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ACSION LIMITED - Summarised Reviewed Annual Results for the Three Months Ended 28 February 2015

Release Date: 28/05/2015 07:05
Code(s): ACS     PDF:  
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Summarised Reviewed Annual Results for the Three Months Ended 28 February 2015

Acsion Limited Group
Incorporated in the Republic of South Africa
Registration Number: 2014/182931/06
JSE share code: ACS  
ISIN code: ZAE000198289
Acsion ("The Group" and "the Company")

SUMMARISED REVIEWED ANNUAL RESULTS FOR THE THREE MONTHS ENDED 28 FEBRUARY 2015


STATEMENT OF FINANCIAL POSITION AS AT 28 FEBRUARY 2015
                                                                                   Group
                                                                                    2015
                                                                                       R
ASSETS
Non-current assets                                                         4 705 603 927
Investment property                                                        3 434 689 962
Plant and equipment                                                          119 368 620
Operating lease asset                                                        101 959 225
Goodwill                                                                     625 464 153
Prepayments                                                                  409 661 602
Investments in associates                                                      1 136 021
Other financial assets                                                        13 324 344

Current assets                                                                41 519 034
Operating lease asset                                                         11 423 330
Loans to group companies                                                       1 715 241
Loans to shareholders                                                            258 812
Trade and other receivables                                                   11 321 363
Cash and cash equivalents                                                     16 800 288
Non-current assets held for sale                                              87 658 711

TOTAL ASSETS                                                               4 834 781 672

EQUITY AND LIABILITIES
Equity
Equity attributable to equity holders of parent                            
Share capital                                                              3 979 955 592
Retained income                                                               40 810 869
                                                                           4 020 766 461
Non-controlling interest                                                         (17 678)
                                                                           4 020 748 783
Liabilities
Non-current liabilities                                                      734 706 823
Deferred tax                                                                 545 141 460
Other financial liabilities                                                  189 565 363

Current liabilities                                                           79 326 066
Current tax payable                                                           13 086 757
Loans from shareholders                                                          361 373
Other financial liabilities                                                    8 746 882
Provisions                                                                     6 108 015
Trade and other payables                                                      51 023 039

Total liabilities                                                            814 032 889
TOTAL EQUITY AND LIABILITIES                                               4 834 781 672

Net asset value per share (R)                                                      10,18
Net asset value per share excluding deferred taxation (R)                          11,56


STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
                                                                                   Group
                                                                            Three months
                                                                        28 February 2015
                                                                                       R
Revenue                                                                      107 423 590
Other income                                                                   4 604 667
Operating expenses                                                           (56 135 158)
Operating profit                                                              55 893 099
Finance income                                                                   474 200
Income from equity accounted investments                                         160 166
Finance costs                                                                 (3 729 019)
Profit before taxation                                                        52 798 446
Taxation                                                                     (12 005 255)
Profit for the period                                                         40 793 191
Other comprehensive income                                                             -
Total comprehensive income for the period                                     40 793 191
Profit attributable to:                                                       
Equity shareholders of Acsion                                                 40 810 869
Non-controlling interest                                                         (17 678)
                                                                              40 793 191
Total comprehensive income attributable to:                                   
Equity shareholders of Acsion                                                 40 793 191  

Earnings per share
Basic/diluted/headline earnings per share (c)                                      41.33



STATEMENT OF CASH FLOWS

                                                                                   Group
                                                                            Three months
                                                                        28 February 2015
                                                                                       R
Cash flows from operating activities                                          
Cash generated from operations                                                55 085 304
Interest income                                                                  474 200
Finance costs                                                                 (3 729 019)
Tax paid                                                                     (20 010 694)
Net cash from operating activities                                            31 819 791

Cash flows from investing activities
Purchase of plant and equipement                                              (4 615 371)
Development costs of                                                         
investment property                                                          (20 668 596) 
Sale of investment property                                                    1 221 659
Cash acquired with purchase of investments in subsidiaries                    13 095 903
Increase in financial assets                                                  (4 950 908)
Net cash from investing activities                                           (15 917 313)
Cash flows from financing activities                                           
Proceeds from other financial liabilities                                      4 347 831   
Loans received from                                                              
shareholders                                                                     361 373  
Loans advanced or repaid to shareholders                                      (3 811 394)
Net cash from investing activities                                               897 810
Total cash movement for the period                                            16 800 288
Cash at the beginning of the period                                                    -
Total cash at end of the period                                               16 800 288


STATEMENT OF CHANGES IN EQUITY

                                                             Total attributable to
                                                             equity holders of the   Non-controlling
                             Share capital  Retained income          group/company          interest  Total equity
                                         R                R                      R                 R             R
Group
Profit for the period                    -       40 810 869             40 810 869          (17 678)    40 793 191
Issue of shares              3 979 955 852                -          3 979 955 852                -  3 979 955 852
Balance at 28 February 2015  3 979 955 852       40 810 869          4 020 766 721          (17 678) 4 020 749 043

IFRS 3 - Business combinations

The group arose on the 3rd December 2014 in terms of a Business combination, the details of which can be found in the pre-listing statement on
www.acsionsa.co.za the pertinent details are described below:

The restructure transaction that lead to the forming of Acsion Limited and ultimately gave 100% control in most of the subsidiaries is illustrated below. 
The purchase consideration was settled by way of a share issue. The fair value of the identifiable assets and liabilities are as follows:

                                                     Group
                                                      2015
                                                         R
ASSETS                           
Investment property                          3 737 395 953
Investment in associates                           975 855
Trade and other receivables                    429 877 716
Cash and cash equivalents                       13 106 915
Total                                        4 181 356 439

LIABILITIES                                    
Deferred tax                                   546 574 365
Other financial liabilities                    193 975 108
Loans to shareholders                           69 274 549
Current tax payable                             19 031 789
Trade and other payables                        67 283 424
Total                                          896 139 235

Total identifiable net assets at fair value  3 285 217 204
Goodwill arising on acquisition                625 464 153
Purchase consideration transferred           3 910 681 357

IFRS 8 - Segment reporting

Due to the current investment property portfolio exposure being heavily weighted to retail the CODM considers the operations to be a single operating segment
and as such reviews financial information on this basis.

IFRS 13 - Fair value measurement

The Group's policy is to value investment properties at year-end, with independent valuations performed on a rotational basis to ensure each property is valued
at least every three years by an independent external valuer. The directors value properties by applying the discounted cashflow method. There were no revaluations 
for the 3 month period ended 28 February 2015.

Fair value hierarchy      Level 3
Investment property       R3.755bn

IAS 24 - Related parties
During  the  financial  year,  Anastasi Construction  close  corporation  of  which K. Anastasiadis is the sole member, undertook construction of the 
Hyde Park development as well as the phase III extension of Mall@Carnival to the value of R24 299 344 for the 3 month period ended 28 February 2015.

Kinsella consultants were used for ad hoc repairs and maintenance to the value of R39 786 for the 3 month period ended 28 February 2015. Kinsella consultants is
owned by I. Anastasiadis's wife, a director of all underlying subsidiaries.

GEOGRAPHIC AND TENANT PROFILES

The tenant profile is separated into national and semi-national to indicate the exposure Acsion has to direct head office leases and individual franchises. The
national and semi-national exposure is supported by robust leases and national tenant financial strength, and at 82% based on GLA is above the retail property
industry norm of 70%.

The line and other franchises are carefully vetted by Acsion's leasing division to promote maximum dwelling time and footfall in the centre, to ensure trading
densities are sustainable over all tenants' lease terms.

GEOGRAPHIC PROFILE  GEOGRAPHIC PROFILE  TENANT PROFILE                  TENANT PROFILE
BY REVENUE          BY GLA              BY REVENUE                      BY GLA

78% Gauteng         75%: Gauteng        59%: National                   69%: National
13% Mpumalanga      13%: Mpumalanga     22%: Semi-national              13%: Semi-national
9%  Limpopo         12%: Limpopo        19%: Line and other franchises  18%: Line and other franchises


COMMENTARY

About Acsion

Acsion ("the Group" and "the Company") is a property manager and property developer that listed on the Johannesburg Stock Exchange on 9 December 2014. Acsion is
differentiated from Real Estate Investment Trusts (REITs) in the listed property sector as it focuses on the delivery of superior net asset value (NAV) growth.
NAV growth drivers include enhancing existing properties, completing the secured development pipeline and obtaining additional future development opportunities.
To a lesser extent, the Group derives capital growth from selling completed developments and purchasing existing properties.

The group's development function and "value-engineering" approach to development, significantly enhances return to shareholders.

At the time of listing, Acsion's portfolio of assets was independently valued at R3.246bn, and the group was in various stages of developing a pipeline to be
completed over a period of three years at an approximate cost of R1.981bn.

Existing investment properties consist of six predominantly retail developments strategically located in Gauteng, Mpumalanga and Limpopo with an aggregate gross 
lettable area (GLA) of 188 716 m2. The tenant profile comprises 69% national tenants, 13% semi-national and 18% line and other franchises, by GLA.

Operational update

Management is pleased to report that the development and leasing of the development pipeline disclosed at the time of listing is progressing in line with
expectations. Construction of some developments is currently underway with additional developments expected to commence by August 2015.

Further development opportunities are currently being considered, including the initiation of Acsion's footprint in the Free State and into the rest of Africa
and expanding the group's interest in Mpumalanga.


Financial results

In the three months since listing, Acsion performed well. The group recorded revenue of R107.4m and net profit after tax of R40.8m despite a challenging
operating environment with escalating utility costs continuing to place tenants under pressure. Although this could ultimately lead to possible rental
reversions, Acsion is pleased to report minimal rental reversions during the reporting period.

The direct property expenses to income ratio across the portfolio for the three months to 28 February 2015 was 11.08%.

Net profit after tax attributable to ordinary shareholders was R40.8m equating to basic/diluted/headline earnings of 41.33c per share.

The financial position remains strong with investment property less estimated cost to completion at R3.755bn. Mortgage bonds decreased from R230m (acquired on
restructure) to R198m after expansion costs of R25.2m, which is testament to the cash-generating capability of the Group. Mortgage bonds were prepaid by R147m
as at 28 February 2015.

Goodwill is carried at R625.4m. Goodwill originated on the restructuring transaction through which Acsion was formed and was paid to acquire the development
function that has successfully developed the investment portfolio to date. The estimated profit from the development pipeline exceeds the value of goodwill and
as such no impairment of goodwill occurred.

Prepayments include two projects, previously carried as part of goodwill. The transfer of the Benmore development, priced at R200m for listing, is imminent and
it is envisaged that construction will start in July 2015. The duart of the Maputo development, priced for listing at R210m, is expected in the last quarter of
this year. Strong interest from a number of national retailers was received for this development.

The group has significant headroom to increase debt funding. Debt as at 28 February 2015 was R198m, which equates to 6.1% of the developed investment property
value. Given the current low cost of debt, all debt is at a floating interest rate. Weighted average cost of debt funding is 7.37% with a remaining average term
of 7.32 years.

Net asset value per share (excluding deferred tax) increased from R10.70 on listing to R11.56 at the end of the reporting period.


Vacancy levels

The weighted average vacancy level for the portfolio is 5.05% of which 1.86% was planned vacancies for Mall@Carnival and Mall@Reds to facilitate expansion and
tenant relocations respectively.


Lease expiry profile

The weighted average lease expiry by GLA for the portfolio is 4.5 years, which is in line with what was communicated in the prelisting statement. 
Management does not expect any additional material vacancies to arise.

The developed investment portfolio consists of six properties with a total GLA of 188 716 m2. Details of the existing portfolio is as follows:

                                       Value/m2     Percentage
                Independent          (excluding       of total
                  valuation    GLA  bulk, where   portfolio by
Property name          (Rm)    (m2)  applicable)      value (%)
Mall@Carnival        1 525  72 338       21 082          47.0
Mall@Reds              820  53 423       15 349          25.3
Mall@Emba              419  24 477       17 118          12.9
Mall@Lebo              314  23 964       13 103           9.7
Moreleta Square        136   8 507       15 987           4.2
Simarlo Rainbow         32   6 007        5 377           0.9
Total developed
investment
portfolio            3 246 188 716       17 200         100.0


Development pipeline

The Mall@Carnival phase III (12 136 m2) and Phase IV (2 900 m2) expansion, a tenant-driven expansion of Mall@Carnival to accommodate and introduce new tenants
to the mall and expand on the trading space of select existing national tenants. The expansion will include the introduction of a value retail offering to the
Mall@Carnival node.

The expansion project entrenches Mall@Carnival's position as the preferred regional retail destination in its primary catchment area of Brakpan, Benoni,
Springs, Boksburg and Germiston by increasing the Mall@Carnival's total GLA to 87 374 m2 and enhancing the mall's relevance as a regional shopping centre in its
catchment area.

Acsion has secured rights to develop up to a total of 217 000 m2 at Mall@Carnival and, dependent on sufficient tenant demand to justify further expansion, the
Group aims to expand Mall@Carnival to 110 000 m2 over the next five to seven years.

Acsiopolis, executive residential accommodation in Benmore,Sandton. An approximate 1 hectare parcel of land in Benmore, Sandton for upmarket residential accommodation 
and a small component of mixed-use of 56 000 m2 and underground parking of 55 000 m2. The development rights have been obtained for 70 000 m2 above ground. With the 
transfer of the land being the only outstanding condition, it is anticipated that the construction will start in July 2015. This development is situated in the heart 
of Sandton's densely populated, ultra-high-income residential Benmore node.

There is a scarcity of land for new high-rise developments in Sandton and it is the opinion of management that above average rentals can be achieved for the
right nature of development. This development is also in line with Acsion's vision of sectoral diversification into residential and mixed-use property.

The subdivision of the land has been completed and the final legal conveyancing steps are being undertaken so that the transfer can be lodged. Engineering
service assessments and traffic impact assessments were completed and approved by the council.

Mall@Moutsiya phase I, a 15 648 m2 development, comprising a 14 348 m2 retail offering and a 1 300 m2 petrol station in Walkraal, Limpopo. The highly visible
and easily accessible location has direct thoroughfare onto the Moloto Road, a major regional arterial road through the Elias Motsoaledi municipality in
Limpopo. The primary catchment market consists of approximately 136 000 people and secondary catchment market consists of approximately 396 000 people.

Mall@55 phase 1 (previously named Mall@Ruimte), a 15 433 m2 convenience shopping centre in Monavoni, Gauteng. It is located on an extremely busy arterial route
accessible from the N14 freeway and the R55. This development is ideal for a value/convenience/ lifestyle centre, which is underrepresented in the Monavoni area
with the closest convenience/value offering over 5 km away. The convenience offering will also include a drive-through fast food offering. The anticipated start
date for this development is September 2015 with the centre opening in September 2016.

Trade 55 phase 1 (previously named Commercial@Ruimte), a 10 000 m2 big box retail with special commercial and retail rights already obtained in Monavoni,
Gauteng. It is located on an extremely busy arterial route accessible from the N14 freeway and the R55 and across from the Mall@55 site. Trade 55's value
offering will be complementary to Mall@55's offering. The timing thereof is anticipated to be similar to that of Mall@55.

Hyde Park Terrace, a residential development comprising 12 completed cluster units and 27 residential land parcels in Hyde Park, Gauteng. This high-end
residential development is in the heart of one of Sandton's most exclusive areas. The total land size of 2.5 ha and is situated 500 m away from the Hyde Park
shopping centre. The 12 units are approximately 350 m2 to 540 m2 under roof, the balance is to be sold as stands of 450 m2 to 650 m2 with or without building
packages. There is significant appetite based on initial marketing and sales, and a growing demand for luxury residential properties in close proximity to the
Sandton CBD driven by rising living standards. Completed four to five-bedroom units start from R6.5m.

Residential@Moutsiya, an affordable housing development in Walkraal, Limpopo with a total land size of 40 ha. Acsion has formed a partnership with local
residents and the local municipality to approach prospective buyers with access to housing subsidies from the Department of Human Settlements. Proclamation of
the land is at its final stage with all services (water, sewage and electricity) already secured. Plans to build up to 551 residential units for sale are
supported by a shortage of affordable housing in the Moutsiya area. The proceeds will be between R300 000 to R350 000 per unit. Interest for approximately 50
units has already been secured and construction is anticipated to commence in August 2015. The development will be demand driven.

Mall@Mfula (previously named Mall@Piet Retief) an 18 000 m2 shopping centre, with an anticipated 75% national tenancy, providing a complete formal retail
offering for Piet Retief. Acsion is currently finalising the township establishment application of this property, and aims to commence construction by October
2015 with the opening scheduled for October 2016. National retailer commitments for 65% of GLA have been received and negotiations for the remaining 35% of GLA
are anticipated to be finalised by end July 2015.

Further development opportunities

Acsion is continuously evaluating up to 30 new opportunities and is in advanced discussions on certain projects to further enhance capital growth for
shareholders for financial years 2018 and beyond. Details of most of these projects are not contained in this report and will be communicated to shareholders in
due course once an appropriate level of certainty has been reached. At the last practicable date, the following further development opportunities were under
investigation by Acsion, among others, the salient features include:

Mall@Frankfort, an 8 000 m2 shopping centre in Frankfort, Free State. The rezoning of land is currently in process and construction is anticipated to commence
in January 2016, with the opening planned for April 2017. Interest from a potential anchor tenant for 4 000 m2 has already been received.

Mall@Maputo, this development is located in northern Maputo and is adjacent to the main Maputo ring road, with a total land size of 8.9 ha. A memorandum of
understanding has been signed with the Mozambican Ministry of Sport to develop a 50 000 m2 shopping centre - a formal agreement is still to be finalised.
Acsion's effective holding in the development project will be 85%, with 15% held by local Mozambican partners. The development is to be completed in partnership
with a reputable local Mozambican partner and is in line with Acsion's vision of geographic diversification into Southern African retail. In terms of a recently
commissioned Dirk Prinsloo study, there are 125 000 households in the primary trade area, which is expected to increase to 140 000 by 2020 with limited formal
retail supply in the northern sector of Maputo, the catchment area of the proposed development. The study shows support for 46 275 m2 of retail in the primary
and secondary catchment area. Interest has been received from South African national retailers looking to expand their footprint into Maputo. Letters of intent
have been received from Pepkor, Woolworths and other retailers for up to 7 000 m2. Discussions with various other South African national retailers for
approximately 32 000 m2 are underway, and include the likes of Shoprite, Spar, Foodlovers Market, Clicks, Truworths, Identity and Foschini, Mr Price and the
Edcon group.

Offices@Lusaka, Acsion aims to take advantage of Zambia's growing economy and limited available infrastructure for multinational companies. Negotiations with a
local land owner to co-develop up to 20 000 m2 of office space are currently underway. The site is located in close proximity to Manda Hill Shopping Mall and
next to Stanbic's Lusaka offices.

Prospects

Acsion's board and management remain confident that the group's growth objectives can be achieved despite a challenging economic operating environment. 
The group remains focused on the completion of its secured development pipeline over the next three years.

Acsion will also continue reinvesting in its existing portfolio and focus on its development expertise, or "value-engineering" approach to ensure above average
NAV growth. In addition, Acsion will explore further development opportunities in high-growth markets in the rest of Africa and Europe.

These prospects have not been reviewed or reported on by Acsion's independent external auditors.


Dividends

No dividends were declared for the period ending 28 February 2015.

By order of the board
Centurion, 28 May 2015

D Green        K Anastasiadis
(Chairman)    (Chief executive officer)



Basis of preparation and accounting policies

The summarised reviewed consolidated financial results for the three months ended 28 February 2015 were prepared in accordance with International Financial
Reporting Standards (IFRS), the information required by IAS 34: 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 financial statements were summarised from the audited financial statements on which Ernst & Young Inc. has issued an unqualified audit opinion. The
additional disclosure required in terms of IFRS 7 Financial Instruments: Disclosures and IFRS 13 Fair Value Measurements, will be included in the integrated
report. The integrated report will be posted to shareholders and published on www.acsionsa.co.za on or about 30 June 2015.

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 reviewed consolidated financial results for the three months ended 28 February 2015 and for ensuring that the financial information was
correctly extracted from the underlying audited annual financial statements.

These results were prepared under the supervision of the chief financial officer, Pieter Scholtz CA(SA), MCom (Tax).

Directors: D Green (Chairman)*, K Anastasiadis (CEO), P Scholtz (CFO), S Griesel*, PD Sekete*, T Jali* (*Independent non-executive)
  
Registered office: Mall@Reds, 1st Floor, Corner of Rooihuiskraal and Hendrik Verwoerd Drives, Rooihuiskraal, Ext 15, Centurion  
Postal address: PO Box 569, Wierda Park, 0149. 

Registration number: 2014/182931/06

Transfer secretaries: Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg 2001

Sponsor: Investec Bank Limited







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