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ROCKCASTLE GLOBAL REAL EST CO LTD - Condensed unaudited consolidated interim financial statements for the 3 months and 6 months ended 31 December 2014

Release Date: 10/02/2015 13:22
Code(s): ROC     PDF:  
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Condensed unaudited consolidated interim financial statements for the 3 months and 6 months ended 31 December 2014

ROCKCASTLE GLOBAL REAL ESTATE COMPANY LIMITED
Incorporated in the Republic of Mauritius Reg no 108869 C1/GBL
Primary listing SEM (SEM code Rock.N0000) and
JSE (JSE code ROC)
ISIN MU0364N00003
(“Rockcastle” or “the Group”)

CONDENSED UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS for the
three months and the six months ended 31 December 2014

DIRECTORS’ COMMENTARY

1. STRUCTURE AND LISTING
On 25 November 2014, Rockcastle’s secondary listing on the Alternative
Stock Exchange (“AltX”) of the Johannesburg Stock Exchange (“JSE”) was
successfully transferred to the Main Board of the JSE. The Group now
maintains primary listings on both the SEM and the JSE. During the six
months ended 31 December 2014, Rockcastle successfully raised USD114
million by the issue of 64.2 million shares through a private placement.

2. DISTRIBUTABLE EARNINGS
The Board has declared a dividend of 4.28 USD cents per share for the six
months ended 31 December 2014. This represents an increase of 5.2% over
the comparable prior period and marginally ahead of the guidance of
approximately 5%.


3. OPTION TO RECEIVE A SCRIP DIVIDEND
Given the Group’s acquisition and development strategy, and following
requests from shareholders, the Board have explored alternatives to paying
cash distributions. Subject to regulatory approvals, shareholders will be
given the option to receive their dividend either in cash or as a scrip
dividend at a ratio of 1.95 new shares for each 100 shares held.

A circular, containing details of this election, accompanied by
announcements on the Stock Exchange News Service (“SENS”) of the JSE as
well as the website of the SEM will be issued in due course.

4. REVIEW
Global listed property counters have continued their strong recovery and
many counters are now trading at a premium to their net asset values. This
strong performance validates Rockcastle’s investment strategy of investing
in high growth property stocks and is evidenced by the significant
increase in net asset value from USD1.39 to USD1.50. The considerable
premium to net asset value of many listed securities supports the Group’s
strategy of migrating from listed to direct property assets.

Listed security portfolio
Rockcastle’s portfolio of listed property counters has performed well over
the period and the portfolio continues to maintain a bias towards quality
and high growth counters. The portfolio continues to be heavily focused
towards retail. Distribution growth of many of the securities in the
portfolio was ahead of forecast, however, this was offset by the
depreciation of a number of currencies in which the Group is invested
against the USD. Rockcastle’s reporting currency is the USD, and the Group
policy is not to hedge its currency positions.
In an environment where low interest rates perdure, Real Estate Investment
Trusts (“REITs”) will continue to perform well.

The Rockcastle management team continues to conduct physical inspections
of the underlying properties held by our portfolio counters to accurately
and objectively assess both their future growth prospects and their
management capabilities. Rockcastle’s outperformance can be partially
attributed to this strategy.


Geographical profile by market value
Hong Kong             5,1%
Australia             6,5%
Canada                9,8%
Singapore            10,6%
Europe               12,1%
UK                   12,6%
USA                  43,3%

Sectoral profile by market value
Office                1,9%
Mortgage              3,3%
Industrial            4,8%
Other/Diversified     6,4%
Hotel                 7,3%
Residential           7,5%
Healthcare            8,9%
Retail               59,9%

The following table indicates the Group’s top 10 investment holdings by
market value as at 31 December 2014:

Counter                   Sector         Jurisdiction         Market value
                                                            at 31 Dec 2014
                                                            (USD million)
Hammerson plc             Retail                   UK                227.6
Unibail Rodamco           Retail               Europe                181.4
Simon Property Group      Retail                  USA                174.4
Avalonbay Communities     Residential             USA                135.6
Ventas Inc                Healthcare              USA                109.1
CapitaMall Trust          Retail            Singapore                105.4
The Link REIT             Retail            Hong Kong                 92.3
Ascendas                  Industrial        Singapore                 87.0
Westfield Group           Retail            Australia                 81.5
Hospitality Properties    Hotel                   USA                 70.1

The most significant change in the portfolio composition is the
substantial increase in the Hammerson holding. The decision to increase
this stake followed price weakness after a capital raising and detailed
physical inspection of the Hammerson assets in the UK and France by senior
executives. The investment decision has been validated by the strong
performance of the Hammerson share price.

Direct Property
Following the opening of Kafubu Mall in Ndola, Zambia, additional land has
been purchased to accommodate future expansion.
Construction of Mukuba Mall in Kitwe, Zambia, a 29 000m2 regional mall, is
progressing ahead of schedule and is due to open in April this year. The
mall will be anchored by Game, Pick n Pay, Shoprite and Woolworths, and
will include all major national retailers. Rockcastle will acquire its
stake at a yield of 9.5%. In line with the long term strategy of investing
in developments that have the capacity to achieve and maintain dominance,
additional land has been acquired which will facilitate the expansion of
the mall when this is required.

The third investment in Zambia, Cosmopolitan Mall in Lusaka, is under
construction and will be opened in March 2016. The 25 800m2 mall is 90%
let and tenants include Shoprite, Game, Edgars, Mr Price and Woolworths.
Rockcastle has a 50% share of the three Zambian malls.

Rockcastle’s strategy in Poland to invest in Polish retail assets is
making progress and the first acquisition in Poland has been concluded.
This transaction is a joint venture with an experienced Polish retail
developer to construct a 16 500m2 mall in the town of Tomaszow Mazowiecki
situated 120km south of Warsaw. Rockcastle will hold an 85% stake in the
development which is expected to yield 9.5% on completion, with a capital
commitment of EUR 25 million. Construction is scheduled to commence in
September 2015 and is to be completed by October 2016. The centre will be
anchored by an international grocery operator and will include
international fashion tenants.

Rockcastle has successfully completed its due diligence for the
acquisition of a well-established mall with a GLA of 18 000m2. All salient
terms pertaining to this transaction have been agreed with the vendor, but
the transaction will only be concluded once a satisfactory VAT ruling has
been obtained. This is standard for property transactions of this nature
in Poland. The property will be acquired at a purchase price of EUR 52
million and a yield of 7.7%. The mall is anchored by an upmarket grocer
and includes most international fashion retailers, including Inditex.

Rockcastle is in negotiations with vendors to purchase two further retail
properties. Details in this regard will be provided once the transactions
have been finalised.


5. CAPITAL STRUCTURE AND HEDGING
In addition to its direct holdings in shares, Rockcastle utilises equity
derivatives in its portfolio. The Group also utilises interest rate swaps
and bond shorts to hedge its interest rate and capital risks. These bond
short positions were substantially reduced during the last 6 months, prior
to the recent decline in interest rates. The principal counterparties are
BoA Merrill Lynch and Morgan Stanley. Rockcastle intends to make use of
term funding from local banks in the underlying property owning vehicles
in Poland. Rockcastle’s loan to value ratio was 37.5% at 31 December 2014.

6. OUTLOOK
The Board believes that growth in dividends of approximately 5% for the
2015 financial year will be achieved.

The aforegoing forecast statement and the forecasts underlying such
statement are the responsibility of the Board and have not been reviewed
or reported on by the Group’s external auditors. The forecast is based on
the assumptions that a stable global macro-economic environment will
prevail and no failures of listed REITs will occur.
By order of the Board

Intercontinental Trust Limited
Company Secretary
Mauritius – 10 February 2015


STATEMENT OF FINANCIAL POSITION
                                    Unaudited       Audited        Audited
                                        as at         as at          as at
                                  31 Dec 2014   30 Jun 2014    31 Dec 2013
                                      USD’000       USD’000        USD’000
ASSETS
Non-current assets                 1 856 433     1 587 451       1 066 876
Investment property                    3 231             -               -
Investment property
  under development                    7 324             -               -
Listed security investments        1 808 623     1 565 259       1 052 690
Rockcastle management
  incentive loans                     25 162        17 000          10 859
Investment in associate company        7 093         5 192               -
Loan to associate company              5 000             -               -
Loans to development partners              -             -           3 327
Current assets                        15 760        19 125           3 531
Investment income receivable               -         6 934               -
Cash and cash equivalents                463           486           2 374
Trade and other receivables               93             3           1 157
Loans to development partners         15 204        11 702               -
Total assets                       1 872 193     1 606 576       1 070 407

EQUITY AND LIABILITIES
Total equity attributable
  to equity holders                1 155 762       983 184         615 999
Stated capital                       985 104       871 154         630 983
Non-distributable reserves          (78 007)      (19 684)        (36 555)
Retained income                      248 665       131 714          21 571
Total liabilities                    716 431       623 392         454 408
Non-current liabilities              130 778       340 057         247 751
Interest-bearing borrowings          130 778       340 057         247 751
Current liabilities                  585 653       283 335         206 657
Trade and other payables              14 568         6 832           1 467
Interest-bearing borrowings          570 822       275 896         204 934
Income tax payable                       263           607             256
Total equity and liabilities       1 872 193     1 606 576       1 070 407
Total number of shares
  in issue                        769 700 000   705 500 000    530 000 000
Net asset value per
share (USD)                              1.50         1.39            1.16


STATEMENT OF COMPREHENSIVE INCOME
                   Unaudited          Audited     Unaudited         Audited
                 for the six      for the six for the three   for the three
                months ended    months ended months ended      months ended
                 31 Dec 2014      31 Dec 2013   31 Dec 2014     31 Dec 2013
                     USD’000          USD’000       USD’000         USD’000
Rental revenue            16                -            16              -
Dividends received
  from listed security
  investments          30 815        14 976       20 943            8 812
Income from
  associate             1 563             -        1 492               -
Fair value gain/
  (loss) on listed
  security
  investments         125 229     (24 962)       163 707         (11 862)
Foreign exchange
  (loss)/gain        (44 164)          69       (25 900)          (4 311)
Operating expenses      (868)         (480)      (525)             (284)
Profit/(loss)
  before net finance
  (costs)/income      112 591     (10 397)       159 733         (7 645)
Net finance
  (costs)/income     (24 210)       4 078      (14 003)           5 778
Finance income          1 210       7 913          671            7 240
Interest on Rockcastle
  management
  incentive loans         527          61          313              39
Interest on development
   partner loans          683          -           358              -
Unrealised fair
  value gain on
  interest rate
  derivatives               -       1 053            -            1 436
Unrealised fair
  value gain on
  bond shorts               -        6 799             -         5 765
Finance costs        (25 420)      (3 835)      (14 674)       (1 462)
Interest on
  borrowings          (9 934)      (3 835)       (4 218)       (1 462)
Unrealised fair
  value loss on
  interest rate
  derivatives         (6 648)             -      (4 756)              -
Unrealised fair
  value loss on
  bond shorts         (8 838)             -      (5 700)              -
Profit/(loss)
  before income
  tax expense          88 381      (6 319)       145 730       (1 867)
Income tax expense      (263)        (255)         (146)          (36)
Profit/(loss)
  for the period
  attributable to
  equity holders       88 118      (6 574)       145 584       (1 903)
Total comprehensive
  income/(loss) for
  the period           88 118      (6 574)       145 584       (1 903)
Weighted average
  number of shares
  in issue        736 902 174   397 704 918   768 304 348   517 978 022
Basic earnings/
  (loss) per share
  and headline earnings/
 (loss) per share
 (USD cents)         11.96         (1.65)          18.95         (0.37)

There are no reconciling items between basic earnings and headline
earnings.
Rockcastle has no dilutionary instruments in issue.

SEGMENTAL REPORTING
                                               Unaudited                       Audited
                                             for the six                   for the six
                                            months ended                  months ended
                                             31 Dec 2014                   31 Dec 2013
                                                 USD’000                       USD’000
Profit/(loss) before income tax expense
Australia                                            21 581                   (2 894)
Canada                                              (7 967)                     (226)
Europe                                              (3 406)                     9 765
UK                                                   15 823                     6 935
Hong Kong                                            14 691                       261
Singapore                                            12 573                   (2 682)
USA                                                  77 345                  (17 153)
Zambia                                                1 563                         -
Corporate                                          (43 822)                     (325)
                                                     88 381                   (6 319)

                                   
                                   Unaudited             Audited              Audited
                                       as at               as at                as at
                                 31 Dec 2014         30 Jun 2014          31 Dec 2013
                                     USD’000             USD’000              USD’000
Total assets
Australia                           117    778            125   174            78 849
Canada                              177    846            209   459           146 930
Europe                              225    767            193   275           177 787
UK                                  230    972            143   045           102 053
Hong Kong                            92    313             79   592            55 614
Singapore                           192    388            192   218           129 477
USA                                 782    659            629   916           365 411
Zambia                               27    297             16   894                 -
Corporate                            25    173             17   003            14 286
                                  1 872    193          1 606   576         1 070 407


STATEMENT OF CHANGES IN EQUITY
                                      Retained           Non-
                        Stated         income/         distributable
                       capital          (loss)         reserves*                    Total
                       USD’000         USD’000          USD’000                  USD’000
Audited for the six
 months ended 31
  December 2013
Opening balance        409 771          (8 410)             -                 401 361
Issue of shares        235 212                                                 35 212
Reclassification of 
 stated capital
  Recategorisation
  of reserves         (14 000)          14 000                                     -
  Distribution paid                   (14 000)                              (14 000)
Total comprehensive
loss for the period                    (6 574)                              (6 574)
Transfer to non-
  distributable
   reserves                               36 555            (36 555)            -
Balance at
  31 December 2013      630 983           21 571            (36 555)      615 999

Audited for the six
months ended
 30 June 2014
Opening balance         630 983           21 571            (36 555)     615 999
Issue of shares         240 171                                          240 171
Dividends declared                      (21 571)                        (21 571)
Total comprehensive
income for the period                    148 585                         148 585
Transfer to non-
  distributable
   reserves                             (16 871)             16 871             -
Balance at
  30 June 2014          871 154          131 714          (19 684)       983 184

Unaudited for the six
  months ended
  31 December 2014
Opening balance         871 154          131 714          (19 684)       983 184
Issue of shares         113 950                                          113 950
Dividends declared                      (29 490)                        (29 490)
Total comprehensive
  income for the period                   88 118                          88 118
Transfer to non-
  distributable
   reserves                               58 323          (58 323)              -
Balance at
31 December 2014        985 104          248 665          (78 007)     1 155 762

*Rockcastle’s policy on non-distributable reserves is set out in the
‘Notes’ section of this announcement.


RECONCILIATION OF PROFIT/(LOSS) FOR THE PERIOD TO DISTRIBUTABLE EARNINGS

                                           Unaudited                      Audited
                                  for the six months           for the six months
                                   ended 31 Dec 2014            ended 31 Dec 2013
                                             USD’000                      USD’000
Profit/(loss) for the period
  attributable to equity holders              88 118                (6 574)
Income tax expense                               263                    255
Tax on accrued dividends                       (328)                  (358)
Foreign exchange loss/(gain)                  44 164                   (69)
Fair value (gain)/loss on
  listed security investments              (125 229)                 24 962
Fair value loss/(gain) on bond shorts         8 838                 (6 799)
Fair value loss/(gain) on
  interest rate derivatives                    6 648                 (1 053)
Dividends received from
  listed security investments               (30 815)               (14 976)
Accrued income from listed
  security investments                        41 234                20 711
Adjustment to income from associate          (1 388)                     -
Shares issued cum distribution                 1 438                 5 472
Distributable earnings for the period         32 943                21 571
Less: interim dividend declared             (32 943)              (21 571)
Earnings not distributed                           -                     -
Number of shares entitled
  to distribution                        769 700 000           530 000 000


STATEMENT OF CASH FLOWS
                                            Unaudited              Audited
                                  for the six months    for the six months
                                    ended 31 Dec 2014    ended 31 Dec 2013
                                              USD’000              USD’000
Cash inflow from operating activities          30 386               14 962
Cash outflow from investing activities      (200 516)            (398 124)
Cash inflow from financing activities         170 107              385 341
(Decrease)/increase in cash and cash
  equivalents                                    (23)                2 179
Cash and cash equivalents at
  beginning of period                             486                  195
Cash and cash equivalents at
  end of period                                   463                2 374
Cash and cash equivalents comprise:
Current accounts                                  463                2 374

NOTES
The Group is required to publish financial results for the three months
and the six months ended 31 December 2014 in terms of the Listing Rule
12.19 of the SEM. Accordingly, this announcement presents the financial
results of the Group in respect of the period from 1 October 2014 to 31
December 2014, the period from 1 July 2014 to 31 December 2014 as well as
the comparative results from the prior period.

The accounting policies which have been applied are consistent with those
used in the preparation of the audited financial statements for the year
ended 30 June 2014. Non-distributable reserves arise from any accumulated
losses pertaining to changes in the fair value of the assets and
liabilities in the Group on a US Dollar basis. The Group does not consider
such reserves to be distributable.

The condensed unaudited consolidated interim financial statements
(“financial statements”) for the three months and the six months ended 31
December 2014 have been prepared in accordance with the measurement and
recognition requirements of IFRS, the requirements of IAS 34: Interim
Financial Reporting, the JSE Listings Requirements, the SEM Listing Rules
and the Securities Act of Mauritius 2005.

The financial statements have not been reviewed or reported on by the
Group’s external auditors.

These financial statements were approved by the Board on 10 February 2015.

Copies of the financial statements and the Statement of direct and
indirect interests of each officer of the Group, pursuant to rule 8(2)(m)
of the Securities (Disclosure Obligations of Reporting Issuers) Rules of
Mauritius 2007, are available free of charge, upon request at Rockcastle’s
registered address.
Contact person: Mr Kesaven Moothoosamy.

This communiqué is issued pursuant to SEM Listing Rule 12.20 and section
88 of the Securities Act of Mauritius 2005. The Board accepts full
responsibility for the accuracy of the information contained in these
financial statements. The directors are not aware of any matters or
circumstances arising subsequent to the period ended 31 December 2014 that
require any additional disclosure or adjustment to the financial
statements.

Directors Mark Olivier (chairman); Spiro Noussis (CEO)*; Nick Matulovich*;
Andries de Lange; Rory Kirk; Andre van der Veer; Yan Ng; Paul Pretorius*
(*executive director)
Company secretary Intercontinental Trust Limited
Registered address Level 3, Alexander House, 35 Cybercity, Ebene, 72201,
Mauritius
Transfer secretary in South Africa Link Market Services South Africa
Proprietary Limited
JSE sponsor Java Capital Trustees and Sponsors Proprietary Limited
SEM sponsor Capital Markets Brokers Limited

Date: 10/02/2015 01:22:00 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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