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Summarised audited results for the year ended 31 August 2014
REBOSIS PROPERTY FUND LIMITED
(Incorporated in the Republic of South Africa)
Registration number 2010/003468/06
JSE share code: REB
ISIN: ZAE000156147
(Approved as a REIT by the JSE)
(“Rebosis” or the “company”)
SUMMARISED AUDITED RESULTS FOR THE YEAR ENDED 31 AUGUST 2014
- 8,1% distribution growth to 99,45 cents per linked unit for the year
- 32,1% acquisition of Ascension Properties
- 44,0% growth in assets under management to R7,6 billion
- Strategic acquisition of Ascension Manco
STATEMENT OF COMPREHENSIVE INCOME
Audited for the Audited for the
year ended 31 year ended 31
August 2014 August 2013
R’000 R’000
REVENUE 855 946 565 209
Property portfolio 747 837 522 757
Rental income 48 107 -
Straight line rental income
accrual 60 002 42 452
Net facilities management income 17 891 16 833
Asset management fees received 9 812 -
Sundry income 729 630
Total revenue 884 378 582 672
Property expenses (207 290) (132 658)
Administration and corporate costs (34 138) (20 481)
Net operating profit 642 950 429 533
Changes in fair values 227 687 (3 065)
Profit from operations 870 637 426 468
Finance charges (185 104) (130 030)
Finance charges – secured loans (186 170) (147 883)
Interest received - other 1 066 17 853
Profit before taxation 685 533 296 438
Debenture interest (378 964) (262 807)
Profit before taxation 306 549 33 631
Taxation - 242 305
Total comprehensive income for the year 306 549 33 631
Reconciliation of earnings and
distributable earnings - 242 305
Profit for the year attributable to equity
holders 306 549 275 936
Debenture interest 378 984 262 807
Change in fair value of properties (net of
deferred taxation) (304 400) (195 695)
Headline earnings attributable to linked
unitholders 381 133 343 048
Change in fair value of derivatives (net
of deferred taxation) 26 001 (18 176)
Straight line rental income accrual (net
of deferred taxation) (60 002) (67 821)
Change in fair value of investment in
isted property securities 50 712 -
Pre-acquisition distributions on Ascencion
linked units (27 017) -
Antecedent interest 5 421 39 252
Corporate transaction costs 4 022 -
Structuring fee amortisation 4 135 2 756
Debt restructuring fee - 3 000
Distributable earnings attributable to
linked unitholders 384 405 302 059
Number of weighted units in issue 386 531 577 348 131 693
Weighted average number of linked units in
issue 379 617 629 284 622 851
Basic and diluted earnings per linked unit
(cents) 80,75 96,95
Basic and diluted headline earnings per
linked unit (cents) 100,40 120,53
Distributable earnings per linked unit
(cents) 99,45 92,00
NOTES TO THE STATEMENT OF COMPREHENSIVE
INCOME
Debenture interest
Debenture interest payable to linked
unitholders 384 405 302 059
Less: antecedent interest on linked units
issued (5 421) (39 252)
Charge per income statement 376 984 262 807
STATEMENT OF FINANCIAL POSITION
Audited for the Audited for the
year ended 31 year ended 31
August 2014 August 2013
R’000 R’000
ASSETS
Non-current assets 7 714 435 5 379 498
Investment property 6 856 000 5 283 500
Listed property securities 597 592 -
Goodwill 95 703 95 703
Intangibles 149 963 -
Derivative instruments 14 617 -
Property, plant and equipment 540 295
Current assets 137 926 95 339
Trade and other receivables 89 076 55 804
Cash and cash equivalents 48 850 39 535
7 852 361 5 474 837
EQUITY AND LIABILITIES
Equity 1 832 554 1 382 698
Stated capital 1 053 732 910 425
Reserves 778 822 472 273
Non-current liabilities 5 115 544 3 023 242
Debentures 2 806 219 2 527 436
Interest bearing borrowings 2 031 017 488 810
Derivative instruments 8 036 6 996
Current liabilities 904 263 1 066 897
Short term portion of interest bearing
borrowings 642 824 872 234
Trade and other payables 64 503 31 300
Unitholders for distribution 196 936 165 363
Total equity and liabilities 7 852 361 5 474 837
Net asset value per linked unit (R) 12,00 11,23
Net asset value per linked unit (excluding
goodwill and intangibles)(R) 11,37 10,96
ABRIDGED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Audited for the Audited for the
year ended 31 year ended 31
August 2014 August 2013
R’000 R’000
Stated capital 1 053 731 910 425
Balance at beginning of year 910 425 550 087
Issue of shares 143 306 360 338
Reserves 778 823 472 273
Balance at beginning of year 472 273 196 336
Profit for the year 269 050 275 937
1 832 554 1 382 698
ABRIDGED CONSOLIDATED STATEMENT OF CASH FLOW
Audited for the Audited for the
year ended 31 year ended 31
August 2014 August 2013
R’000 R’000
Cash flows from operating activities 31 282 17 748
Cash generated from operations 577 161 348 354
Net finance costs (180 969) (88 021)
Debenture interest paid (384 910) (242 584)
Cash outflows from investing activities
(1 561 096) (739 365)
Cash inflows from financing activities 1 539 131 743 830
Net movement in cash and cash equivalents 9 315 22 213
Cash and cash equivalents at the beginning
of the year 39 535 17 322
Cash and cash equivalents at the end of
the year 48 850 39 535
SEGMENTAL OVERVIEW
Retail Office Industrial Total
R’000 R’000 R’000 R’000
For the year ended 31
August 2014
Rental income (excluding
straight-line rental
income accrual) 344 670 389 985 13 182 747 837
Net facilities management
income - 17 891 - 17 891
Operating costs (123 566) (83 584) (140) (207 290)
Net property income 221 104 324 292 13 042 58 438
Changes in fair values of
investment property 88 683 265 719 10 000 364 402
Investment property 3 048 000 3 672 000 136 000 6 856 000
For the year ended 31
August 2013
Rental income (excluding
straight-line rental
income accrual) 280 165 236 739 5 853 522 757
Net facilities management
income - 16 833 - 16 833
Operating costs (88 834) (43 675) (179) (132 688)
Net property income 191 331 209 897 5 674 406 902
Changes in fair values of
investment property (151 136) 152 604 4 384 5 852
Investment property 2 843 500 2 314 000 126 000 5 283 500
COMMENTARY
INTRODUCTION
Rebosis is a black managed Real Estate Investment Trust (“REIT”) with a market
capitalisation of R4,23 billion and assets under management of R7,6 billion. Its
objective is to grow distributions and achieve long term capital appreciation for
its shareholders through its ownership of a high growth, defensive portfolio of
well diversified properties.
During the year under review, Rebosis increased assets under management by 44,0%
through yield enhancing strategic acquisitions and has delivered impressive
results despite the tough macro economic environment of a tightening interest
rate cycle, rising inflation and slowing economic growth.
FINANCIAL RESULTS
Rebosis has declared a distribution of 50,95 cents per linked unit for the six
months ended 31 August 2014 which, together with the distribution of 48,50 cents
per linked unit for the six months ended 28 February 2014, amounts to a total
distribution of 99,45 cents for the year ended 31 August 2014, an increase of
8,1% for the year. The total distribution for the year exceeds the upper range of
that forecast of 99,0 cents per linked unit due to better portfolio fundamentals,
a decrease in the overall cost of funding and continued operating efficiencies
across the portfolio.
Property expenses continue to be well contained with a net cost to income ratio
of 13,7% for the year. Receivables are tightly managed and at the reporting date,
arrears were 3,8% of annualised collectables and the total allowance for doubtful
debts was R7,7 million or 68,1% of debtors aged 90 days and older.
PROPERTY PORTFOLIO
At the reporting date, the property portfolio was valued at R6,9 billion (2013:
R5,3 billion). The increase in value predominantly relates to the acquisition of
the Nthwese portfolio for R1,06 billion which transferred with effect from 1
September 2013. Quadrant Properties is the appointed valuers of the
office/industrial portfolio and Old Mutual Investments Group SA of the retail
portfolio. The entire portfolio was valued using the discounted cash flow method
at the reporting date.
The portfolio of 19 properties has a total gross lettable area (“GLA”) of
415 048m² and is located in Gauteng, the Eastern Cape, KwaZulu Natal and North
West Province. The portfolio comprises 44% retail, 54% office and 2% industrial,
by value.
GLA Value Value/m²
m² R000 R/m²
Retail 163 961 3 048 000 18 590
Office 232 133 3 672 000 15 819
Industrial 18 954 136 000 7 125
Total portfolio 415 048 6 856 000 16 519
The retail portfolio comprises four high quality shopping malls underpinned by
strong anchor and national tenants delivering secure, income streams escalating
at 7,1%. The expansion and tenant mix optimization programme at Hemingways Mall,
the largest centre in the portfolio, was completed in July 2014, positioning the
mall for exceptional growth in the future. Hemingways reported turnover growth of
8,8% for the year under review.
The office portfolio consists of 14 buildings which are well located in nodes
attractive to government tenants. These are mainly single tenanted buildings let
to the National Department of Public Works under long leases providing for
average escalations of 8,0%. The office portfolio represents a sovereign underpin
to a substantial portion of the earnings and shields it from private sector risks
such as tenant insolvency and default. The company’s only industrial property is
a specialised single tenanted industrial warehouse located in Selby,
Johannesburg, occupied under a triple net lease escalating at 7,0%, expiring in
December 2019.
At 31 August 2014, vacancies for the total portfolio were 2,4%, including
strategic vacancies created at Bloed Street Mall for the redevelopment project.
The expiry profile by gross lettable area is as follows:
31 August 31 August 31 August 31 August
2015 2016 2017 2018 Beyond Total
% % % % % %
Retail 20 10 10 18 42 100
Office 3 2 14 51 30 100
Industrial - - - - 100 100
Total
portfolio 11 5 12 33 39 100
PROPERTY ACQUISITIONS
With effect 1 September 2013, Rebosis took transfer of a portfolio of five
recently refurbished quality properties let to the national and provincial
government of Gauteng. The 67 952m² fully let portfolio consists of long-term
leases expiring in 2019 and 2020 and provides linked unitholders with predictable
revenue streams and low forecast risk. R760 million of the purchase price of R1,06
billion was discharged in cash and R300 million by the allotment and issue of
25,43 million Rebosis linked units to the vendors at an average issue price of
R11,80 per unit.
A purchase price adjustment of R16,9 million in respect of Sunnypark, a retail
centre acquired in June 2013, has been accrued against the fair value of the
property. The adjustment, which was recovered from the vendors after the year
end, relates to the shortfall in rentals in respect of renewed leases that
expired within the 12 month period post transfer of the property, capped at the
acquisition yield of 7,75%.
STRATEGIC ACQUISITIONS
In February 2014, Rebosis acquired the entire issued share capital of the
Ascension Property Management Company Proprietary Limited (“Ascension Manco”),
the asset manager of Ascension Properties Limited (“Ascension Properties”), for
R150 million. The acquisition of this right to manage property has been
classified as an intangible asset.
Rebosis further acquired a 32,1% interest in the linked units of Ascension for
R638,6 million. The purchase price was settled as to R498,8 million in cash and
the balance by the allotment and issue of 13,0 million Rebosis linked units to
the vendors at an issue price of R10.78 per unit. The interest, comprising 28,0
million Ascension A linked units and 191,9 million Ascension B linked, was
acquired “cum” distribution of R27,0 million which amount has been excluded from
the Rebosis distribution for the year.
BUSINESS COMBINATION
Details of the net assets of the Ascension Manco acquired on
3 February 2014 are:
R’000
Property plant and equipment 6
Trade and other receivables 1
Cash and other equivalents 434
Trade and other payables (424)
Total net assets acquired 17
Right to manage 149 983
Purchase consideration settled in cash 150 000
If the controlling interest had been acquired on 1 September 2013, the revenue
and profit after tax from the business would have been R16,7 million and R12,3
million respectively.
FUNDING
At 31 August 2014, Rebosis’ borrowings increased to R2,9 billion as a result of
the property and Ascension acquisitions, increasing the gearing ratio to 38,0%
from 25.3% at 31 August 2013. The weighted average cost of borrowings has
decreased from 8,4% to 7,9% for the period under review and the average remaining
term of the debt is 2,3 years. At the reporting date, interest rates in respect
of 75,9% of borrowings have been hedged in terms of interest rate swap and
interest rate cap arrangements as follows:
Weighted Weighted Average
Value average average cap remaining
interest rate term
Derivative R’000 % % Years
rate
Interest rate cap 1 200 000 6,045 7,230 2.5
Interest rate swap 745 000 7,340 3.8
Debt at fixed rates 272 500 9,027 1.7
DIRECTORATE
Janys Finn, the executive financial director, has resigned to pursue an
opportunity in the private sector. She will be leaving Rebosis on 30 November
2014 and will be replaced by Kameel Keshav with effect 1 December 2014.
PROSPECTS
Given our strong portfolio fundamentals of long term leases with contractual
escalations in the office sector combined with strong turnover growth in the
retail sector, we remain confident about the performance of the fund. Demand for
space remains strong, vacancies are low and operating costs are well managed. The
current retail expansion and tenant mix optimisations have positioned the centres
for exceptional growth in the future.
Despite the tough economic environment, the board anticipates that the
distribution for the year ending 31 August 2015 will be between 105,5 cents and
107,5 cents per linked unit. This forecast is based on the assumption that there
will be no change in current trading conditions of the existing portfolio, a
stable macro-economic environment will prevail, tenants will be able to absorb
rising utility cost and that there will be no major corporate failures. This
forecast is the responsibility of the directors of Rebosis and has not been
reviewed or reported on by the company’s auditors.
PAYMENT OF DISTRIBUTION
Distribution no. 7 of 50,95 cents per linked unit for the six months ended 31
August 2014 will be paid to linked unitholders in accordance with the abbreviated
timetable set out below:
Last day to trade cum Friday 21 November 2014
distribution trade ex
Linked units Monday 24 November 2014
distribution
Record date Friday 28 November 2014
Payment date Monday 1 December 2014
Linked unitholders may not dematerialise or rematerialise their linked units
between Monday 24 November 2014 and Friday 28 November 2014, both days inclusive.
An announcement relating to the tax treatment of the distribution will be
released separately.
BASIS OF PREPARATION
The summarised audited financial statements for the year ended 31 August 2014
have been audited by the company’s independent auditors, Grant Thornton (Jhb)
Inc. The auditor’s unqualified opinion together with the financial information is
available for inspection at the registered office of the company. These
summarised audited financial statements have been prepared in accordance with
International Financial Reporting Standards (IFRS), IAS 34: Interim Financial
Reporting, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee and Financial Reporting Pronouncements as issued by the
Financial Standards Council, JSE Limited Listings Requirements and the
requirements of the South African Companies Act 2008. Except for new standards
adopted as set out below, the accounting policies adopted in the preparation of
these unaudited results are consistent with those applied in the preparation of
the financial statements for the year ending 31 August 2013:
- IAS 23 Borrowing costs
- IAS 39 Financial assets (listed property securities)
- IAS 18 Revenue recognition (listed securities revenue)
- IFRS 10 Consolidated financial statements
- IFRS 13 Fair value measurement
These summarised audited financial results for the year ended 31 August 2014 have
been prepared under the supervision of the financial director, JA Finn (CA(SA)
and have been extracted from the audited information. The information is not
itself audited and the directors take full responsibility for the preparation of
these summarised audited financial results and that the financial information has
been correctly extracted from the underlying annual financial statements.
The comparative figures have been restated in order to give effect to the JSE’s
guidance to REITS as regards the treatment of antecedent interest. While this
restatement has had no impact on net profit or basic and diluted headline
earnings for the year, on the distributions to unitholders or on the statement of
financial position, the impact on basic and diluted headline earnings is as
follows:
Before Restated
(cents) (cents)
Basic and diluted headline earnings per linked unit 134,32 120,53
While the company has complied with requirements by disclosing earnings and
headline earnings per share, the directors are of the view that distributable
earnings and the distribution per linked unit, as disclosed above, are more
meaningful to investors.
By order of the board
Dr ATM Mokgokong (Chair) SM Ngebulana (CEO)
5 November 2014
Directors
ATM Mokgokong*^ (Chairperson), SM Ngebulana (CEO), JA Finn, AM Mazwai*^, WJ
Odendaal*^, KL Reynolds*, MF Rodel, SV Zilwa*^
*Non-executive ^Independent
Registered office
3rd Floor, Palazzo Towers West, Montecasino Boulevard, Fourways 2191
(PO Box 2972, Northriding 2162)
Transfer secretaries
Computershare Investor Services (Proprietary) Limited
Sponsor
Java Capital
Company secretary
M Ndema
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