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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').
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