Wrap Text
Condensed Unaudited Consolidated Interim Results for the 6 months ended 31 December 2014
Ascension Properties
(Incorporated in the Republic of South Africa)
(Registration number: 2006/026141/06)
JSE share code for A-linked units: AIA ISIN: ZAE000161881
JSE share code for B-linked units: AIB ISIN: ZAE000161899
(Approved as a REIT by the JSE)
(“Ascension” or “the company” or “the fund” or “the group”)
Condensed Unaudited Consolidated Interim Results for the 6 months
ended 31 December 2014
Directors’ Commentary
Introduction
Ascension is a REIT focusing on centrally located commercial
office buildings in South Africa with a strong focus towards
government and other empowerment sensitive tenants.
The company achieved distributable earnings of R107,1 million for
the 6 months ended 31 December 2014 (31 December 2013: R100,6
million). The company will pay an interim distribution for the
6 months to 31 December 2014 of 20.94750 cents per A-linked unit
(2013: 19.95 cents) and 11.27673 cents per B-linked unit (2013:
10.36 cents).
Ascension listed on the JSE on 11 June 2012 as a property company
and achieved REIT status with effect from 1 July 2013.
The company has achieved the following total returns since
listing: A-linked units: 73,7% and B-linked units: 82,6% (based on
swap ratios set out below and closing prices on Friday, 20
February 2015).
At listing the company stated its targets as, inter alia:
- to increase its property portfolio by R1 billion per annum;
- to provide above market returns; and
- to create liquidly tradable securities for its investors.
The board is satisfied that the first two objectives were
substantially achieved, but given the market capitalisation of the
company, it has been difficult to create liquidity in the
company’s securities. It is for this reason that the board
entered into various discussions with other REIT’s, culminating in
the offer from Rebosis announced on 23 February 2015 and as
further discussed below.
Rebosis transaction
Unitholders are referred to the joint firm intention announcement
dated 23 February 2015 setting out the proposed transactions
between Rebosis Property Fund Limited (“Rebosis”) and Ascension
unitholders. In terms of the proposed schemes of arrangement
Rebosis will, if succesful, acquire 100% of the Ascension A- and
B-linked units that it does not already own. Ascension A-linked
unitholders will receive Rebosis A-ordinary shares and will in
effect continue to receive the same fixed income distributions
which they are entitled to. The proposed swap ratio of 23.549
Rebosis ordinary shares for every 100 Ascension B-linked units and
a Rebosis ordinary share closing price on Friday, 20 February 2015
of 1289 cents per share translates into a value of 303 cents per
B-linked unit. Clean-out distributions will be paid on both
Rebosis ordinary shares and Ascension A- and B-linked units on the
basis that the record date for participation in such distributions
shall be the last day of the calendar month immediately preceding
the record date for participation in the schemes.
The board of directors have agreed to stay on until the conclusion
of the Rebosis transaction.
Property portfolio
Following the acquisition of Ascension Management Company
Proprietary Limited in February 2014, the asset management and
day-to-day operations have been completely integrated with the
Rebosis operations.
Ascension, Delta and Rebosis explored a three-way merger during
the early part of 2014 which involved an agreement not to do any
acquisitions. This together with the delay in finalising the proposed
transaction with Rebosis resulted in very little portfolio activity
during the last 12 months.
At 31 December 2014 the portfolio (including investment properties
and properties under development) consisted of 29 properties
valued at R3,78 billion, with a total gross lettable area ("GLA")
of 315 670 m². This translates to an average building value of
R130 million.
The sectoral profile of the portfolio is 81.0% offices, 9.3%
retail and 9.7% other. The group does not own any retail focused
properties and the retail components are typically ground floor
areas of office buildings. The total portfolio is 64.3% tenanted
by government in line with our strategic focus on this market.
Total vacancies have increased slightly to 8.5% and are in line
with our expectations. The weighted average rental escalation
remains healthy at 8.5%.
Borrowings
The company's borrowings at 31 December 2014 amounted to R1,463
billion at a blended average rate of 8.00% per annum. R483 million
of borrowings has been fixed at an all-in rate of 7.35% until
December 2015. R500 million of borrowings is subject to a three-
month JIBAR interest rate cap at 6.72%. The interest rate cap
expires on 13 January 2017.
The current portion of interest bearing liabilities of R449
million relate to the Investec facility of R492 million rand that
expires on 31 July 2015. The company has already entered into
renewal discussions with Investec and expect the facility to be
renewed on similar terms.
Performance
The distribution per A-linked unit increased by 5% to 20.94750
cents (2013: 19.90 cents) as determined by the Debenture Trust
Deed.
The distribution per B-linked unit increased by 8,9% to 11.27673
cents (2013: 10.36 cents). This has been negatively impacted by
delays in installing the Department of Arts and Culture in two
buildings (Matrix House in Cape Town and VWL Building in
Pretoria).
Prospects
Despite the challenging business environment we believe that
Ascension has a defensive portfolio and that the quality of its
assets, together with healthy lease and escalation profiles,
should ensure that the group continues to deliver acceptable
returns to its unitholders.
Condensed Consolidated Statement of Profit or Loss and other
Comprehensive Income for the period ended 31 December 2014
Unaudited Audited Unaudited
31-Dec-14 30-Jun-14 31-Dec-13
6 months 12 months 6 months
R’000 R’000 R’000
Revenue 205 930 353 101 164 648
Contractual rental income 183 707 335 110 150 043
Straight-line lease
income adjustment 22 223 17 991 14 605
Property operating expenses
(net of recoveries) (17 058) (42 570) (15 426)
Net property and related income 188 872 310 531 149 222
Sundry income 190 567 112
Asset management fees (8 852) (15 857) (7 549)
Operating expenses (1 563) (3 704) (1 611)
Operating profit 178 647 291 537 140 174
Fair value adjustments (29 630) 194 535 (16 389)
Fair value adjustment -
investment property (22 223) 197 902 (14 605)
Fair value adjustment -
interest rate derivative (7 407) (3 367) (1 784)
Finance income 657 1 765 5 877
Interest received 657 1 765 353
Interest on linked units
issued cum distribution - - 5 524
Finance cost (51 769) (75 035) (32 022)
Interest on non-current
borrowings & other interest (49 941) (72 581) (30 826)
Amortisation of
debenture discount (364) (728) (364)
Amortisation of bond
raising fees (1 464) (1 726) (832)
Net profit before
debenture interest 97 905 412 802 97 640
Debenture interest (107 140) 202 730) (100 620)
Interest on A-debentures (64 699) (117 711) (61 618)
Interest on B-debentures (42 441) (85 019) (39 002)
Net profit/(loss) before tax
for the period (9 235) 210 072 (2 980)
Income tax expense - - -
Net profit/(loss) after tax
for the period (9 235) 210 072 (2 980)
Other comprehensive income - - -
Total comprehensive income/(loss)
for the period (9 235) 210 072 (2 980)
Reconciliation between earnings, headline earnings and
distributable earnings
Unaudited Audited Unaudited
31-Dec-14 30-Jun-14 31-Dec-13
6 months 12 months 6 months
R’000 R’000 R’000
Profit/(loss) for the period
attributable to shareholders (9 235) 210 072 (2 980)
Adjusted for:
Amortisation of discount
on debentures 364 728 364
Net fair value gain on
revaluation of investment
property net of taxation 22 223 (197 902) 14 605
Headline earnings attributable
to shareholders 13 352 12 898 11 989
Adjusted for:
Debenture interest 107 140 202 730 100 620
Headline earnings attributable
to linked unitholders 120 492 215 628 112 609
Adjusted for:
Straight-line lease income
adjustment (net of taxation) (22 223) (17 991) (14 605)
Fair value adjustment - interest
rate derivative 7 407 3 367 1 784
Amortisation of bond raising
fees (net of taxation) 1 464 1 726 832
Distributable earnings attributable
to linked unitholders 107 140 202 730 100 620
Less: distribution declared (107 140) (202 730) (100 620)
Interest on A-debentures (64 699) (117 711) (61 618)
Interest on B-debentures (42 441) (85 019) (39 002)
Earnings not distributed - - -
Basic and fully diluted
(loss)/earnings per share (cents) (1.35) 31.31 (0.47)
Basic and fully diluted headline
earnings per share (cents) 1.95 1.92 1.90
Basic and fully diluted earnings
per A-linked unit (cents) 19.60 71.25 23.83
Basic and fully diluted earnings
per B-linked unit (cents) 9.93 53.90 9.89
Headline- and fully diluted
headline earnings per
A-linked unit (cents) 22.90 41.87 26.21
Headline- and fully diluted headline
earnings per B-linked unit (cents) 13.23 24.51 12.27
Distribution per A- and
B- linked unit
Distribution per A-linked unit 20.95 39.90 19.95
Distribution per B-linked unit 11.28 22.59 10.36
Number of A-linked units
in issue 308 860 859 308 860 859 308 860 859
Number of B-linked units
in issue 376 359 014 376 359 014 376 359 014
Weighted average number of
A-linked units in issue 308 860 859 294 675 376 253 522 172
Weighted average number
of B-linked units
in issue 376 359 014 376 359 014 376 359 014
- The calculation of basic and fully diluted earnings per share is
based on a loss of R9,2 million (31 December 2013: R3,0 million)
and a weighted average number of 685 219 873 shares (31 December
2013: 629 881 186) in issue throughout the financial period.
- The calculation of headline earnings and diluted headline
earnings per share is based on a headline earnings of R13,3
million (31 December 2013: R12,0 million) and a weighted average
number of 685 219 873 shares (31 December 2013: 629 881 186) in
issue throughout the financial period.
Condensed Consolidated Statement of Financial Position at 31
December 2014
Unaudited Audited Unaudited
31-Dec-14 30-Jun-14 31-Dec-13
R’000 R’000 R’000
Assets
Non-current assets 3 791 278 3 722 897 3 283 183
Investment properties and
properties under development 3 782 496 3 706 699 3 278 566
Property, plant and equipment 16 24 34
Interest rate derivative 8 766 16 174 4 583
Current assets 86 862 100 955 83 991
Trade and other receivables 34 977 61 793 47 129
Cash and cash equivalents 51 885 39 162 36 862
Total assets 3 878 140 3 823 852 3 367 174
Equity and liabilities
Equity 863 500 872 735 659 686
Stated capital 322 603 322 603 322 606
Retained income 540 897 550 132 337 080
Non-current liabilities -
Debentures 1 404 179 1 403 815 1 403 451
Total linked unitholders’
interest 2 267 679 2 276 550 2 063 137
Liabilities
Other non-current liabilities 1 011 280 1 377 259 1 162 884
Interest bearing liabilities 1 011 280 1 377 259 1 162 884
Current liabilities 599 181 170 043 141 153
Interest bearing liabilities 448 654 - -
Trade and other payables 43 245 62 329 40 482
Linked unitholders
accrued interest 107 282 107 714 100 671
Total liabilities 3 014 640 2 951 117 2 707 488
Total equity and liabilities 3 878 140 3 823 852 3 367 174
TNAV and NAV per A-linked
unit (cents) 526.7 477.4 443.9
TNAV and NAV per B-linked
unit (cents) 198.8 241.7 210.7
Condensed Consolidated Statement of Cash Flows for the period
ended 31 December 2014
Unaudited Audited Unaudited
31-Dec-14 30-Jun-14 31-Dec-13
6 months 12 months 6 months
R’000 R’000 R’000
Cash flow from operating
activities
Cash generated from operations 164 165 289 028 133 858
Finance income 657 1 765 5 877
Finance costs (49 941) (72 581) (30 826)
Net cash inflow from operating
activities 114 881 218 212 108 909
Cash flow from investing
activities
Purchase of investment properties
and cost of improvements (75 796) (946 306) (734 066)
Purchase of other financial assets - (13 174) -
Net cash outflow from investing
activities (75 796) (959 480) (734 066)
Cash generated from financing
activities
Proceeds from the issue of
linked units - 360 747 349 350
Net proceeds from interest
bearing loans 81 210 581 245 367 764
Distributions paid (107 572) (188 277) (81 810)
Net cash (outflow)/ inflow from
financing activities (26 362) 753 715 635 304
Net increase in cash and cash
equivalents for the period 12 723 12 447 10 147
Cash and cash equivalents
at the beginning of the period 39 163 26 716 26 715
Cash and cash equivalents
at the end of the period 51 886 39 163 36 862
Condensed Consolidated Statement of Changes in Equity for the
period ended 31 December 2014
Stated Retained Total
capital income equity
R’000 R’000 R’000
Balance at 30 June 2013 -
Audited 304 381 340 060 644 441
Issue of linked units net
of transaction costs 18 222 - 18 222
Total comprehensive income
for the period - 210 072 210 072
Balance at 30 June 2014 -
Audited 322 603 550 132 872 735
Total comprehensive income
for the period - (9 235) (9 235)
Balance at 31 December 2014 -
Unaudited 322 603 540 897 863 500
Notes
1. Basis of preparation and accounting policies
The condensed unaudited consolidated interim financial statements
for the 6 months ended 31 December 2014 have been prepared in
accordance with the measurement and recognition requirements of
International Financial Reporting Standards and its interpretations
adopted by the International Accounting Standards Board, the SAICA
Financial Reporting Guides as issued by the Accounting Practices
Committee, the requirement contained in IAS34
- Interim Financial Reporting, the JSE Listings Requirements and
the requirements of the South African Companies Act, 2008. These
results have been prepared under the supervision of the financial
director, Henry Dednam CA(SA).
Except for the new standards adopted as set out below, all
accounting policies applied in the preparation of these condensed
unaudited consolidated interim financial statements are in terms
of IFRS and are consistent with those applied in the prior year.
Ascension adopted the following new standards during the year:
– IFRS 7 Disclosure Offsetting Financial Assets and Financial
Liabilities
– IFRS 10 Consolidated Financial Statements
– IFRS 12 Disclosure of Interest in Other Entities
– IFRS 13 Fair Value Measurement
The directors are not aware of any matters or circumstances
arising subsequent to 31 December 2014 that require any additional
disclosure or adjustment to the financial statements, other than
as disclosed in this announcement.
Grant Thornton, the company’s external auditor, has not reviewed
or audited the financial information set out in this report.
2. Debt facilities
Funder Cost of Facility Utilised Expiry
funding at 31 Dec at 31 Dec date
2014 2014
(R Million) (R Million)
Investec Private Bank 8.75% 493 449 31-Jul-15
Standard Bank 7.93% 393 399 31-Aug-17
Standard Bank 7.75% 160 160 31-Aug-17
Nedbank - loan 1 8.00% 122 123 07-Mar-19
Nedbank - loan 2 8.00% 150 151 12-Sep-16
Nedbank - loan 3 7.75% 26 26 18-Jul-16
Nedbank - loan 4 8.40% 45 45 23-Apr-18
Nedbank - loan 5 7.75% 50 50 28-Jun-16
Nedbank - loan 6 7.75% 34 34 30-Aug-16
Nedbank - loan 7 7.75% 26 26 30-Aug-16
Unamortised
bond raising fees (3)
Total borrowings 1 499 1 460
The weighted average cost of debt at 31 December 2014 is 8.00%
(30 June 2014: 7.86%).
3. Interest rate derivatives
Rate Facility Expiry date
(R million)
Interest rate swap 3-month JIBAR 5,55% 483 01-Dec-15
Interest rate cap 3-month JIBAR 6,72% 500 13-Jan-17
4. Trade and other receivables
Unaudited Audited Unaudited
31-Dec-14 30-Jun-14 31-Dec-13
6 months 12 months 6 months
R’000 R’000 R’000
Trade receivables (net of
impairment provisions) 4 387 11 950 16 816
Debtor accruals (including
consumption charges
not yet invoiced) 21 909 20 786 21 724
Amounts due on acquisition
adjustment accounts 4 572 7 483 6 175
Deposits 1 582 1 366 1 481
Sundry debtors,
prepayments and VAT 2 527 20 208 933
34 977 61 793 47 129
5. Lease expiry profile (Based on GLA)
Total Office Retail
Vacant 8.5% 8.3% 1.8%
June 2015 30.0% 29.5% 45.6%
June 2016 11.9% 9.7% 3.9%
June 2017 10.4% 11.8% 1.9%
June 2018 20.0% 22.7% 22.9%
June 2019 9.3% 8.7% 11.6%
> June 2019 9.9% 9.3% 12.3%
Total 100.0% 100.0% 100.0%
6. Tenants: Government vs. non-government
Based Based on
on GLA monthly
contracted
revenue
Government 64.3% 66.7%
Non-Government 35.7% 33.3%
Total 100.0% 100.0%
7. Operating segments
The group classifies segments based on the type of property i.e.
Commercial, Retail, Industrial and Other. Properties can be mixed-
use properties. In this instance, the property will be classified
according to its principle use. Accordingly, the group only has
one reporting segment, namely Commercial property as the principle
use of all properties in the portfolio is for commercial office
space. Most of the buildings do have a small retail component
(normally at street level), but this seldom exceeds 10% of the
total GLA per building.
8. Payment of distribution
The board has approved and hereby gives notice of distributions
(distributions number 6) of 20.94750 cents per A-linked unit and
11.27673 cents per B-linked unit in respect of the 6 months ended
31 December 2014.
Date
The last date to trade cum distribution Friday, 20 March 2015
Linked units trade ex distribution Monday, 23 March 2015
Record date Friday, 27 March 2015
Payment date Monday, 30 March 2015
Linked unit certificates may not be dematerialised or
rematerialised between Monday, 23 March 2015 and Friday, 27 March 2015,
both days inclusive.
In respect of dematerialised linked unitholders, the distribution
will be transferred to the CSDP/broker accounts on Monday, 30 March 2015.
Certificated linked unitholders’ distribution payments will be posted on
or about Monday, 30 March 2015.
An announcement informing unitholders of the tax treatment of the
distributions will be released separately on SENS.
By order of the board
Cape Town
2 March 2015
Directors
AC Nissen (chairman) / SL Rai * / FW Arendse * / HB Dednam *
J de Villiers (alternate to SL Rai) * / M Burton / B Bayvel / H
Takolia
*(executive director)
Changes to directors
On 1 July 2014 A Mohamed (chief executive officer) resigned and SL
Rai was appointed as the acting chief executive officer.
Company secretary
J de Villiers
Business address
25th Floor, 9 Riebeeck Street, Cape Town, 8001
Transfer secretaries
Computershare Investor Services Proprietary Limited, 70 Marshall
Street, Johannesburg, 2001
Sponsor
Java Capital, 2 Arnold Road, Rosebank, 2196
Date: 02/03/2015 01:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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