Wrap Text
Summarised audited consolidated financial results for the year ended 28 February 2015
The Pivotal Fund Limited
Registration number: 2005/030215/06
Tax reference number: 9395 691 158
Share code: PIV ISIN: ZAE000196440
Summarised audited consolidated financial results for the year ended 28 February 2015
Net asset value per share increased by 25.3% to R18.40
Listed on the main board of the JSE on 8 December ’14
Transactions concluded to the value of R6.4 billion
Portfolio increased to 40 properties valued at R9.3 billion
Strategic development pipeline of 445 000m2
Completed developments measuring 48 000m2
Reduced weighted average cost of debt from 10.2% to 9.4%
Summarised consolidated statement of financial position at 28 February 2015
Audited Audited
As at As at
28 Feb 28 Feb
2015 2014
R’000 R’000
Assets
Non-current assets
Fair value of investment property 8 349 697 1 875 226
Investment property 7 992 125 1 821 860
Straight-line rental income accrual 318 287 40 042
Lease costs and incentives 39 285 13 324
Interest in associate 1 472 26 563
Investment property under construction 907 964 152 874
Intangibles and goodwill 551 670 —
Plant and equipment 1 686 71
Interest rate swaps — 12 571
9 812 489 2 067 305
Current assets
Trade and other receivables 197 540 86 280
Loans receivable 56 885 181 413
Cash and cash equivalents 243 240 63 171
497 665 330 864
Total assets 10 310 154 2 398 169
Equity and liabilities
Capital and reserves 4 849 504 1 157 140
Stated capital 3 979 559 786 787
Share-based payment reserve 290 —
Reserves 869 655 370 353
Non-current liabilities
Interest-bearing liabilities 4 306 947 1 034 967
Interest rate swaps 76 101 —
Deferred taxation 647 990 154 680
5 031 038 1 189 647
Current liabilities
Trade and other payables 236 930 27 780
Loans from shareholders 1 306 6 861
Interest-bearing liabilities 191 376 16 741
429 612 51 382
Total equity and liabilities 10 310 154 2 398 169
Net asset value per share (R) 16.23 12.77
Net asset value per ordinary share, excluding
deferred taxation (R) 18.40 14.69
Summarised consolidated statement of comprehensive income
for the year ended 28 February 2015
Audited Audited
28 Feb 28 Feb
2015 2014
R’000 R’000
Revenue 549 171 138 601
Contractual rental income 460 357 129 662
Straight line rental income accrual 88 308 8 880
Sundry income 506 59
Direct property operating expenses (77 098) (34 867)
Net property income 472 073 103 734
Administration costs (29 788) (2 486)
Amortisation of intangible (7 400) —
Profit on disposal of associate 5 642 —
Income from associates 9 229 26 562
Changes in fair values 434 682 266 229
— Investment properties 504 315 205 031
— Financial instruments (69 633) 61 198
Income from operations 884 439 394 039
Finance charges (268 748) (77 027)
Interest received 5 136 4 392
Profit before taxation 620 826 321 404
Taxation (121 524) (63 045)
— Current (199) (515)
— Deferred (121 325) (62 530)
Profit and total comprehensive income for the
year ended 499 302 258 359
Basic earnings per statement of comprehensive
income 499 302 258 359
Adjusted for:
— Profit on disposal of associate (5 642) —
— Fair value adjustment on investment property (504 316) (205 031)
— Deferred tax thereon 94 139 38 272
Headline earnings 83 482 91 600
Number of shares in issue (adjusted for treasury
shares) 298 233 827 80 939 612
Weighted average number of shares in issue 177 411 886 62 928 374
Basic earnings per share (cents)* 281 411
Headline earnings per share (cents)* 47 146
* There are no dilutionary instruments in issue.
Summarised consolidated statement of cash flows
for the year ended 28 February 2015
Audited Audited
28 Feb 28 Feb
2015 2014
R’000 R’000
Cash flows from operating activities
Cash generated from operations 435 300 41 473
Investment revenue 5 136 4 392
Finance costs (267 276) (77 027)
Taxation paid (199) 219
Net cash generated/(utilised) from operating
activities 172 961 (30 944)
Cash flows from investing activities
Additions to investment properties (1 786 738) (587 714)
Additions to investment properties under (244 693) (42 782)
construction
Arising from business acquisition 56 442 2 259
Loans advanced (9 787) (56 999)
Net cash utilised in investing activities (1 984 776) (685 237)
Cash flows from financing activities
Proceeds on ordinary shares issued 1 215 031 305 151
Share issue costs (14 450) —
Interest-bearing liabilities advanced 796 858 467 227
Shareholders loans repaid (5 555) (6 141)
Dividends paid — (601)
Net cash generated from financing activities 1 991 884 765 636
Net Increase in cash and cash equivalents 180 069 49 455
Cash and cash equivalents at the beginning of
the year 63 171 13 716
Cash and cash equivalents at end of the year 243 240 63 171
Summarised consolidated statement of changes in equity
for the year ended 28 February 2015
Audited
Stated capital/
share capital Non-
and share distributable
premium reserve
R’000 R’000
Group
Balance at 28 February 2013 367 462 97 201
Total comprehensive income for the year — —
Issue of ordinary shares 380 758 —
Issue of preference shares 38 567 —
Fair value adjustment to investment
properties transferred to non-distributable
reserves — 205 031
Transfer of deferred tax in respect of fair
value gain — (38 272)
Dividends paid — —
Total changes 419 325 166 758
Balance at 28 February 2014 786 787 263 960
Transfer to Retained income — 01 March
2014* — (263 960)
Total comprehensive income for the year — —
Share-based payment expenses — —
Issue of ordinary shares 3 213 747 —
Share issue costs (21 950) —
Issue of preference shares 976 —
Total changes 3 192 773 (263 960)
Balance at 28 February 2015 3 979 559 —
Audited
Share-based
Retained payment Total
income reserve equity
R’000 R’000 R’000
Group
Balance at 28 February 2013 20 805 — 485 468
Total comprehensive income for
the year 258 359 — 258 359
Issue of ordinary shares — — 380 758
Issue of preference shares — — 38 567
Fair value adjustment to investment
properties transferred to non-
distributable reserves (205 031) — —
Transfer of deferred tax in respect of
fair value gain 38 272 — —
Dividends paid (6 013) — (6 013)
Total changes 85 588 — 671 671
Balance at 28 February 2014 106 393 — 1 157 139
Transfer to Retained income —
01 March 2014?* 263 960 — —
Total comprehensive income for
the year 499 302 — 499 302
Share-based payment expenses — 290 290
Issue of ordinary shares — — 3 213 747
Share issue costs — — (21 950)
Issue of preference shares — — 976
Total changes 763 262 290 3 692 365
Balance at 28 February 2015 869 655 290 4 849 504
* At 1 March 2014 the total Non-distributable reserve was reclassified to
Retained income. All future fair value adjustments and the relating
deferred tax will be reported directly in Retained income. This does not
represent a change in accounting policy.
Commentary
1. Profile
Pivotal listed on the JSE main board on 8 December 2014. The company has
an A-grade office and retail property portfolio, divided into completed
income producing properties and developments (including property under
development and land held for future development). The portfolio consists
of well-located retail centres in established and expanding nodes and A-
grade office developments (including office parks), which are enhanced by
lifestyle elements such as piazzas, coffee shops and gyms.
Pivotal focuses on creating sustainable value for its investors by
achieving above average growth in the capital value of its portfolio
through its extensive development pipeline and active management of its
existing portfolio. To ensure long-term sustainability and high tenant
retention, the A-grade nature of the properties is maintained by
continuous re-investment through preventative maintenance as well as with
regular upgrades and refurbishments.
Pivotal’s portfolio was valued at R9.3 billion as at 28 February 2015. In
addition R112 million was held by property-owning trusts, which forms part
of the secured development pipeline. During the period under review,
Pivotal acquired properties to the value of R3.5 billion which included
strategic land for development and acquisition of property-owning trusts
to the value of R2.9 billion.
2. Financial results
Pivotal’s net asset value per share excluding deferred tax (“NAVPS”)
increased by 25.3% year-on-year to R18.40 as at 28 February 2015 (2014:
R14.69). The growth in NAVPS was attributable to the revaluation
of the income producing properties, fair value adjustments on current
developments including the impact of the margin between the development
cost and the fair value of the completed properties (“development margin”)
as well as net working capital generated from operating activities. Included
in the current NAV is a once–off accounting adjustment to goodwill of
R85 million arising on internalisation of the management company and
negative fair value adjustment to interest rate swaps of R69 million.
3. Property portfolio
Number of properties
Office Retail Industrial Total
Income producing 20 10 3 33
Current development* 2 0 0 2
Future development* 3 2 0 5
* Only includes new properties not already included under income producing
properties.
Independent property portfolio value at 28 February 2015
R billion Office Retail Industrial Total
Income producing 4.50 3.70 0.15 8.35
Current development 0.62 — — 0.62
Future development 0.12 0.17 — 0.29
Total 5.24 3.87 0.15 9.26
Total gross rentable area (GRA)
m2 Office Retail Industrial Total
Total GRA built 185 937 221 885 19 210 427 032
Current developments 60 121 — — 60 121
Future secured developments 91 098 114 085 — 205 183
Future secured development
pipeline 68 301 — — 68 301
Future potential development
pipeline — — 111 436 111 436
Income producing portfolio
Office Retail Industrial Total
GRA as % of the portfolio 43 52 5 100
Value/m2 (R) 23 787 16 688 7 637 19 372
Average lease escalation (%) 8.5 7.8 8.0 8.15
Average net rental/m2 (R) 126 121 53 121
4. Lease expiry profile by GRA
Beyond Total
2016 2017 2018 2019 2019 GRA
Office 21 985 31 881 32 284 13 464 86 323 185 937
Retail 29 756 27 400 19 504 34 576 110 649 221 885
Industrial — — — — 19 210 19 210
5. Vacancies
Level of GRA % vacancy
Portfolio 28 Feb 2015 28 Feb 2014
Office 1.03 1.87
Retail 2.99 2.37
Industrial 0.00 0.00
Total 1.82 2.13
6. Share conversions and property acquisitions
6.1 Share conversions
During the period, preference shares in 10 property-owning trusts were
converted to ordinary shares resulting in consolidation in terms of IFRS 3
(Business Combinations). The 10 property-owning trusts were converted in
two batches with effect from 1 March 2014 and 1 September 2014
respectively. The conversions resulted in an additional 81.3 million
ordinary shares being issued, at NAV excluding deferred tax at the time of
conversion, and the consolidation of an aggregated property value of
R2.9 billion.
6.2 Property acquisitions
Pivotal has acquired the balance of the undivided shares in co-owned
properties and other properties to the value of R3.5 billion. The properties
comprise income-producing properties valued at R2.9 billion and a current
and a future development pipeline valued at R600 million including
the remaining 80% of the Alice Lane development in Sandton, Goldfields
Mall in Welkom and Lakeview Office Park in Constantia Kloof.
In addition, Pivotal has entered into an MOU to acquire a 37.1%
shareholding in a development in Lagos, Nigeria valued at USD104 million,
which is subject to certain conditions precedent being met.
The acquisitions were funded by a combination of (i) an issue of new
shares at a value equal to the NAVPS at 31 August 2014 of R15.55, which
excludes deferred tax (ii) additional borrowings (iii) the R200 million
rights offer undertaken in September 2014, and (iv) the R1 billion
placement raised at listing on the JSE.
The acquisitions increased the number of properties in the portfolio to
40 with a total value of R9.3 billion in terms of the 28 February 2015
valuations. The bulk available for development increased to 445 000m2 with
an estimated value of R5.7 billion on completion.
7. Current and future developments
7.1 Alice Lane Building 2 was completed in November 2014. It has a total
floor-area of 16 000m2 and is fully let to Sanlam/Santam on a 12-year
lease. The building’s market value on completion was R511 million.
7.2 Alice Lane Building 3, which is currently under construction has an
estimated completion date of early 2017. It will have a total floor-area
of 35 000m2 of which 22 000m2, has been let to Bowman Gilfillan, one of
South Africa’s ‘big five’ legal firms on a 12 year lease.
7.3 Construction has commenced on the first two building at Westend
Office Park in Centurion of 3 677m2 and 5 079m2, which are due to be
completed in May 2015 and November 2015 respectively. Westend Office
Park is a 27 000m2 A-grade development which will provide excellent
security, is easily accessible from the N1 freeway and other major
routes and is situated within walking distance of the Centurion
Gautrain station and Centurion Mall.
7.4 Pivotal has acquired a 33.3% investment in Hertford Office Park which
is ideally located on the corner of Allandale and Bekker Roads, opposite
the Mall of Africa development. The park comprises approximately 54 000m2
of GRA, which is made up of three completed buildings of which three
buildings totalling 10 000m2 have been completed. All buildings are fully
let and were occupied from 1 April 2015. Two further buildings of 3 700m2
and 3 880m2 are currently under construction and are due for completion
and occupation in June 2015 and November 2015 respectively. Subsequent to
year-end, an additional tenant of 6 500m2 has been secured for the sixth
building and construction is to due to commence in mid 2015. The balance
of the floor-area within the park will continue to be developed on a
phased basis subject to demand and the provision of an appropriate amount
of GRA on a speculative basis. The buildings provide space for small and
large users and the park offers ample parking and good security.
7.5 Construction has commenced on the first building at Hill on Empire
Office Park in Parktown of 6 880m2, which is due for completion in
February 2016. This is a 35 000m2 A-grade office park development which
will provide excellent security and is easily accessible from the M1
freeway and other major public transport routes.
7.6 The fourth building of 2 769m2 at Stoneridge Office Park was completed
in March 2015 and is fully let. Construction of the fifth building of
3 541m2 has commenced and is due to be completed in November 2015. This
office park is an 18 000m2 A-grade office park development.
7.7 Construction has commenced on the first buildings at Monte Circle
Office Park in Fourways of 5 253m2, and is due for completion in September
2015. This is a 52 000m2 A-grade office park development which will form
part of the Monte Casino Precinct and will provide excellent security and
is easily accessible from the N1 freeway and other major transport routes.
7.8 Pivotal has acquired an 80% interest in the Kyalami Corner Shopping
centre development. This proposed 28 000m2 retail development enjoys a
prime position at a busy arterial intersection and will offer upscale
convenience shopping and dining. The centre will be anchored by
Woolworths,Checkers, Pick n Pay and Virgin Active. The lower level
will focus on convenience retail and selected award-winning restaurants,
while the upper level is earmarked for home and lifestyle-orientated
tenants. Construction is due to commence in May 2015.
7.9 During the period, Pivotal acquired strategic land situated adjacent
to Wonderboom Junction, which will be used to expand the existing mall.
The expansion will provide for both an upgrade of the existing mall and an
additional 22 500m2 floor-area, which will bring the mall to a total GRA
of 62 000m2. The additional floor-area will provide for a more diversified
tenant mix, wider variety in the apparel category and a newly refurbished
restaurant and family area. The expansion is targeted for completion in
November 2016.
7.10 Cradlestone Mall was expanded by increasing Woolworths store area by
2 000m2 and introducing all their brands, being Country Road, Trenery and
Witchery. In addition, the introduction of Dis-Chem, Food Lover’s Market
and Virgin Active have collectively added 10 000m2 to the mall.
7.11 Pivotal has acquired a 50% share in the property adjacent to the
iconic Loftus Versfeld rugby stadium. The proposed development will be
phased with a total GRA of 55 0000m2. This mixed use precinct is planned
to include offices of 35 000m2, a retail component of 7 800m2 as well as a
hotel of 8 600m2 and a gym of 3 500m2. Construction is due to commence in
May 2015.
8. Interest-bearing liabilities
Pivotal currently has borrowings of R4.7 billion which represents 47% of
the current property portfolio value. At 28 February 2015, the average
cost of funding was 9.4% (2014: 10.2%) and interest rates have been fixed
in respect of 87% of borrowings for an average period of five years.
During the period, debt facilities totalling over R3 billion were
restructured which included cross collateralising of security, which
resulted in a reduction in the overall weighted average cost of debt.
9. Net asset value per share
The table below details the net asset value calculation per share:
28 Feb 2015 28 Feb 2014
R’000 R’000
Total equity 4 849 504 1 157 139
Adjusted for:
— Equity of preference shareholders (10 568) (123 144)
Total equity (net asset value) attributable to
ordinary shareholders 4 838 936 1 033 995
Total ordinary shares in issue (Adjusted for
treasury shares) 298 233 827 80 939 612
Net asset value per ordinary share 16.23 12.77
Reconciliation of net asset value, excluding
deferred tax, per ordinary share to total equity
Total equity (net asset value) attributable to
ordinary shareholders 4 838 936 1 033 995
Adjusted for:
— Total deferred tax liability 647 991 154 680
Net asset value attributable to ordinary
shareholders 5 486 927 1 188 675
Total ordinary shares in issue (Adjusted for
treasury shares) 298 233 827 80 939 612
Net asset value per ordinary share, excluding
deferred tax (R) 18.40 14.69
10. Listing on the JSE
Pivotal listed on the main board of the JSE on 8 December 2014, during
which it raised R1 billion by way of an offer of new shares for
subscription to invited investors at an issue price of R17.00 per share.
The proceeds of the private placement, net of preliminary and issue
expenses, was used to part finance the acquisitions referred to in
paragraph 6.
11. Changes in fair value
The portfolio, including investment properties and properties under
development, was independently valued at 28 February 2015 which resulted
in an increase in the portfolio value of R504 million. It is Pivotal’s
policy to value properties under development (including land) at cost
until the fair value can be reliably measured, at which point the cost
plus the present value of the development margin is recognised on a
percentage completed basis. The recognition of fair value adjustments is
in line with the development spend “S-Curve”, with a greater portion of
development margin being recognised closer to completion of the
development.
Movement in fair value adjustments
28 Feb 2015 28 Feb 2014
R’000 R’000
Completed properties 334 144
Properties under development 170 61
Total changes in fair value of investment
properties (Rm) 504 205
Key portfolio metrics used in determining property valuations are set
out below:
12-month
forward
Sector Rate/m2 yield (%)
Retail 16 686 7.8
Retail convenience 15 548 8.1
Small regional/regional 17 163 7.7
Office and industrial 22 236 8.0
Offices — PTA/JHB 23 723 8.1
Offices — CPT 23 802 7.1
Industrial 7 637 8.3
Total portfolio 19 372 7.9
Weighted average
Reversionary
Capitalisation capitalisation Discount
Sector rate (%) rate (%) rate (%)
Retail 7.7 8.2 13.2
Retail convenience 8.1 8.6 13.6
Small regional/regional 7.5 8.0 13.0
Office and industrial 7.8 8.3 13.3
Offices — PTA/JHB 7.8 8.3 13.3
Offices — CPT 7.5 8.0 13.0
Industrial 8.5 9.0 14.0
Total portfolio 7.7 8.2 13.2
The property portfolio, save for Wanderers Office Park, has been
independently valued by Jones Lang LaSalle Proprietary Limited with
Wanderers Office Park valued by Mills Fitchet JHB.
12. Changes to the board
The following changes have been made to the board. Thys Neser, co-founder
of Pivotal, has stepped down as executive chairman after five years of
service, but continues to serve on the board as a non-executive director.
Tom Wixley has been appointed as independent non-executive chairman in
September 2014. Robert Hurwitz retired after five years of service in
November 2014 and Warren Lawlor, who had agreed to serve as a non-executive
director until the listing of the company, has resigned in November 2014.
The board has seen the appointments of Chris Ewing and Tony Dixon who are
both independent non-executive directors in September 2014 both serving on
the audit and risk committee with Mr Dixon replacing Mr Lawlor as chairman
of the audit and risk committee. The board would like to thank the departing
directors for their valuable contributions during their tenure.
13. Prospects
Notwithstanding the challenging economic environment in which we operate,
we strive to maintain an above-average growth in net asset value per share
as a development fund. We are pleased with the returns the portfolio has
delivered over the last year. We acknowledge, however, that it is due to
the culmination of several key developments.
Pivotal remains focused on creating long-term value for its stakeholder by
the successful completion of its existing developments and the on-going
rollout of its development pipeline of secured development of 333 000m2
and potential future development pipeline of 112 000m2, which is situated
in prime locations throughout South Africa.
Pivotal will continue to re-invest in its portfolio of income producing
properties to ensure delivery of sustainable growth with focussed
attention being placed on the key fundamentals.
In furtherance of its growth strategy, Pivotal also plans to pursue
opportunities to expand and diversify its investment portfolio by
investing in selected international markets.
These prospects have not been reviewed or reported on by Pivotal’s
independent external auditors.
14. Basis of preparation and accounting policies
The summarised audited consolidated financial results for the year ended
28 February 2015 have been prepared in accordance with International
Financial Reporting Standards (“IFRS”), the information required by
IAS34: Interim Financial Reporting, the SAICA Financial Reporting Guides
as issued by the Accounting Practices Committee, the requirements of the
Companies Act of South Africa and the JSE Listings Requirements. The
accounting policies are consistent, in all material respects, with those
applied in prior years, and except for the first-time adoption of new
standards, are consistent with those applied in the previous annual
financial statements for the year ended 28 February 2014.
The following new standards were adopted during the period:
* Amendments to IFRS 10, IFRS 12 and IAS 27 — Investment entities
* Amendment to IAS 32 — Offsetting Financial Assets and Financial
Liabilities
* Amendment to IAS 36 — Recoverable amount disclosures for non-financial
assets
* Amendment to IAS 39 — Novation of derivatives and continuation of hedge
accounting
* IFRIC 21 Levies
None of these standards had a material impact on the results of the group.
The financial statements have been summarised from the audited financial
statements on which Grant Thornton has issued an unqualified audit opinion
and which are available for inspection at the company’s registered office.
The directors are not aware of any matters or circumstances arising
subsequent to the period ended 28 February 2015 that require additional
disclosure or adjustment to the financial statements.
The auditor’s report does not necessarily cover all of the information
included in this announcement. The directors take full responsibility for
the preparation of the summarised audited consolidated financial results
for the year ended 28 February 2015 and for ensuring that the financial
information has been correctly extracted from the underlying audited
annual financial statements.
These results have been prepared under the supervision of the financial
director, Aaron Suckerman (ACCA UK).
By order of the Board
The Pivotal Fund Limited
12 May 2015
Registration number: 2005/030215/06
Directors: A Dixon*#, C Ewing*#, JA Mackay*, MSB Neser*, DS Savage,
S Shaw-Taylor*, TS Sishuba*#, A Suckerman, JR van Niekerk, M Wainer*#,
T Wixley*#.
* Non-executive #Independent
Registered office: Abcon House, Fairway Office Park, 52 Grosvenor Road,
Bryanston, 2021
Postal address: PO Box 67663, Bryanston, 2021
Telephone: 011 510 9999
Internet address: www.pivotalfund.co.za
VAT registration number: 431 022 9432
Tax reference number: 9395 691 158
Country of incorporation: Republic of South Africa
E-mail: jackie.vanniekerk@pivotalfund.co.za
Auditors: Grant Thornton South Africa
Commercial bankers: The Standard Bank of South Africa Limited
Company secretary: Juba Statutory Services Proprietary Limited
Sponsor: Java Capital Trustees and Sponsors Proprietary Limited
Transfer secretary: Computershare Investor Services Proprietary Limited
Property managers: Abreal Proprietary Limited
13 May 2015
Java Capital
Date: 13/05/2015 07:30:00 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.
Sharenet Sites 
