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Preliminary summarised audited consolidated financial statements for the year ended 28 February 2015
Equites Property Fund Limited
(formerly VB Transport Proprietary Limited)
(Incorporated in the Republic of South Africa)
(Registration number 2013/080877/06)
JSE share code: EQU ISIN: ZAE000188843
(Approved as a REIT by the JSE)
("Equites" or "the Company")
Preliminary summarised audited consolidated financial statements for the year ended 28 February 2015
Highlights
- R650 million capital raised through a substantially oversubscribed
private placement
- Total distributions to shareholders of R69.9 million since listing,
exceeding the pre-listing forecast by R3.4 million (5.1%)
- The dividend per share of 61.3 cents equals a distribution yield of 8.2%
for the 9 months to 28 February 2015, marginally exceeding the pre-listing forecast
- A share price growth of 28.5% since listing on 18 June 2014 until the
end of the reporting year
- A total shareholder return of more than 36.6% (48.8% annualised) since
listing
- Delivery on all forecasted transactions in the pre-listing statement
- Post-listing acquisitions totalling R118.8 million were concluded and
implemented
- An agreement for R150 million concluded for a new The Foschini Group
distribution centre in Midrand
1. Introduction
Through the merger of the property portfolios of three independent Western
Cape-based industrial property developers, Equites successfully listed on
the JSE on 18 June 2014.
The Equites value proposition, which included a high-end industrial property
focus, was well received by the market. The R650 million capital raised on
listing received substantial investor attention and was oversubscribed
several times.
Since the amalgamation of the three portfolios saw the creation of a new,
separate and independent legal entity, management focused almost exclusively
on the following three objectives:
- the employment of a talented and experienced management team capable of
handling all aspects of asset and property management relating to the
portfolio in-house
- bedding down the listing process by taking ownership of the property
portfolio and implementing the requisite systems and processes to ensure
the sustainable and profitable management of the portfolio
- delivering on the undertakings and financial forecasts contained in the
pre-listing statement ("PLS")
Our business is all about consistently delivering on our undertakings and
exceeding expectations, and we are pleased to confirm that we have achieved
all the above objectives.
2. Interpretation of financial results
As fully described in the company's PLS, the company acquired certain
subsidiaries with effect from 1 March 2014 (before listing) and the results
for the year ending 28 February 2015 therefore reflect the trading activity
of these subsidiaries as of this date. All retained profits for the period 1 March
to 31 May 2014 were declared to the previous shareholders of these subsidiaries as
a "clean-out distribution" and the financial results for the three months until
31 May 2014 are therefore less important for the purposes of evaluating the
company's financial performance for the year ending 28 February 2015.
Consequently the results for the 9 months ended 28 February 2015 (which are
highlighted on the statement of comprehensive income) were used to determine
the distributable earnings.
3. Distributable earnings and commentary on results
The board of directors ("the Board") declared a final dividend of 40.89
cents per share on 12 May 2015 after an interim dividend of 20.37 cents per
share was declared on 10 October 2014. The Board is pleased with achieving a
total dividend that exceeds the forecast in the PLS by R3.4 million (5.1%),
despite the many uncertainties that prevail in a listing process. Although
5 million more shares were issued than was forecast, the distribution per
share marginally exceeded the projections in the PLS.
Dividends declared Cents per share R'000
Interim dividend declared on 10 October 2014 20.37 23 131
Final dividend declared on 12 May 2015 40.89 46 782
Total distributions declared since listing on the JSE 61.26 69 913
Equites has a strategic focus on A-grade distribution centres and large
national, international and listed tenants. As a result the group's results
were largely sheltered from the not insignificant headwinds experienced by
the South African economy during the reporting period. We expect this to
continue to stand us in good stead.
The net asset value per share of the Company was 1 137 cents per share as at
28 February 2015.
Comparative figures have not been disclosed as this was the Company's first
year of operation.
4. Property acquisitions
As detailed in the PLS, Equites acquired a portfolio of properties as part
of its listing process. Although some of the properties were only transferred
after listing, all were concluded by 31 August 2014. Subsequent to this, Equites
has concluded and implemented another four property acquisitions with a capital
value of R118.8 million during the reporting period. They are as follows:
Crossroads, Milnerton
Equites acquired a newly constructed, A-grade distribution facility known as
Crossroads in Milnerton, Cape Town at a 9% yield with an agreed property
valuation of R42.029 million effective 1 September 2014. The tenant,
Crossroads Distribution, is contracted to transport petroleum from the
Chevron refinery in Milnerton to the Cape Town International Airport
("CTIA"). The remaining period on the lease is just short of nine years.
Execujet hangar, Cape Town International Airport
Equites acquired the remaining 50% of the Execujet hangar at the CTIA on
1 September 2014 at a yield of 9.8% and an agreed property value of
R46.1 million (for the 50%) thus taking its ownership of the hangar to
100%. The tenant, Execujet Aviation, has just short of five years left
on the lease.
Attyard, Epping Industria
Equites acquired a property of 1.3343 hectares (with a gross lettable area
of 5 478 square meters) in Epping Industria, Cape Town at an 11.5% yield for
R18.1 million on 26 November 2014. This property is ideally located for an
industrial distribution warehouse and the Company intends redeveloping it in
due course. It is tenanted on short-term leases and generates a yield-enhancing
rental income as is.
Sanspark, Bellville
A property of 9 977 square meters in Bellville, which is adjacent to a
bakery and two Digistics distribution centres already owned by Equites, was
acquired at a 12% yield for R12.6 million. It presents an ideal redevelopment
opportunity and will allow for any expansion requirements Digistics may have.
It is currently tenanted on a short-term lease and generates a yield-enhancing rental
income as is.
5. Developments
The Foschini Group distribution centre
During the reporting period, Equites concluded an agreement in terms of
which it will develop a 22 227 square meter distribution warehouse for The
Foschini Group ("TFG") in the prestigious Lords View Industrial Park. The
landlord will be a joint venture between Equites and the owners of Lords
View Industrial Park. The capital value of the project is approximately R150 million
and Equites will own approximately 75% of the joint venture. The lease commences
1 April 2016 and the budgeted development yield is 9%.
Airport land
Equites concluded an agreement to acquire 14.4 hectares of prime vacant
industrial land at CTIA for R142.2 million. The acquisition will be settled
by issuing Equites shares in May 2016 and is subject to certain conditions
precedent.
6. Funding
At year end, Equites had only drawn R127 million of its R600 million loan
facility with Nedbank Limited, which equates to a loan-to-value ratio of
8.9%. This loan accrues favourable funding at prime less 1.6%. As at 28
February 2015, 79% of this debt was fixed for a five-year period at an all-
in current weighted average rate of 8.85%.
7. Vacancies
Our industrial portfolio remains fully let and our office portfolio has a
vacancy of just 6.6% of the gross lettable area, which is in line with the
normal churn in multitenanted buildings. Total vacancies are only 2.9% of
the overall gross lettable area.
8. Prospects
Weighted average escalations of 8.1% for Equites' existing property
portfolio should support distribution growth (on an annualised basis) at the
upper end of the 7 - 8% expected for the listed property sector as a whole.
This means that Equites will comfortably meet the projections in the PLS. As
new developments such as the TFG distribution centre in Midrand come online,
we expect to accelerate distribution growth, although this will only start
having a significant impact in the year ending 28 February 2017. These
forecasts have not been reviewed or reported on by the Company's auditors.
9. Subsequent events
Other than the matters highlighted in this report, the Directors are not
aware of any matters or circumstance arising after the year end that may
have a material impact on the results or disclosures in the annual financial
statements.
10. Basis of preparation
The preliminary summarised consolidated financial statements are prepared in
accordance with the JSE Listings Requirements for preliminary reports and
the requirements of the Companies Act (Act No. 71 of 2008) of South Africa.
The JSE Listings Requirements require that preliminary reports 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 the Financial Pronouncements as issued by the Financial Reporting
Standards Council, and that they, as a minimum, contain the information required
by IAS 34, Interim Financial Reporting. Except for the adoption of revised and
new standards that came into effect during the year, all accounting policies
applied in the preparation of these summarised consolidated financial statements
are IFRS compliant and consistent with those applied in the previous consolidated
financial statements. The adoption of these standards had no material impact on the
annual financial statements.
The auditors, Moore Stephens Cape Town Inc., have issued an unmodified audit
opinion on the Group's annual financial statements for the year ended 28
February 2015. The audit was conducted in accordance with International
Standards on Auditing. The preliminary summarised consolidated financial
statements have been derived from and are consistent in all material
respects with the Group financial statements. The directors take full
responsibility for the preparation of the preliminary summarised
consolidated financial statements and for ensuring that the financial
information has been correctly extracted from the underlying audited annual
financial statements. A copy of the audit report is available for inspection
at Equites' registered address. The auditor's report does not necessarily
report on all of the information contained in this announcement. To obtain a
full understanding of the nature of the auditor's engagement, shareholders
are advised to request a copy of the report together with the accompanying
financial information from Equites' registered address.
Bram Goossens (CA) SA, in his capacity as Financial Director, was
responsible for the preparation of the summarised consolidated financial
results.
11. Final dividend
Notice is hereby given of the declaration of the final dividend number 2 of
R46 782 000 for the 6 months ending 28 February 2015. This is the equivalent
of 40.88969 cents per share based on 114 410 255 shares in issue as at 28 February 2015
and brings the total dividend for the 9 months ending 28 February 2015 to R69 913 000.
(This is the equivalent of 61.26 cents per share based on the number of shares outstanding
at the time of declaring the interim and year-end dividends.)
As Equites is a REIT, the dividend meets the definition of a "qualifying
distribution" for the purposes of section 25BB of the Income Tax Act (Act No.
58 of 1962). Qualifying distributions received by South African tax
residents will form part of their gross income in terms of section
10(1)(k)(i)(aa) of the Income Tax Act. Consequently these dividends are
treated as income in the hands of the shareholders and are not subject to
dividend withholding tax. The exemption from dividend withholding tax is not
applicable to non-resident shareholders but they may qualify for relief
under a tax treaty.
A separate announcement with further details regarding the tax treatment of
the dividend will be released on SENS.
Holders of uncertified shares have to ensure that they have verified their
residency status with their Central Securities Depository Participant
("CSDP") or broker. Holders of certified shares will be asked to submit a
declaration in this regard to the Company.
The dividend is payable to shareholders in accordance with the timetable set
out below:
2015
Declaration date Tuesday 12 May
Last day to trade shares cum dividend distribution Friday 29 May
Shares trade ex-dividend distribution Monday 1 June
Record date Friday 5 June
Payment date Monday 8 June
Share certificates may not be dematerialised or rematerialised between
Monday 1 June 2015 and Friday 5 June 2015, both dates included.
In respect of dematerialised shareholders, the dividend will be transferred
to the CSDP account/broker accounts on Monday, 8 June 2015. Certificated
shareholders' dividend payments will be posted on or about Monday, 8 June 2015.
By order of the Board
Equites Property Fund Limited
12 May 2015
CONSOLIDATED STATEMENT of FINANCIAL POSITION
Audited
28 February 2015
R'000
ASSETS
Non-current assets
Fair value of investment property (excluding straight-lining) 1 416 949
Straight-lining lease accrual 14 928
Property, plant and equipment 1 847
1 433 724
Current assets
Current tax receivable 91
Trade and other receivables 4 479
Financial asset held at fair value 4 489
Cash and cash equivalents 3 582
12 641
TOTAL ASSETS 1 446 365
EQUITY AND LIABILITIES
Equity and reserves
Stated capital 1 140 599
Accumulated profit 160 215
Shared-based payment reserve 201
1 301 015
Liabilities
Non-current liabilities
Financial liabilities 127 372
127 372
Current liabilities
Derivative financial liability 512
Trade and other payables 17 466
17 978
TOTAL LIABILITIES 145 350
TOTAL EQUITY AND LIABILITIES 1 446 365
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited Audited
3 months 9 months year
ended* ended* ended
31 May 28 February 28 February
2014 2015 2015
R'000 R'000 R'000
Revenue
Contractual revenue and
tenant recoveries 13 587 102 077 115 664
Straight-lining of leases adjustment 2 931 11 997 14 928
16 518 114 074 130 592
Other gains - 158 158
Property operating and management
expenses (4 549) (19 931) (24 480)
Net property income 11 969 94 301 106 270
Administrative expenses - (7 742) (7 742)
Operating profit 11 969 86 559 98 528
Fair value adjustments (478) 115 575 115 097
Finance costs (8 374) (7 254) (15 628)
Finance income 21 2 404 2 425
Financial instrument capital loss - (1 490) (1 490)
Capital-raising expenses (14 288) (613) (14 901)
Net profit before tax (11 150) 195 181 184 031
Income tax expense - - -
Profit for the period (11 150) 195 181 184 031
OTHER COMPREHENSIVE INCOME - - -
TOTAL COMPREHENSIVE INCOME
FOR THE PERIOD (11 150) 195 181 184 031
PROFIT ATTRIBUTABLE TO:
Owners of the parent (11 150) 195 181 184 031
Non-controlling interest - - -
(11 150) 195 181 184 031
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent (11 150) 195 181 184 031
Non-controlling interest - - -
(11 150) 195 181 184 031
Basic earnings per share (cents) 204,6
Diluted earnings per share (cents) 204,4
* The 9-month results to 28 February 2015 were used to determine the
distribution to post-listing shareholders as explained above. The
information presented for the 3 months ended 31 May 2014 and 9 months
ended 28 February 2015 are for information purposes only and serve to
illustrate the earnings attributable to the listed shareholders.
CONSOLIDATED STATEMENT OF CASH FLOW
Audited
year ended
28 February 2015
R'000
Cash flow from operating activities
Profit before tax 184 031
Adjusted for:
Finance costs 15 628
Finance income (2 425)
Straight-lining of leases adjustment (14 928)
Fair value adjustments (115 097)
Amortisation 58
Share-based payment charge 201
Increase in trade and other receivables (4 479)
Increase in trade and other payables 17 466
Cash generated from operations 80 455
Finance costs paid (15 628)
Finance income received 2 238
Tax paid (91)
Dividends paid (23 816)
Net cash flow from operating activities 43 158
Cash flow utilised by investing activities
Acquisition of investment properties (811 171)
Investment in financial instrument (200 000)
Amount including interest received from sale
of financial instrument 195 698
Acquisition of property, plant and equipment (1 905)
Net cash flow utilised by investing activities (817 378)
Cash flow from financing activities
Proceeds from share issue 650 430
Proceeds from bank loans 127 372
Net cash flow from financing activities 777 802
Net movement in cash and cash equivalents 3 582
Cash and cash equivalents at the beginning of the year -
Cash and cash equivalents at the end of the year 3 582
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Audited February 2015
Reserves
Stated / Retained
capital earnings Total
Audited R'000 R'000 R'000
Balance at 1 March 2014 - - -
Total comprehensive income - 184 031 184 031
Shares issued for property and
subsidiary acquisitions 490 599 - 490 599
Shares issued for cash on listing 650 000 - 650 000
Share-based payment movement - 201 201
Dividends distributed to shareholders - (23 816) (23 816)
Balance at 28 February 2015 1 140 599 160 416 1 301 015
SUMMARISED OPERATING SEGMENT INFORMATION
Audited Audited Audited
3 months 9 months year
ended* ended* ended
31 May 28 February 28 February
2014 2015 2015
R'000 R'000 R'000
Revenue
Industrial 13 587 80 264 93 851
Office - 21 813 21 813
Non-property - - -
Straight-lining of leases 2 931 11 997 14 928
16 518 114 074 130 592
Operating profit
Industrial 9 038 66 355 75 393
Office - 15 949 15 949
Non-property - (7 742) (7 742)
Straight-lining of leases 2 931 11 997 14 928
11 969 86 559 98 528
28 February 2015
R'000
Total assets
Industrial 1 041 017
Office 383 327
Non-property 7 093
Straight-lining of leases 14 928
1 446 365
* The 9-month results to 28 February 2015 were used to determine the
distribution to post-listing shareholders as explained above. The
information presented for the 3 months ended 31 May 2014 and 9 months
ended 28 February 2015 are for information purposes only and serve to
illustrate the earnings attributable to the listed shareholders.
Selected explanatory notes
1. Earnings per share
This note provides the information required in terms of IAS 33 earnings
per share and SAICA Circular 2/2013 for the Group and should be read in
conjunction with note 2, where earnings are reconciled to distributable
earnings. Distributable earnings determine the dividend declared to
shareholders, which is a meaningful metric for stakeholders in a REIT.
1.1 Basic earnings per share
2015
Shares in issue Number of shares
Number of shares in issue at end of year 114 410 255
Weighted average number of shares in issue 89 935 947
Add: weighted potential dilutory impact of
condition shares awarded during the year (note 13) 79 250
Diluted weighted average number of shares in issue 90 015 198
Basic earnings per share cents
Basic earnings per share 204,6
Diluted earnings per share 204,4
1.2 Headline earnings per share
Reconciliation between basic earnings and headline earnings: R'000
Earnings (profit attributable to owners of the parent) 184 031
Adjusted for:
Fair value adjustments to investment properties (115 609)
Headline earnings 68 422
Headline earnings per share: cents
Headline earnings per share 76,1
Diluted headline earnings per share 76,0
2. Reconciliation between earnings and distributable earnings: Group
2.1 Distributable earnings and distribution per share
3 months 9 months year
ended* ended* ended
31 May 28 February 28 February
2014 2015 2015
R'000 R'000 R'000
Earnings (profit attributable
to owners of the parent) (11 150) 195 181 184 031
Adjusted for:
Fair value adjustments to
investment properties 478 (116 087) (115 609)
Headline earnings (10 672) 79 094 68 422
Adjusted for:
Straight-lining of leases
adjustment (2 931) (11 997) (14 928)
Fair value adjustments
to financial instruments - 512 512
Capital raising expenses 14 288 613 14 901
Equity-settled share-based
payment reserve - 201 201
Financial instrument capital loss - 1 490 1 490
Distributable earnings 685 69 913 70 598
* The 9-month results to 28 February 2015 were used to determine the
distribution to post-listing shareholders as explained above. The
information presented for the 3 months ended 31 May 2014 and
9 months ended 28 February 2015 are for information purposes
only and serve to illustrate the earnings attributable to the
listed shareholders.
3. Investment property 28 February 2015
R'000
Reconciliation of investment property
Opening balance -
Additions 1 301 340
Fair value adjustment 115 609
Fair value of investment properties
(excluding straight-lining) 1 416 949
Straight-lining lease accrual 14 928
Closing balance 1 431 877
4. Property analysis
4.1 Tenant profile
Gross Gross Number
lettable lettable Number of
area area of tenants
(m2) % tenants %
A: Large nationals,
large listeds and
government 94 874 68,90% 44 58,70%
B: Smaller international
and national tenants 23 249 16,90% 10 13,30%
C: Other local tenants
and sole proprietors 18 384 13,40% 21 28,00%
Vacant 1 156 0,80%
137 663 100,00% 75 100,00%
4.2 Vacancy profile
Gross
lettable Vacant
area area Vacancy
(m2) (m2) %
Industrial 21 586 - 0,00%
Commercial 17 602 1 156 6,60%
39 188 1 156 2,90%
4.3 Lease expiry profile
Lease expiry profile based on gross
lettable area (GLA) Based on Based
revenue on GLA
Vacant 0,84%
Monthly 1,69% 1,02%
Expiring in the year to 29 February 2016 11,71% 9,70%
Expiring in the year to 28 February 2017 9,72% 9,06%
Expiring in the year to 28 February 2018 14,80% 19,26%
Expiring in the year to 28 February 2019 24,45% 30,69%
Thereafter 37,63% 29,43%
100,00% 100,00%
4.4 Weighted average escalations and yield
Sector Yield Escalation
Industrial 8,58% 8,18%
Commercial 9,01% 7,58%
8,66% 8,09%
Directors
A Taverna-Turisan (CEO)^, G.R. Gous (COO), B Goossens (CFO), P.L. Campher*~
(Chairman), G Lanfranchi* (Deputy Chairman), J.H. Cullum*, K Dreyer*, N
Khan*~, R.E. Benjamin-Swales*~
* Non-executive
~ Independent
^ Italian
Registered office
14th Floor
Portside Towers
4 Bree Street
Cape Town
8000
Contact details
info@equites.co.za
Change in company secretary
Shareholders are advised that Riaan Gous was appointed as Company Secretary
with effect from 1 December 2014 in place of CIS Company Secretaries (Pty)
Ltd.
Company secretary
Riaan Gous
Transfer secretary
Link Market Services South Africa (Pty) Ltd
Auditors
Moore Stephens Cape Town Inc.
Sponsor
Java Capital
Bankers
Nedbank Limited
Attorneys
DLA Cliffe Dekker Hofmeyr
13 May 2015
Date: 13/05/2015 10:35:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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