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Unaudited consolidated interim results for the 6 months ended 31 August 2014
Equites Property Fund Limited
(formerly VB Transport Proprietary Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2013/080877/06)
JSE share code: EQU ISIN: ZAE000188843
(Approved as a REIT by the JSE)
("Equites" or "the Company")
Equites Property Fund Limited: Unaudited consolidated interim results for
the 6 months ended 31 August 2014
Highlights
- R650 million capital raised through a substantially oversubscribed
private placement
- All forecasted acquisitions successfully concluded
- First distribution of 20,4 cents per share exceeds PLS forecast by 2.5%
- Initial yield of 8.1% and forecasted yield of 8.2% for 9 months to
28 February 2015
- Three property acquisitions totalling R72,7 million post period end
Introduction
Equites was registered and incorporated as a private company on 20 May 2013.
The Company converted into a public company and changed its name to Equites
Property Fund Limited on 15 May 2014.
On 28 April 2014 Equites concluded agreements to acquire the shares and
claims of seven property owning companies as well as nine rental
enterprises, which culminated in the successful listing of the shares of
Equites on the JSE on 18 June 2014 as a Real Estate Investment Trust
("REIT"). These transactions were set out in detail in the Pre-listing
Statement of Equites ("PLS") issued on 4 June 2014.
Although the PLS, and all the financial and other projections therein,
envisaged a capital raising of R600 million, following strong demand, and a
substantial oversubscription, management decided to increase the capital
raise to R650 million.
The board of directors ("the Board") is pleased to advise that all the
transactions as set out in the PLS were successfully implemented.
Strategy
Equites is entirely focused on long-term investments in the top-end
industrial sector. To this end, the Company intends growing its portfolio in
the following ways:
- by acquiring existing, A-grade, completed industrial distribution
warehouses with predominantly blue chip tenants;
- by acquiring brownfields development opportunities, which entail
purchasing strategically located parcels of land with B or C grade
tenanted buildings. This provides short-term yield enhancing income
combined with medium term re-development opportunities.
- by utilising its extensive in-house development expertise to undertake
A grade industrial warehouse developments.
It is the intention of the Board and management to grow the property
portfolio to R4 billion of assets within five years.
Financial results
As fully described in the PLS, Equites acquired certain subsidiaries with
effect from 1 March 2014 (pre-listing) and the results for the period
ending 31 August 2014, therefore, reflect the trading activity of these
subsidiaries from this date. All retained profits for the period 1 March
2014 to 31 May 2014 were declared to the previous shareholders of these
subsidiaries as a "clean-out distribution" and the financial results for
3 months till 31 May 2014 are, therefore, of lesser importance for the
purposes of evaluating the financial performance of Equites for the 6 months
ending 31 August 2014.
Furthermore, the effective date of the acquisition of each of the nine
properties ("Post-listing Transactions"), implemented subsequent to
listing, was 1 June 2014. Accordingly, the relevant financial results relate
to the period from 1 June 2014 - 31 August 2014, which has been highlighted
on the statement of comprehensive income. The results for this period were
also used to determine the maiden distribution of 20,4 cents per share.
This initial dividend of 20,4 cents per share exceeds the forecasted
distribution of 19,9 cents per share set out in the PLS by 2.5% for the
3 months ending 31 August 2014. This equates to an initial yield of 8.1% and
the yield for the 9 months ending 28 February 2015 is now forecasted as 8.2%
compared to 8.1% in the PLS (all on an annualised basis and calculated on
the price per share on listing). The Board and management are confident the
Company is on track to achieve, or marginally exceed, the forecast published
in the PLS. It is important to note that the financial information in the
PLS was based on the total number of shares in issue being 109 327 388; as
opposed to the actual number of shares in issue being 113 575 515. The
initial distribution therefore exceeds the distribution reflected in the PLS
(and adjusted to take into consideration the additional shares in issue) by
6.4% and the distribution forecasted for the period ending 28 February 2015
exceeds the adjusted PLS numbers by 4.5%. These forecasts are the
responsibility of the Board and have not been reviewed or reported on by the
Company's auditors.
Inevitably, some of the Post-listing Transactions were not affected
immediately and the Company invested surplus cash in a money market
investment. This investment had an exposure to African Bank Investments
Limited ("ABIL") senior debt, which resulted in a capital loss of
R1,490 million, which has been added back for the purposes of computing
the dividend declared.
The net asset value per share of the Company was 1 009 cents per share as at
31 August 2014.
Comparative figures have not been disclosed as this was the Company's first
year of operation.
Acquisitions post 31 August 2014
Following the implementation of all the transactions that culminated in the
listing in June 2014, there were no further acquisitions made by Equites
during the financial period under review.
The Company has subsequent to 31 August 2014 acquired three properties:
- Through the acquisition of the entire share capital in Nascispan
Proprietary Limited, the Equites group now owns a newly constructed,
A-grade distribution facility known as Crossroads situated in Milnerton,
Cape Town. It was acquired at a 9% yield with an agreed property valuation
of R42,029 million. The tenant, Crossroads Distribution Proprietary
Limited, is contracted to transport petroleum from the Chevron refinery to
the Cape Town International Airport ("CTIA"). There are a further 9 years
left on the lease.
- An 1,3343 hectares property (gross lettable area of 5 478 square metres)
located in Epping Industria, was acquired at an 11.5% yield for
R18,1 million. This property is ideally located for an industrial
distribution warehouse and the Company intends re-developing this property
in due course. It is currently tenanted on short-term leases and
generating yield-enhancing rental income prior to re-development.
- A 9 977 square metre property in Bellville, adjacent to the bakery and
two Digistics distribution centres already owned by Equites, was acquired
at a 12% yield for R12,6 million. This property also presents an ideal
re-development opportunity and caters for any expansion requirements that
Digistics may have. It is also currently tenanted on a short-term lease
and generating yield-enhancing rental income prior to re-development.
The above acquisitions are in line with the Company's strategy to focus on
brownfields development opportunities, which entail acquiring strategically
located parcels of land with B or C grade tenanted buildings. This provides
short-term yield-enhancing income combined with medium term re-development
opportunities.
Funding
The Company has a loan facility of R600 million with Nedbank Limited at a
blended floating rate of 7.65%. The Company drew down on this facility
for the first time during September 2014 and will look to hedge a portion
of the interest rate exposure once the outstanding loan balance approaches
R150 million. In the medium-term, once the loan balance reaches R500 million,
the Company aims to have hedged approximately 80% of the interest rate
exposure.
Changes to the board of directors
Bram Goossens was appointed as the Chief Financial Officer and executive
director of Equites with effect from 1 September 2014. Chrystal Grauso
resigned as Chief Financial Officer on the same date.
Basis of preparation
The unaudited consolidated interim financial results for the 6 months ended
31 August 2014 are prepared in accordance with the information required by
IAS34: Interim Financial Reporting, the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and the requirements of the
Companies Act of South Africa and the JSE Listings Requirements. The
accounting policies adopted are in accordance with International Financial
Reporting Standards ("IFRS") and except for the first-time adoption of new
standards, are consistent with those applied in the previous annual
financial statements for the year ended 28 February 2014.
The following new standards were adopted during the period:
- Amendments to IFRS 10, IFRS 12 and IAS 27 - Investment entities
- Amendment to IAS 32 - Offsetting Financial Assets and Financial
Liabilities
- Amendment to IAS 36 - Recoverable amount disclosures for non-financial
assets
- Amendment to IAS 39 - Novation of derivatives and continuation of hedge
accounting
- IFRIC 21 Levies
None of these standards had a material impact on these interim results.
Bram Goossens (CA) SA, in his capacity as Financial Director, was
responsible for the preparation of these unaudited consolidated interim
results. These consolidated interim financial results have not been reviewed
or reported on by the Company's auditors.
Interim dividend
Notice is hereby given of the declaration of interim dividend number 1 of
R23 131 000 for the period ended 31 August 2014. This is equivalent to
20,36619 cents per share based on 113 575 515 shares in issue as at the time
of the declaration.
As Equites is a REIT, the dividend meets the definition of a 'qualifying
distribution' for the purposes of section 25BB of the Income Tax Act, No. 58
of 1962 ("Income Tax Act"). Qualifying distributions received by South
African tax residents will form part of their gross income in terms of
section 10(1)(k)(i)(aa) of the Income Tax Act. Consequently, these dividends
are treated as income in the hands of the shareholders and are not subject
to dividends withholding tax. The exemption from dividends withholding tax
is not applicable to non-resident shareholders, but they may qualify for
relief under a tax treaty.
Holders of uncertified shares have to ensure that they have verified their
residence status with their Central Securities Depository Participant
("CSDP") or broker. Holders of certified shares will be asked to complete a
declaration to the Company.
An announcement with further detailed information regarding the tax
treatment of the dividend will be released separately on SENS.
The dividend is payable to shareholders in accordance with the timetable set
out below:
2014
Declaration date Friday, 10 October
Last day to trade cum dividend distribution Friday, 31 October
Shares trade ex dividend distribution Monday, 3 November
Record date Friday, 7 November
Payment date Monday, 10 November
Share certificates may not be dematerialised or rematerialised between
Monday, 3 November 2014 and Friday, 7 November 2014, both days inclusive.
In respect of dematerialised shareholders, the dividend will be transferred
to the CSDP account / broker accounts on Monday, 10 November 2014. Certified
shareholders' dividend payments will be posted on or about Monday,
10 November 2014.
By order of the Board
Equites Property Fund Limited
10 October 2014
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited
31 August 2014
R'000
ASSETS
Non-current assets
Fair value of investment property (excluding straight-lining) 1 178 629
Straight-lining lease accrual 6 999
1 185 628
Current assets
Current tax receivable 395
Trade and other receivables 4 158
Financial asset held at fair value 70 314
Cash and cash equivalents 16 065
90 932
TOTAL ASSETS 1 276 560
EQUITY AND LIABILITIES
Equity and reserves
Stated capital 1 131 884
Accumulated profit 13 585
1 145 469
Liabilities
Current liabilities
Financial liabilities 121 729
Trade and other payables 9 362
131 091
TOTAL LIABILITIES 131 091
TOTAL EQUITY AND LIABILITIES 1 276 560
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Unaudited
3 months 3 months 6 months
ended ended ended
31 May 31 August 31 August
2014 2014 2014
R'000 R'000 R'000
Revenue
Contractual revenue and tenant recoveries 13 587 30 452 44 039
Straight-lining of leases adjustment 2 931 4 068 6 999
16 518 34 520 51 038
Property operating and management expenses (4 549) (4 820) (9 369)
Net property income 11 969 29 700 41 669
Administrative expenses - (2 142) (2 142)
Operating profit 11 969 27 558 39 527
Fair value adjustment to investment
properties (478) (289) (767)
Finance costs (8 374) (2 362) (10 736)
Finance income 21 2 003 2 024
Financial instrument capital loss - (1 490) (1 490)
Capital raising expenses (14 288) - (14 288)
Net (loss) profit before tax (11 150) 25 420 14 270
Income tax expense - - -
(Loss) profit for the period (11 150) 25 420 14 270
OTHER COMPREHENSIVE INCOME - - -
TOTAL COMPREHENSIVE (LOSS) INCOME
FOR THE PERIOD (11 150) 25 420 14 270
(LOSS) PROFIT ATTRIBUTABLE TO:
Owners of the parent (11 150) 25 420 14 270
Non-controlling interest - - -
(11 150) 25 420 14 270
TOTAL COMPREHENSIVE (LOSS)
INCOME ATTRIBUTABLE TO:
Owners of the parent (11 150) 25 420 14 270
Non-controlling interest - - -
(11 150) 25 420 14 270
RECONCILIATION BETWEEN EARNINGS, HEADLINE EARNINGS, DISTRIBUTABLE PROFIT AND
DISTRIBUTABLE EARNINGS
Unaudited Unaudited Unaudited
3 months 3 months 6 months
ended ended ended
31 May 31 August 31 August
2014 2014 2014
R'000 R'000 R'000
Earnings ((loss) profit attributable
to owners of the parent) (11 150) 25 420 14 270
Adjusted for:
Fair value adjustments to
investment properties 478 289 767
Headline (loss) earnings (10 672) 25 709 15 037
Adjusted for:
Straight-lining of leases adjustment (2 931) (4 068) (6 999)
Distributable (loss) profit (13 603) 21 641 8 038
Adjusted for:
Capital raising expenses 14 288 - 14 288
Financial instrument capital loss - 1 490 1 490
Distributable earnings 685 23 131 23 816
Basic (loss) earnings per share (cents) (36,5) 22,4 19,8
Headline (loss) earnings per share (cents) (34,9) 22,6 20,9
Diluted (loss) earnings per share (cents) (36,5) 22,4 19,8
Diluted headline (loss) earnings
per share (cents) (34,9) 22,6 20,9
Distribution per share (cents) 2,2 20,4 21,0
Weighted average number of
shares in issue 30 565 254 113 575 515 72 070 385
Diluted weighted average number
of shares in issue 30 565 254 113 575 515 72 070 385
Number of shares in issue at
period-end 30 565 254 113 575 515 113 575 515
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited
6 months
ended
31 August 2014
R'000
Cash flows from operating activities
Profit before tax 14 270
Adjusted for:
Finance costs 10 736
Finance income (2 024)
Financial instrument capital loss 1 490
Straight-lining of leases adjustment (6 999)
Fair value adjustment to investment properties 767
Increase in trade and other receivables (4 158)
Increase in trade and other payables 9 362
Cash generated from operations 23 444
Finance costs (10 736)
Tax paid (395)
Dividends paid (685)
Net cash flows from operating activities 11 628
Cash flows utilised by investing activities
Acquisition of investment properties (603 464)
Investment in financial instrument (200 000)
Proceeds from sale of financial instrument 130 220
Net cash flows utilised by investing activities (673 244)
Cash flows from financing activities
Proceeds from share issue 650 000
Proceeds from bank loans 27 681
Net cash flows from financing activities 677 681
Net movement in cash and cash equivalents 16 065
Cash and cash equivalents at the beginning of the year -
Cash and cash equivalents at the end of the year 16 065
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Stated Retained
capital earnings Total
R'000 R'000 R'000
Balance at 1 March 2014 - - -
Total comprehensive income 14 270 14 270
Shares issued for property and
subsidiary acquisitions 481 884 481 884
Shares issued for cash on listing 650 000 650 000
Dividends distributed to shareholders (685) (685)
Balance at 31 August 2014 1 131 884 13 585 1 145 469
CONDENSED OPERATING SEGMENT INFORMATION
Unaudited Unaudited Unaudited
3 months 3 months 6 months
ended ended ended
31 May 31 August 31 August
2014 2014 2014
R'000 R'000 R'000
Revenue
Industrial 13 587 23 812 37 399
Office - 6 640 6 640
Non-property - - -
Straight-lining of leases 2 931 4 068 6 999
16 518 34 520 51 038
Operating profit
Industrial 9 038 20 789 29 827
Office - 4 843 4 843
Non-property - (2 142) (2 142)
Straight-lining of leases 2 931 4 068 6 999
11 969 27 558 39 527
31 August 2014
R'000
Total assets
Industrial 975 742
Office 230 281
Non-property 70 537
1 276 560
Directors
A Taverna-Turisan (CEO), GR Gous (COO), B Goossens (CFO), PL Campher*^
(Chairman), G Lanfranchi* (Deputy Chairman), JH Cullum*, K Dreyer*, N Khan*^,
RE Benjamin-Swales*^
*Non-executive ^Independent
Registered office
31 Brickfield Road
Upper East Side
Woodstock
Cape Town
7925
Contact details
info@equites.co.za
Change in company secretary
Shareholders are advised that following the acquisition of the business of
Probity Business Services Proprietary Limited by Computershare Investor
Services Proprietary Limited ("Computershare"), CIS Company Secretaries
Proprietary Limited, a subsidiary of Computershare, has been appointed as
the company secretary of Equites with effect from 8 September 2014.
Company secretary
CIS Company Secretaries Proprietary Limited
Transfer secretary
Link Market Services South Africa Proprietary Limited
Auditors
Moore Stephens BKV Inc.
Sponsor
Java Capital
Bankers
Nedbank Limited
Attorneys
DLA Cliffe Dekker Hofmeyr
Date: 10/10/2014 09:12:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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