Wrap Text
Condensed Consolidated Results For The Six Months Ended 31 December 2014
FAIRVEST PROPERTY HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/005011/06)
("Fairvest" or "the company" or "the group")
Linked unit code: FVT ISIN: ZAE000034658
Granted REIT status with the JSE
CONDENSED CONSOLIDATED RESULTS
FOR THE SIX MONTHS ENDED 31 DECEMBER 2014
27.6% annualised return
to shareholders for the 2014
calendar year
Interim distribution increased by
10.03% to 7.427 cents per linked
unit
Market capitalisation
increased to
R854.8 million
Reduction in vacancies, bringing the
total vacancies to 3.9% of the total
lettable GLA
Anticipated distribution growth of 9%
to 10% per linked unit for the year to
30 June 2015 remains achievable
Net asset value per linked unit increased to
160.5 cents
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 Dec 31 Dec 30 Jun
2014 2013 2014
R‘000 R‘000 R‘000
ASSETS
NON-CURRENT ASSETS 1 123 365 799 716 1 103 918
Investment property 1 100 834 790 400 1 089 481
Office equipment 305 537 342
Loans receivable 3 817 – –
Operating lease asset 18 409 8 779 14 095
CURRENT ASSETS 22 824 17 931 19 013
Trade and other receivables 16 055 13 300 15 347
Current portion of loans receivable 1 396 – –
Cash and cash equivalents 5 373 4 631 3 666
Non-current assets held for sale – – 4 500
TOTAL ASSETS 1 146 189 817 647 1 127 431
EQUITY AND LIABILITIES
EQUITY AND RESERVES
Ordinary share capital 5 274 3 598 5 254
NON-CURRENT LIABILITIES 1 071 122 768 336 1 055 647
Linked unit debentures 841 393 546 814 830 024
Interest-bearing borrowings 229 729 221 515 222 000
Deferred taxation – 7 3 623
CURRENT LIABILITIES 69 793 45 713 66 530
Taxation – 7 –
Trade and other payables 69 793 45 706 66 530
TOTAL EQUITY AND LIABILITIES 1 146 189 817 647 1 127 431
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months 6 months 12 months
to 31 Dec to 31 Dec to 30 Jun
2014 2013 2014
R‘000 R‘000 R‘000
GROSS REVENUE 89 377 62 724 148 961
Rental income – contractual 84 622 57 871 138 371
– straight-line accrual 4 755 4 853 10 590
Property expenses (30 342) (19 525) (49 158)
Net profit from property
operations 59 035 43 199 99 803
Corporate administrative expenses (5 806) (4 707) (10 099)
OPERATING PROFIT 53 229 38 492 89 704
Fair value adjustment to investment
properties 295 – 56 423
Fair value adjustment to debentures (8 241) (3 505) (56 153)
Finance cost (10 207) (9 535) (21 015)
Investment revenue 335 354 629
PROFIT BEFORE
DEBENTURE INTEREST 35 411 25 806 69 588
Debenture interest (39 033) (24 284) (59 600)
(LOSS)/PROFIT AFTER
DEBENTURE INTEREST (3 622) 1 522 9 988
Capital raising expenses – (1 522) (6 372)
(LOSS)/PROFIT BEFORE TAXATION (3 622) – 3 616
Taxation 3 622 – (3 616)
COMPREHENSIVE INCOME
ATTRIBUTABLE TO
SHAREHOLDERS – – –
Profit and total comprehensive
income attributable to:
– Owners of the parent – – –
– Non controlling interest – – –
Reconciliation between profit
attributable to shareholders and
headline earnings per linked unit
Shares are traded as
part of linked units
Profit attributable to linked
shareholders* – – –
Capital raising expenses – 1 522 –
Fair value adjustment to investment
properties (295) – (56 423)
Headline and diluted headline loss
attributable to shareholders (295) 1 522 (56 423)
Fair value adjustment to debentures 8 241 3 505 56 153
Debenture interest 39 033 24 284 59 600
Headline and diluted headline profit
attributable to linked unitholders 46 979 29 311 59 330
DISTRIBUTION
(DEBENTURE INTEREST)*
Interim interest distribution per
linked unit (cents) 7.427 6.75 6.75
Final interest distribution per linked
unit (cents) – – 6.97
Total interest distribution per linked
unit (cents) 7.427 6.75 13.72
EARNINGS PER SHARE
Basic and diluted earnings per share
(cents) ** – – –
Headline and diluted headline loss
per share (cents) ** (0.1) 0.4 (13.1)
Headline and diluted headline
earnings per linked unit (cents) ** 8.9 8.1 13.7
Net asset value per linked unit and
net tangible asset value per linked
unit (cents)*** 160.5 153.0 159.0
Linked unit statistics
(excluding treasury shares)
Linked units in issue 527 636 276 359 762 307 527 636 276
Less: Treasury linked units (248 001) – (2 211 860)
Effective linked units in issue 527 388 275 359 762 307 525 424 416
Weighted average
number of linked units 525 762 609 359 762 307 432 337 771
* Debenture interest is calculated on the capital at a variable rate equal to
99.9% of the net profit of the company before taxation, but after adjusting
for extraordinary income and expenditure, capital gains and losses, and capital
expenditure.
** Headline earnings have been presented in accordance with IAS 33. The linked
unit structure of the group whereby every shareholder is a debenture holder,
coupled with the terms of the Debenture Trust Deed which states that 99.9% of
profits are attributable to debenture holders, results in the benefits of improved
trading which would be ordinarily attributable to shareholders being expensed
in the income statement as a fair value adjustment to debentures and debenture
interest. This results in no profit being attributable to ordinary shareholders.
*** Linked unit debentures are included in the net asset value and net tangible asset
value calculation.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Unaudited Unaudited Audited
6 months 6 months 12 months
to 31 Dec to 31 Dec to 30 Jun
2014 2013 2014
R‘000 R‘000 R‘000
Cash inflow from operating
activities 5 331 552 15 055
Cash outflow to investing activities (11 353) (20 093) (32 298)
Cash inflow from financing activities 7 729 21 468 18 205
Net increase in cash and cash
equivalents 1 707 1 927 962
Cash and cash equivalents at
beginning of period 3 666 2 704 2 704
Cash and cash equivalents at end
of period 5 373 4 631 3 666
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Share Retained
capital income Total
R’000 R’000 R’000
Balance at 1 July 2013 3 598 – 3 598
Total comprehensive income
for the period – – –
Balance at 31 December 2013 3 598 – 3 598
Linked units issued 1 678 – 1 678
Acquisition of treasury linked units (22) – (22)
Total comprehensive income
for the period – – –
Balance at 30 June 2014 5 254 – 5 254
Disposal of treasury units 20 – 20
Total comprehensive income
for the period – – –
Balance at 31 December 2014 5 274 – 5 274
STATEMENTS OF CHANGES IN LINKED UNIT DEBENTURES
Linked unit Linked unit
debenture debenture
capital premium Total
R’000 R’000 R’000
Balance at 1 July 2013 3 598 539 711 543 309
Net fair value adjustment – 3 505 3 505
Balance at 31 December 2013 3 598 543 216 546 814
Linked units issued 1 678 231 666 233 344
Acquisition of treasury linked units (22) (2 760) (2 782)
Net fair value adjustment – 52 648 52 648
Balance at 30 June 2014 5 254 824 770 830 024
Disposal of treasury units 20 3 108 3 128
Net fair value adjustment – 8 241 8 241
Balance at 31 December 2014 5 274 836 119 841 393
OTHER SEGMENTAL INFORMATION
Unaudited Unaudited Audited
31 Dec 31 Dec 30 Jun
2014 2013 2014
R‘000 R‘000 R‘000
Regional profile based on
leasable area
Gauteng 27.7% 32.1% 23.3%
Western Cape 24.5% 30.6% 24.2%
KwaZulu-Natal 24.4% 29.1% 29.5%
Limpopo 9.5% – 9.3%
Northern Cape 7.2% – 7.2%
Eastern Cape 5.1% 6.3% 5.0%
Free State 1.6% 1.9% 1.5%
Vacancy profile based on gross
lease area
Gross lease area in metres squared
as at end of period * 123 087 100 287 125 520
Properties held 31 28 32
Vacancy area in metres squared * 4 804 8 402 8 772
Vacancy area as % of gross
lease area 3.9% 8.4% 7.0%
Regional vacancy profile (regions
where vacancies are located)
Gauteng 45.3% 42.8% 36.2%
KwaZulu-Natal 14.2% 41.8% 42.4%
Western Cape 24.4% 15.4% 9.7%
Northern Cape 4.3% – 7.7%
Limpopo 11.8% – 4.0%
* Gross lease area and vacancy in the prior and current periods has been updated
after the remeasurement of various properties and excludes unlettable space.
CONDENSED CONSOLIDATED SEGMENT REPORT
Reconciling
Eastern KwaZulu- Western Northern items/
Cape Free State Gauteng Natal Cape Cape Limpopo (Eliminations) Total
FOR THE 6 MONTHS ENDED 31 DECEMBER 2014
Revenue – external customers 4 388 1 651 17 564 23 590 22 602 7 333 7 494 – 84 622
Operating profit 3 581 1 235 8 407 21 430 16 464 3 380 4 719 (5 987) 53 229
Total assets 45 302 22 733 203 072 406 782 284 618 53 627 111 461 18 594 1 146 189
FOR THE 6 MONTHS ENDED 31 DECEMBER 2013
Revenue – external customers 4 502 1 539 14 955 17 292 19 583 – – – 57 871
Operating profit 3 651 1 308 8 814 15 535 14 058 – – (4 874) 38 492
Total assets 39 989 18 822 187 575 308 085 250 241 – – 12 935 817 647
FOR THE 12 MONTHS ENDED 30 JUNE 2014
Revenue – external customers 8 789 1 398 34 406 39 531 41 533 5 578 7 136 – 138 371
Operating profit 7 158 993 20 870 33 220 29 371 2 809 5 382 (10 099) 89 704
Total assets 43 919 6 970 215 674 406 960 276 171 53 140 111 113 13 484 1 127 431
Basis of preparation and accounting policies
The preparation of these condensed consolidated financial statements was supervised by the Chief
Financial Officer, BJ Kriel CA (SA).
The accounting policies applied in the preparation of these condensed consolidated results for the six months
ended 31 December 2014, which are based on reasonable judgements and estimates, are in accordance with
International Financial Reporting Standards (“IFRS”) and are consistent with those applied in the annual
financial statements for the year ended 30 June 2014. Any other new and amendments to IFRS and IFRIC
interpretations did not impact on the financial position or performance of the company but has resulted in
additional disclosures. These condensed consolidated results as set out in this report have been prepared
in accordance and containing the information required by IAS 34 – Interim Financial Reporting, the SAICA
Financial Reporting Guidelines as issued by the Accounting Practices Committee and Financial Reporting
Pronouncements as issued by the Financial Reporting Council, the Companies Act of South Africa 71 of
2008, as ammended and the Listings Requirements of JSE Limited.
These condensed consolidated results for the six months ended 31 December 2014 have been prepared in
accordance with the historic cost basis, except for the measurement of investment properties, debentures
and certain financial assets and financial liabilities which are stated at fair value.
The financial results are presented in Rands, which is Fairvest’s functional and presentation currency and
have been prepared on a going concern basis.
These condensed consolidated results have not been reviewed or audited by the company’s auditors, BDO South
Africa Inc.
Estimates and critical judgements
Except for the measurement of investment properties, debentures and certain financial assets and financial
liabilities the financial statements do not include any material estimates.
COMMENTARY
Introduction
Fairvest is a property investment holding company and Real Estate Investment Trust (REIT), with a
unique focus on retail assets weighted toward non-metropolitan and rural shopping centres, as well as
convenience and community shopping centres servicing the lower LSM market, in high-growth nodes,
close to commuter networks. The Fairvest property portfolio consists of 31 properties, with 123 087m2
of lettable area and valued at R1 104.6 million.
Acquisitions
Linked unitholders are referred to the Company’s various SENS announcements, regarding certain
acquisitions by the Company. The Richmond and Sibilo acquisitions are still subject to certain conditions
precedent, should these to be fulfilled, we expect the properties to transfers by 31 March 2015 and
30 June 2015 respectively. The transfer of the Cosmos acquisition has been lodged with the deeds office
and we expect the transfer to be registered by 15 March 2015.
Properties transferred after 31 December 2014
Purchase Date
price Acquisition Major of
Property Location GLA (m2)
R'000 yield tenants transfer
Jan Niemand Spar Gauteng 2 139 20 000 10.0% Spar 18-Feb-15
Cosmos Centre Mpumalanga 4 677 59 000 9.6% Spar 15-Mar-15
Properties pending transfer, subject to conditions precedent
Purchase Expected
price Acquisition Major date of
Property Location GLA (m2)
R'000 yield tenants transfer
Richmond Shopping KwaZulu-
Centre Natal 9 157 61 538 10.0% Spar 31-Mar-15
Northern
Sibilo Cape 8 543 95 000 9.9% Shoprite 30-Jun-15
Review of results
Fairvest board of directors is pleased to announce a distribution of 7.427 cents per linked unit for the six
months ended 31 December 2014, representing 10.03% increase from the previous period and at the
upper end of the guidance previously issued of between 9% and 10% growth in distribution.
Distribution history
Interim Final Total
cents per cents per cents per
linked unit linked unit linked unit
Jun-11 5.000 5.900 10.900
Jun-12 5.200 6.300 11.500
Jun-13 4.570 6.000 10.570
Jun-14 6.750 6.970 13.720
Jun-15 7.427
Revenue for the six months ended 31 December 2014 increased by 42.5% to R89.4 million as a result
of income growth in the historic portfolio and the acquisitions during the previous year. Net profit from
property operations increased by 36.1% to R59.0 million, while administration expenses were contained
to a 19.1% increase to R5.8 million despite the new acquisitions, resulting in debenture interest increasing
by 60.7% to R39.0 million. Property expenses as a ratio of revenue on a gross basis has remained in line
with the prior year at 35.9%, with increases to rates and taxes and other government services being offset
by cost containment within the portfolio. On a net basis (expenses net of utility recoveries) the property
expenses as a ratio of revenue decreased from 17.7% in the previous financial year to 17.1%.
Gross rentals across the portfolio trended upwards, with a 8.4% increase in the weighted average rental
to R92.2/m2 at 31 December 2014 compared to the 30 June 2014. At 31 December 2014 the weighted
average contractual escalation for the portfolio remained at 7.2%. This is mainly as a result of the high
national tenant percentage component of 79.0% of the portfolio, which provides unit holders with a
relatively low risk investment profile.
Tenant grade as a percentage of GLA
A-grade tenants 79.0%
B-grade tenants 7.8%
C-grade tenants 13.2%
A – Anchor and national tenants
B – Franchise, professional and large tenants
C – Other
Vacancies reduced from 7.0% to 3.9% or 4 804m2 during the period under review, mainly as a result of
some positive letting during the period and the sale of the vacant Gingindlovu property. New leases were
concluded on 2 572m2 of the vacant space prior to the period end which only commences in the first
quarter of 2015 and will reduce the vacancy percentage further to 1.8%.
Based on Based on
Lease expiry profile rentable area gross rental
Vacant 3.9% –
Monthly 6.7% 7.1%
30-Jun-15 12.9% 11.7%
30-Jun-16 19.9% 22.0%
30-Jun-17 15.7% 16.9%
30-Jun-18 11.1% 11.8%
After 30-Jun-19 29.8% 30.5%
During the period under review 18 new leases were concluded with a GLA of 2 361m2. Renewal activity
was also positive with a 6.9% escalation achieved on the 8 979m2 of leases that were renewed during the
year. Tenant retention for the year was 79.1%, mainly as a result of an Ellerines lease that was cancelled.
We are currently in negotiations to re-let this space to a National tenant.
Redevelopments and upgrades
Nyanga Junction
The redevelopment project at Nyanga Junction continued during the period, with the creation of a food
court, enhancing the offering to our shoppers and improving the quality of tenants further. The project is
expected to be completed by the end of March 2015 and all the new premises have been let.
The Palms
A redevelopment was undertaken at The Palms office building during the period to improve the lettability
of the building, as the vacancy levels at this building has been in excess of 40% over the last few years.
Subsequent to the commencement of the redevelopment the majority of the vacant space was let
Borrowings
The interest bearing debt to asset ratio remains conservative at 20.86%. The targeted gearing levels are
between 35% and 40%. As at 31 December 2014, 44.67% of the debt was fixed, with the intention of
increasing this percentage to 70%. Future acquisitions will be utilised to increase the fixed component of
our debt and de-risk the portfolio further, by minimising the impact of interest rates movements on our
performance.
The weighted average all-in cost of funding is 8.61% with a weighted average maturity of 35 months.
Prospects
Despite the challenging economic environment and slower economic growth, Fairvest remains in a strong
and healthy position for delivery on future prospects. Management is confident that distribution growth,
at the upper end of the range of between 9% and 10% as previously communicated to the market, is still
achievable for the 2015 financial year. This is due to the positive letting of vacant space during the latter
half of the reporting period, which positions us well for strong further growth in the 2016 financial year.
This view assumes that there being no material deterioration in the macro-economic environment relative
to current levels, no major corporate failures will occur and tenants will be able to absorb increases in
municipal and utility costs. Forecast rental income is based on contractual lease terms and anticipated
market related renewals. This forecast is the responsibility of the board of Fairvest and has not been
reviewed or reported on by the auditors.
Distributions
The board has approved and declared a final gross distribution of 7.427 cents per linked unit for the
six-month period ended 31 December 2014, payable to linked unitholders registered as such at the close
of business on Friday, 27 March 2015.
Last date to trade linked units cum distribution payment Friday, 20 March 2015
Linked units commence trading ex distribution payment Monday, 23 March 2015
Record date Friday, 27 March 2015
Payment date Monday, 30 March 2015
Linked units may not be dematerialised or rematerialised between Monday, 23 March 2015 and Friday,
27 March 2015, both days inclusive.
In accordance with Fairvest's status as a REIT, linked unitholders are advised that the distribution meets
the requirements of a "qualifying distribution" for the purposes of section 25BB of the Income Tax Act, 58
of 1962 ("Income Tax Act"). Accordingly, qualifying distributions received by local tax residents must be
included in the gross income of such linked unitholders (as a non-exempt dividend in terms of section
10(1)(k)(aa) of the Income Tax Act), with the effect that the qualifying distribution is taxable as income
in the hands of the linked unitholder. These qualifying distributions are, however, exempt from dividend
withholding tax in the hands of South African tax resident linked unitholders, provided that the South
African resident linked unitholders have provided the following forms to their Central Securities Depository
Participant ("CSDP") or broker, as the case may be, in respect of uncertificated linked units, or the transfer
secretaries, in respect of certificated linked units:
a) a declaration that the distribution is exempt from dividends tax; and
b) a written undertaking to inform the CSDP, broker or the Transfer Secretaries, as the case may be,
both in the form prescribed by the Commissioner for the South African Revenue Service. Linked
unitholders are advised to contact their CSDP, broker or the transfer secretaries, as the case may be,
to arrange for the abovementioned documents to be submitted prior to payment of the distribution, if
such documents have not already been submitted.
Qualifying distributions received by non-resident linked unitholders will not be taxable as income and
instead will be treated as ordinary dividends but which are exempt in terms of the usual dividend exemptions
per section 10(1)(k) of the Income Tax Act. Any qualifying distribution received by a nonresident from
a REIT will be subject to dividend withholding tax at 15%, unless the rate is reduced in terms of any
applicable agreement for the avoidance of double taxation ("DTA") between South Africa and the country
of residence of the linked unitholder. Assuming dividend withholding tax will be withheld at a rate of 15%,
the net amount due to non-resident linked unitholders will be 6.31295 cents per linked unit. A reduced
dividend withholding tax rate in terms of the applicable DTA, may only be relied on if the non-resident
linked unitholder has provided the following forms to their CSDP or broker, as the case may be, in respect
of the uncertificated linked units, or the transfer secretaries, in respect of certificated linked units:
a) a declaration that the dividend is subject to a reduced rate as a result of the application of a DTA; and
b) a written undertaking to inform their CSDP, broker or the Transfer Secretaries, as the case may be,
should the circumstances affecting the reduced rate change or the beneficial owner cease to be the
beneficial owner,
both in the form prescribed by the Commissioner for the South African Revenue Service. Nonresident
linked unitholders are advised to contact their CSDP, broker or the Transfer Secretaries, as the case
may be, to arrange for the abovementioned documents to be submitted prior to payment of the
distribution if such documents have not already been submitted, if applicable.
Local tax resident linked unitholders as well as non-resident linked unitholders are encouraged to consult
their professional advisors should they be in any doubt as to the appropriate action to take.
Linked units in issue at the date of declaration of the final distribution: 527 636 276
Income tax reference number 9205/066/06/1
Subsequent events
The directors of Fairvest are not aware of any other material matter or circumstance arising between
31 December 2014 and this report which may materially affect the financial position of the group or the
results of its operations.
Appreciation
We extend our appreciation to our directors, management and staff for their valued efforts, as well as our
advisers and linked unitholders for their continuing belief in and support of Fairvest.
For and on behalf of the board
Fairvest Property Holdings Limited
2 March 2015
Cape Town
Executive
DM Wilder (Chief executive officer)
BJ Kriel (Chief financial officer)
AJ Marcus (Chief operating officer)
Non-executive
J F du Toit (Chairman)
LW Andrag (Lead independent non-executive)#
KR Moloko#
N Mkhize#
JD Wiese#
# independent
Registered office
Office 18003, 18th Floor,
Triangle House,
22 Riebeek Street,
Cape Town, 8001
Postnet Suite 30,
Private Bag X3,
Roggebaai, 8012
Transfer secretaries
Computershare Investor Services Proprietary Limited
Ground Floor,
70 Marshall Street,
Johannesburg, 2001
PO Box 61051,
Marshalltown, 2107
Company Secretary
SecCorp Secretarial Services Proprietary Limited
Auditor
BDO South Africa Incorporated
Registered Auditors
Sponsor
PSG Capital Proprietary Limited
Date: 02/03/2015 02:00:00 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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