area (m 2)                                        42 462            86 241          12 489        141 192


    Sectorial Profile                           Retail           Offices  Light Industrial         Special          Total
                                                                                                                    
    By revenue (R)                          62 717 380        68 814 292        12 421 356       5 143 016    149 096 045
                         
    By rentable area (m 2)                      58 098            46 330            32 254           4 510        141 192



                                                                                     Light
                                                Retail           Office         Industrial        Special           Total

    Portfolio valuation (R)                823 381 941      757 730 000        211 074 387    105 968 671   1 898 155 000                                          
                 
    Value per (m 2)                             14 172           16 355              6 544         23 496          13 444
    Vacancy % by gross lettable area             0.91%            2.91%              0.87%          0.00%           1.53%
                                       
    Average monthly gross rental per  m 2       114.13           134.93              52.94         164.31          108.58
                                                
    (Rand)
    Weighted Average rental escalation           7.03%            7.14%              8.11%          7.62%           7.33%
                                                
    (%)
    Annualised property yield (%)                8.39%            8.68%              9.02%         10.07%           8.67%
    
    Tenant analysis
    
    A - Large national tenants, listed tenants, government and major franchises
    
       Percentage of GLA                                                               82%
       Number of tenants                                                        41 tenants
    
    B - Other national tenants, other listed tenants, franchisees and medium to large professions
    
       Percentage of GLA                                                                7%
       Number of tenants                                                        47 tenants
    
    C – Other
    
       Percentage of GLA                                                               11%
       Number of tenants                                                       111 tenants
    
    Lease expiry profile

                                                                         Light
                                                 Retail   Office    Industrial    Special     Total
                                                                    
    By rentable area
    Expiring within one year                       7.0%     8.5%          2.6%       4.7%      6.4%
    Expiring between one and two years            33.4%     8.9%          1.7%       0.0%     17.1%
    Expiring between two and three years          23.5%     5.7%          9.7%       0.0%     13.8%
    Expiring between three and four years         10.3%     4.2%          6.7%       0.0%      7.1%
    Expiring between four and five years           3.8%     0.0%         18.7%       0.0%      5.7%
    Expiring between five and six years            4.3%     0.5%          0.0%       0.0%      1.9%
    Expiring between six and seven years           0.4%     0.0%          0.0%       0.0%      0.3%
    Expiring between seven and eight years         9.9%    24.3%          0.0%       0.0%     12.0%
    Expiring between eight and nine years          0.0%    41.1%          0.0%       0.0%     13.4%
    Expiring after nine years                      7.4%     6.8%         60.6%      95.3%     22.3%
    
    By revenue
    Expiring within one year                       9.8%    19.7%          3.4%       3.6%     12.8%
    Expiring between one and two years            31.2%     7.8%          1.9%       0.0%     16.7%
    Expiring between two and three years          24.2%     7.0%         10.3%       0.0%     14.4%
    Expiring between three and four years         12.7%     5.3%         10.7%       0.0%      8.8%
    Expiring between four and five years           5.4%     0.0%         33.8%       0.0%      6.2%
    Expiring between five and six years            4.9%     0.8%          0.0%       0.0%      2.4%
    Expiring between six and seven years           0.6%     0.0%          0.0%       0.0%      0.3%
    Expiring between seven and eight years         6.2%    20.0%          0.0%       0.0%     10.8%
    Expiring between eight and nine years          0.0%    39.3%          0.0%       0.0%     16.0%
    Expiring after nine years                      5.0%     0.1%         39.9%      96.4%     11.6%

7.  Development and Capital Projects

    The Company was not engaged in any major developments or capital projects during the financial period except for
    R669,655 spent on refurbishing the Ethos Building. The Company is committed to spend a further R1,4 million on
    refurbishments at the Ethos Building. The Company is committed to spend R3,3 million on refurbishing the Marion Place
    Office Park.

8.  Borrowings

    The Company's borrowings at 31 March 2014 consisted of two secured loans from Rand Merchant Bank (a division of First
    Rand Bank Ltd) amounting to R510,5 million and a secured loan from Standard Bank of R92,5 million. The Rand Merchant
    Bank loans consist of two three year facilities of which R60,9 million expires on 23 March 2015. The balance expires on 18
    December 2015. Interest rates are fixed for 74% of the debt, either through interest rate swap agreements or as part of the
    facility at an average interest rate of 7,86% for the year. The average rate of interest at 31 March 2014 was 8.02%. Surplus
    cash is invested into the floating facilities to ensure effective cash management. The Company is also party to vendor loans
    with a nominal value of R43,4 million arising from the acquisition of the Oakfields Shopping Centre and the Cell C building.
    The accounting value of these loans of R38,9 million has been netted off against loans receivable to give effect to what is
    considered a net settled arrangement.

    At 31 March 2014, Annuity's average loan to value ratio is 35,3% based on investment properties valued at R1,9 billion. The
    Company had debt facilities available of R294 million at 31 March 2014 (2013: R282 million).

9.  Share and debenture capital

    The Company issued 43 249 636 linked units on 20 September 2013 at 530,52 cents per linked unit in terms of a private
    placement. A further 4 190 216 shares were issued on 18 December 2013 in terms of the distribution re-investment
    programme ("DRIP") offered in respect of the interim cash distribution at an issue price of 509 cents per linked unit.

10. Fair value measurement of financial instruments

    The financial instruments were valued by Investec Bank Limited by discounting the future cash flows using the Jibar swap
    curve.

    The different levels have been defined as:

    Level 1 - fair value is determined from quoted prices (unadjusted) in active markets for identical asset or liabilities
    Level 2 - fair value is determined through the use of valuation techniques based on observable inputs, either directly or
    indirectly
    Level 3 - fair value is determined through the use of valuation techniques using significant inputs

                                 Level 1         Level 2      Level 3           Total
    At 31 March 2014                   R               R            R               R
    Financial instruments              -       6 324 961            -       6 324 961
    
                                 Level 1         Level 2      Level 3           Total
    At 31 March 2013                   R               R            R               R
    Financial instruments              -         849 022            -         849 022

11. REIT Legislation

    Annuity received REIT Status from the JSE Limited on 15 July 2013, effective from the financial year commencing on 1 April
    2013. As a result of its REIT status Annuity will not be taxed on its future capital gains and will be able to deduct its full
    distribution to linked unit holders against taxable income. The deferred tax liability raised previously on fair value adjustments
    to Investment Properties and the straight line rental income accrual has therefore been reduced to nil.

12. Events subsequent to reporting date

    The Company took transfer of the Warich Close Office Park on 28 May 2014. The acquisition was funded from debt.


13. Strategy and prospects

    Annuity's strategy since its listing in May 2012 has been to build a diversified portfolio of income producing properties in the
    retail, commercial and industrial sectors. In keeping with this strategy, Annuity has grown its property portfolio to in excess of
    R1,9 billion, through the acquisition of high quality properties, generally located in sought after, well established and
    defensive nodes in the major metropolitan areas or commercial precincts, underpinned by national tenants with strong
    covenants.

    Annuity has built an attractive portfolio of high quality assets, featuring long lease expiry profiles and very low vacancies.

    Following a rigorous strategic review process, the board of directors of Annuity resolved that a disposal of the company's
    linked units to Redefine Properties Limited ("the Redefine transaction") would be in the best interest of Annuity linked unit
    holders, in the context of the current and foreseeable operating and economic environment and taking into account the
    specific challenges facing a smaller capitalised, lower liquidity listed property entity such as Annuity. As indicated in an
    announcement to Annuity linked unit holders released on the Stock Exchange News Service ("SENS") of the JSE Limited on
    Thursday, 5 June 2014, the Redefine transaction has become unconditional as to its terms and will be fully implemented on
    Monday, 23 June 2014 on which date the Annuity linked units will be delisted from the JSE. The effective date of the
    Redefine transaction is 1 March 2014.


14. Directorate

    There were no changes to the Board of directors during the financial year.


15. Merger with Redefine and payment of special distribution

    Annuity Linked Unitholders are referred to the joint announcement released on SENS on 5 June 2014 and the declaration of
    the special 5 month cash dividend and interest distribution (the "Special Distribution") for the period 1 October 2013 to 28
    February 2014 amounting to 19,04500 cents per unit.

    Linked Unitholders are referred to the above stated announcement for salient dates and times for the finalisation and
    implementation of the proposed transaction, the payment of the Special Distribution and the termination of Annuity's listing on
    the JSE.



16. Basis of preparation and accounting policies

    The financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), including the
    presentation and disclosure requirements of IAS34, SAICA Financial Reporting Guides as issued by the Accounting
    Practices Committee and the requirements of the Companies Act of South Africa, 2008, as amended.
    
    The financial results above include disclosure of earnings and headline earnings per share as well as earnings and headline
    earnings per linked unit, which is obligatory in terms of IAS33, Earnings per share and the JSE Listings Requirements. The
    directors are of the view that this disclosure is not meaningful to investors as the shares are traded as part of a linked unit
    and practically all the distributable earnings are distributed in the form of debenture interest with a small dividend portion in
    the ratio of 500 to 1. In addition, headline earnings include fair value adjustments for financial liabilities, accounting
    adjustments to account for lease income on a straight line basis, once off property acquisition costs, as well as other non-
    cash accounting adjustments which do not affect distributable earnings. The calculation of distributable earnings per linked
    unit as disclosed above is therefore more meaningful to investors.
    
    The financial statements are summarised from a complete set of annual financial statements on which the independent
    auditors, Grant Thornton (Jhb) Inc. have expressed an unmodified audit opinion, which is available for inspection at the
    Company's registered office. Grant Thornton (Jhb) Inc. has also issued an unmodified audit opinion on these summarised
    financial statements stating that these summarised results are consistent in all material respects with the complete set of
    annual financial statements. A copy of the auditors' report is available for inspection at the Company's registered office.
    
    The accounting policies are consistent with those applied in the most recent audited financial statements for the year ended
    31 March 2013 other than the adoption of the amendments to the following standards that are relevant to the Company's
    financial information:
    
    -  IFRS 7    - 1 January 2013
    -  IAS 1     - 1 January 2013
    -  IAS 27    - 1 January 2013
    -  IAS 28    - 1 January 2013
    -  IAS 32    - 1 January 2013
    -  IAS 34    - 1 January 2013
    
    And adoption of the following new standards and interpretations that are relevant to the Company's financial information:
    
    -  IFRS 10   - 1 January 2013
    -  IFRS 11   - 1 January 2013
    -  IFRS 12   - 1 January 2013
    -  IFRS 13   - 1 January 2013
    
    There is no impact on these results from the adoption of these new and amended standards.
    
    The financial results have been prepared by Mr S Strydom CA(SA), the Chief Financial Officer of the company.
    
    By order of the Board
    
    PJ Moleketi                        P Theocharides
    (Chairman)                         (Joint Chief Executive Officer)
    20 June 2014
    
    Directors:
    P.J. Moleketi #
    P. Theocharides
    D. Greenberg
    S. Strydom
    D.E. Rubenstein
    M. Ettin *
    E.C. Loubser #
    A.M. Chait #
    D.T. Soondarjee *
    S.J. Williams #
    N.N Eppel (alternate director) *
    
    # Independent non-executive director
    * Non-executive director
    
    Registered Office: Boundary Office Park, 18 Rivonia Road, Illovo, Sandton.
    
    Tel:010 595 3000 Fax: 086 718 3622 Email: info@annuityproperties.co.za
    Web: www.annuityproperties.co.za
    Income taxation reference number 9050/047/19/1
    
    Sponsor
    RAND MERCHANT BANK (A division of FirstRand Bank Limited)



Date: 20/06/2014 05:41:00 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.

Email this JSE Sens Item to a Friend.

Share This Story