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Preliminary summarised audited consolidated financial statements for the nine month period ended 31 March 2015
LODESTONE REIT LIMITED
(PREVIOUSLY LODESTONE PROPERTIES LIMITED)
(INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA)
(REGISTRATION NUMBER 2010/017830/06)
JSE SHARE CODE: LDO ISIN: ZAE000197935
(APPROVED AS A REIT BY THE JSE)
(“LODESTONE” OR “THE COMPANY”)
PRELIMINARY SUMMARISED AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE
NINE MONTH PERIOD ENDED 31 MARCH 2015
DIRECTORS’ REPORT
NATURE OF THE BUSINESS
Lodestone listed on the Alternative exchange of the JSE (“AltX”) on 25
February 2015. Following the successful private placing of 24 million
ordinary shares at R5,10 per share, the number of shares in issue after
the capital raising increased to 129 762 736 shares.
Lodestone’s property portfolio consists of 22 properties valued at R1 013
million and comprises 58,4% retail and 41,6% industrial based on value.
Geographically, the properties are located in the following provinces.
Gauteng 60,2%
KwaZulu-Natal 8,8%
Northern Cape 8,5%
Limpopo 7,9%
Western Cape 7,1%
North West 6,4%
Mpumalanga 1,1%
RESULTS
The board has declared a dividend of 12,99000 cents per share for the four
month period ended March 2015. This is in line with the 12,97000 cents per
share forecast in the prospectus. The property portfolio performed in line
with projections.
STRATEGY
Lodestone’s primary objective is to identify value enhancing opportunities
with good growth prospects in all sectors of the property market.
Lodestone will continue to adopt an aggressive and opportunistic approach
to the asset management of its portfolio and will actively take advantage
of buying and selling prospects as they arise.
ACQUISITIONS AND DEVELOPMENTS
Makhado Square was transferred in December 2014. This property, with a GLA
of 2 651m2, was acquired for R37,5 million and at a yield of 9%. The
company is currently in advanced negotiations for two further property
acquisitions.
On 13 April 2015, Lodestone received conditional approval from Gauteng
Province for the registration of a servitude facilitating access to 17,94
hectares of zoned industrial land in Alberton. This land was not accorded
a value on listing due to the compromised access, however, this will be
remedied by the improved access.
VACANCIES AND ARREARS
Total vacancies comprised 2,7% of GLA with industrial vacancies of 2,2%
and retail vacancies of 3,6%.
Management placed significant emphasis on tenant retention and letting
vacant space and this will continue to be a focus area. No significant
increase in vacancies is anticipated in the next financial year.
There were no material changes in arrears and potential bad debts are well
provided for.
BLACK ECONOMIC EMPOWERMENT
On 12 March 2015, Lodestone issued 13 698 630 shares to The Siyakha
Education Trust at R7,30 per share. The sole objective of The Siyakha
Education Trust is the promotion of black education.
FUNDING
During the period, Lodestone accepted facilities from Standard Bank
totalling R450 million
FACILITIES
Amount Margin over
Expiry R' million Jibar
Mar 2016 80 2,64%
Mar 2018 450 1,75%
530 1,88%
INTEREST RATE DERIVATIVES
Amount Average
Interest rate swap expiry R' million swap rate
2018 100 6,10%
2019 50 7,23%
2020 50 7,32%
2021 50 7,61%
Total 250 6,87%
Variable rate instruments R’000
Loan to BEE vehicle (100 616)
Cash and cash equivalents (3 751)
Interest-bearing borrowings 339 523
235 156
Total interest rate derivatives 250 000
Percentage hedged 106,3%
The all-in weighted average cost of funding of Lodestone was 8,82% at
March 2015 and the average hedge term was 3,6 years. It is the board’s
policy to hedge at least 80% of the exposure to interest rate risk.
GEARING
Lodestone’s gearing of 29,9% at year-end was marginally below the board’s
target range of between 30% to 40%.
SUMMARY OF FINANCIAL PERFORMANCE
Mar 2015
Dividend per share (cents) 12,99
Shares in issue 143 461 366
Net asset value R5,38
Loan-to-value ratio* 32,9%
Net property expense ratio 13,8%
Gross property expense ratio 39,1%
Net total expense ratio 20,7%
Gross total expense ratio 43,7%
*The loan-to-value ratio is calculated by dividing interest-bearing
borrowings net of cash on hand by the total of investment property and
loans advanced.
RECONCILIATION BETWEEN STATEMENT OF COMPREHENSIVE INCOME AND DIVIDEND
DECLARED
Mar 2015
R'000
Recoveries and contractual rental revenue 107 785
Property operating expenses (42 197)
Income from investments 1 736
Administrative expenses (5 647)
Interest received 1 516
Antecedent dividend 3 907
Interest on borrowings (30 837)
Capitalised interest 284
Dividend for the period 36 547
Less: interim dividend declared (17 910)
Final dividend declared 18 637
OUTLOOK
The board is confident that Lodestone will deliver growth in distributions
of approximately 10% for the year ending March 2016.
The growth is based on the assumptions that a stable macro-economic
environment will prevail, no major corporate failures will occur and that
tenants will be able to absorb the recovery of rising utility costs and
municipal rates. Budgeted rental income was based on contractual
escalations and market related renewals. This forecast has not been
audited or reviewed by Lodestone’s auditors.
By order of the board
Jason Cooper Inge Pick
Managing director Financial director
Johannesburg
6 May 2015
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
Mar 2015 Jun 2014
R'000 R’000
ASSETS
Non-current assets 1 122 164 989 493
Investment property 986 906 876 103
Straight-lining of rental revenue adjustment 24 574 23 869
Investment property under development 1 370 14 718
Investments - 66 105
Loans to employees 8 698 8 698
Loan to BEE vehicle 100 616 -
Current assets 11 605 148 449
Investment property held for sale - 33 835
Trade and other receivables 7 582 10 413
Loans to linked unitholders - 102 215
Loans to employees 272 80
Cash and cash equivalents 3 751 1 906
Total assets 1 133 769 1 137 942
EQUITY AND LIABILITIES
Total equity attributable to equity holders 772 332 390 317
Stated capital/share capital 751 077 200
Non-distributable reserves - 390 117
Reserves 21 255 -
Total liabilities 361 437 747 625
Non-current liabilities 315 092 687 093
Linked debentures - 99 800
Interest-bearing borrowings 314 550 498 916
Deferred tax 542 88 377
Current liabilities 46 345 60 532
Trade and other payables 17 139 14 920
Linked debenture interest payable - 14 967
Dividend payable - 6 721
Income tax payable 4 233 -
Interest-bearing borrowings 24 973 23 924
Total equity and liabilities 1 133 769 1 137 942
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
for the nine for the year
months ended ended
Mar 2015 Jun 2014
R'000 R’000
Net rental and related revenue 66 293 85 208
Recoveries and contractual rental revenue 107 785 132 921
Straight-lining of rental revenue adjustment 705 6 209
Rental revenue 108 490 139 130
Property operating expenses (42 197) (53 922)
Distributable income from investments 1 736 2 383
Fair value gain on investment
property and investments 70 143 107 271
Fair value gain on investment property 54 752 98 685
Adjustment resulting from
straight-lining of rental revenue (705) (6 209)
Fair value gain on investments 16 096 14 795
Administrative expenses (5 647) (6 249)
Listing costs (5 459) -
Profit before net finance costs 127 066 188 613
Net finance costs (30 384) (65 733)
Finance income 1 516 6 283
Interest received 1 516 3 603
Fair value adjustment on interest rate derivatives - 2 680
Finance costs (31 900) (72 016)
Interest on borrowings (30 837) (38 960)
Capitalised interest 284 700
Fair value adjustment on interest rate derivatives (1 347) -
Interest to linked debenture holders
- A linked units - (16 081)
- B linked units - (17 675)
Profit before income tax 96 682 122 880
Income tax 80 980 (22 003)
Profit for the period
attributable to equity holders 177 662 100 877
Total comprehensive income for the period 177 662 100 877
Basic earnings per ordinary share (cents) 161,84
Basic earnings per A share (cents) 151,32
Basic earnings per B share (cents) 857,45
Basic earnings per A linked unit (cents) 312,13
Basic earnings per B linked unit (cents) 1 034,20
RECONCILIATION OF PROFIT FOR THE PERIOD TO HEADLINE EARNINGS
Audited Audited
for the nine for the year
months ended ended
Mar 2015 Jun 2014
R'000 R’000
Basic earnings - profit for the period
attributable to equity holders 177 662 100 877
Adjusted for: (137 652) (73 982)
- Fair value gain on investment property (54 047) (92 476)
- Income tax effect (83 605) 18 494
Headline earnings 40 010 26 895
Headline earnings per ordinary share (cents) 36,45
Headline earnings per A share (cents) 40,34
Headline earnings per B share (cents) 228,61
Headline earnings per A linked unit (cents) 201,15
Headline earnings per B linked unit (cents) 405,36
Basic earnings per share and headline earnings per share are based on the
weighted average of 109 778 334 shares (2014: 10 000 000 A linked units/10
000 000 B linked units) in issue during the period.
Lodestone has no dilutionary instruments in issue.
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
for the nine for the year
months ended ended
Mar 2015 Jun 2014
R'000 R’000
Cash (outflow)/inflow from operating activities (10 610) 9 498
Cash inflow/(outflow) from investing activities 73 309 (186 860)
Cash (outflow)/inflow from financing activities (60 854) 175 875
Increase/(decrease) in cash and cash equivalents 1 845 (1 487)
Cash and cash equivalents at beginning of period 1 906 3 393
Cash and cash equivalents at end of period 3 751 1 906
Cash and cash equivalents consist of:
Current accounts 3 751 1 906
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital/ Non-
stated distributable
capital reserves Reserves Total
Audited R'000 R'000 R'000 R'000
Balance at Jun 2013 200 295 961 - 296 161
Total comprehensive
income for the year 100 877 100 877
Dividend declared (6 721) (6 721)
Transfer to non-
distributable reserves 94 156 (94 156) -
Balance at Jun 2014 200 390 117 - 390 317
Issue of ordinary shares 750 877 (528 614) 222 263
- 105 762 736 on
26 January 2015 528 614 (528 614) -
- 24 000 000 on
25 February 2015 122 322 122 322
- 13 698 630 on
12 March 2015 99 941 99 941
Total comprehensive
income for the period 177 662 177 662
Dividend declared (17 910) (17 910)
Transfer from non-
distributable reserves (390 117) 390 117 -
Balance at Mar 2015 751 077 - 21 255 772 332
NOTES
PREPARATION, ACCOUNTING POLICIES AND AUDIT OPINION
The summarised audited consolidated financial statements have been
prepared in accordance with the requirements of the JSE Listings
Requirements for preliminary reports and the requirements of the Companies
Act of South Africa applicable to summary financial statements. The JSE
Listings Requirements require preliminary reports to be prepared in
accordance with the framework concepts and the measurement and recognition
requirements of International Financial Reporting Standards (“IFRS”), the
SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Pronouncements as issued by the Financial
Reporting Standards Council, and to also, as a minimum, contain the
information required by IAS 34, Interim Financial Reporting. The
accounting policies applied in the preparation of the consolidated
financial statements, from which the summarised consolidated financial
statements were derived, are in terms of IFRS and are consistent with the
accounting policies applied in the preparation of the previous
consolidated financial statements.
The summarised financial statements were compiled under the supervision of
Inge Pick CA(SA), the financial director.
Lodestone changed its year end from 30 June to 31 March.
The directors are not aware of any matters or circumstances arising
subsequent to March 2015 that require any additional disclosure or
adjustment to the financial statements.
The auditors, Deloitte & Touche, have issued their opinion on the
consolidated financial statements for the nine month period ended March
2015. The audit was conducted in accordance with International Standards
on Auditing. They have issued an unmodified audit opinion. These
preliminary summarised consolidated financial statements have been derived
from the consolidated financial statements and are consistent, in all
material respects, with the consolidated financial statements. A copy of
their audit report is available for inspection at Lodestone’s registered
address. This preliminary report has been audited by Deloitte & Touche and
an unmodified audit opinion has been issued. The auditor’s report does not
necessarily report on all of the information contained in this
announcement. Shareholders are therefore advised that in order to obtain a
full understanding of the nature of the auditor’s engagement, they should
obtain a copy of that report together with the accompanying financial
information from Lodestone’s registered address. Both reports are
available at Lodestone’s registered address.
SECTORAL SPLIT
Based on: GLA Book value
Retail 37,5% 58,4%
Industrial 62,5% 41,6%
100,0% 100,0%
LEASE EXPIRY PROFILE (unaudited)
Based on: GLA Rental
revenue
Vacant 2,7%
Mar 2016 24,6% 19,8%
Mar 2017 19,3% 23,2%
Mar 2018 12,4% 15,7%
Mar 2019 3,4% 6,1%
Mar 2020 16,6% 17,3%
> Mar 2020 21,0% 17,9%
100,0% 100,0%
SEGMENTAL ANALYSIS
Audited
for the nine Audited
months for the year
ended ended
Mar 2015 Jun 2014
R'000 R’000
Segmental revenue - recoveries
and contractual rental revenue
Industrial 47 004 56 512
Retail 60 781 76 409
Total 107 785 132 921
Property operating expenses
Industrial (16 365) (20 286)
Retail (25 832) (33 636)
Total (42 197) (53 922)
Segmental revenue - rental revenue
Industrial 48 560 57 825
Retail 59 930 81 305
Total 108 490 139 130
Profit for the period
Industrial 51 633 68 533
Retail 68 707 109 151
Corporate 57 322 (76 807)
Total 177 662 100 877
CAPITAL COMMITMENTS
Audited Audited
Mar 2015 Jun 2014
R'000 R’000
Authorised and contracted - 2 800
PAYMENT OF FINAL DIVIDEND
The board has approved and notice is hereby given of a final dividend of
12,99000 cents per share for the four months ended 31 March 2015.
The dividend is payable to Lodestone shareholders in accordance with the
timetable set out below:
Last date to trade cum dividend: Friday, 22 May 2015
Shares trade ex dividend: Monday, 25 May 2015
Record date: Friday, 29 May 2015
Payment date: Monday, 1 June 2015
Share certificates may not be dematerialised or rematerialised between
Monday, 25 May 2015 and Friday, 29 May 2015, both days inclusive.
In respect of dematerialised shareholders, the dividend will be
transferred to the CSDP accounts/broker accounts on Monday, 1 June 2015.
Certificated shareholders’ dividend payments will be posted on or about
Monday, 1 June 2015.
An announcement informing shareholders of the tax treatment of the
dividend will be released separately on SENS.
Registered office 3rd Floor, Rivonia Village, Rivonia Boulevard, Rivonia,
2191, PO Box 6063, Rivonia, 2128
TRANSFER SECRETARIES
Link Market Services South Africa Proprietary Limited, 13th Floor, Rennie
House, 19 Ameshoff Street, Braamfontein, 2001, PO Box 4844, Johannesburg,
2000
SPONSOR
Java Capital
COMPANY SECRETARY
Leonie Gindan
DIRECTORS
Annalese Manickum (chairperson)*; Jason Cooper (managing director); Craig
Hallowes*; Michael McNamara*; Inge Pick; Ndhlabole Shongwe*; Gidon Trope;
Jacques van Wyk*; Herman Zolty (*Independent non-executive director).
Date: 06/05/2015 01:52:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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