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Unaudited results for the 6 months ended 31 March 2015
INDLUPLACE PROPERTIES LIMITED
(Previously known as Arrowhead Residential Properties Limited)
(Incorporated in the Republic of South Africa)
(Registration number: 2013/226082/06)
JSE share code:ILU; ISIN: ZAE000201125
(Approved as a REIT by the JSE)
("Indluplace" or "the company").
UNAUDITED RESULTS FOR THE 6 MONTHS ENDED 31 MARCH 2015
Indluplace listed on the JSE on 19 June 2015. For the period ended 31 March 2015, Indluplace was a wholly-owned subsidiary of
Arrowhead Properties Limited ("Arrowhead") and the company's results noted below formed part of the results of Arrowhead which
was released on 11 May 2015 on SENS, in accordance with the JSE Listings Requirements. The distributable income for the period
was paid over to Arrowhead as the sole shareholder and was included in the distributions to the Arrowhead linked unitholders
for the six months ended 31 March 2015.
CONSOLIDATED CONDENSED STATEMENT OF COMPREHENSIVE INCOME
Unaudited for 6 months Unaudited for 6 months Audited year ended 30
ended 31 March ended 31 March September
R 2015 2014 2014
Property portfolio revenue
Contractual rental income 38 443 837 3 984 311 37 447 343
Straight line rental income accrual 3 095 030 - (727 665)
Total revenue 41 538 867 3 984 311 36 719 678
Operating costs (13 926 733) (29 882) (6 413 007)
Administration costs (3 440) - -
Net operating profit 27 608 694 3 954 429 30 306 671
Changes in fair values - - 14 281 889
Profit from operations 27 608 694 3 954 429 44 588 560
Net finance (charges)/income (24 513 664) - (31 034 336)
Finance charges (24 569 298) - (31 034 336)
Finance income 55 634 - -
Profit before taxation 3 095 030 3 954 429 13 554 224
Taxation - - -
Net profit for the period 3 095 030 3 954 429 13 554 224
Other comprehensive income - - -
Total comprehensive income for the period 3 095 030 3 954 429 13 554 224
Total comprehensive income attributable to:
Equity shareholders of Indluplace Properties Limited 3 095 030 3 954 429 13 554 224
Reconciliation of earnings, headline earnings and
distributable earnings for the period
Net profit for the period attributable to equity shareholders 3 095 030 3 954 429 13 554 224
Earnings 3 095 030 3 954 429 13 554 224
Change in fair value of properties - - (14 281 889)
Headline earnings attributable to equity shareholders 3 095 030 3 954 429 (727 665)
Straight line rental income accrual (3 095 030) - 727 665
Distributable earnings attributable to equity shareholders - 3 954 429 -
Headline and diluted headline earnings per ordinary share
(cents) 30 950 39 544 (7 277)
CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION
Unaudited as at 31 Unaudited as at 31 Audited as at 30
March March September
R 2015 2014 2014
ASSETS
Non-current assets 787 847 840 150 447 630 519 949 295
Investment property 787 847 840 150 447 630 519 949 295
Fair value of property portfolio for accounting purposes 785 480 475 150 447 630 520 676 960
Straight line rental income accrual 2 367 365 - (727 665)
Current assets 15 618 203 1 962 273 14 161 322
Trade and other receivables 1 159 304 4 183 3 692 442
Cash and cash equivalents 14 458 899 1 958 090 10 468 880
Total assets 803 466 043 152 409 903 534 110 617
EQUITY AND LIABILITIES
Reserves 16 649 354 3 954 429 13 554 324
Stated capital 100 100 100
Reserves 16 649 254 3 954 329 13 554 224
Other non current liabilities 758 322 454 148 455 474 487 844 426
Shareholders loan 758 322 454 148 455 474 487 844 426
Current liabilities 28 494 235 - 32 711 867
Trade and other payables 3 924 937 - 1 677 532
Shareholders loan 24 569 298 - 31 034 335
Total equity and liabilities 803 466 043 152 409 903 534 110 617
Net asset value per share (R) 166 494 39 544 135 543
Weighted number of shares in issue 100 100 100
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY
R Stated capital Reserves Total
Balance at 30 September 2013 - - -
Issue of shares 100 - 100
Total comprehensive income for the year - 13 554 224 13 554 224
Balance at 30 September 2014 100 13 554 224 13 554 324
Total comprehensive income for the period - 3 095 030 3 095 030
Balance at 31 March 2015 100 16 649 254 16 649 354
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
Unaudited for 6 months Unaudited for 6 months Audited year ended 30
ended 31 March ended 31 March September
R 2015 2014 2014
Net cash generated from operating activities 4 780 543 3 950 246 (2 014 910)
Net cash utilised in investing activities (2 889 704) (150 447 630) (506 395 071)
Net cash generated from financing activities 2 099 180 148 455 474 518 878 861
Net movement in cash and cash equivalents 3 990 019 1 958 090 10 468 880
Cash and cash equivalents at the beginning of the year 10 468 880 - -
Cash and cash equivalents at the end of the period 14 458 899 1 958 090 10 468 880
NATURE OF BUSINESS
Indluplace is a Real Estate Investment Trust ("REIT") that is focused on the owning and growing of a substantial residential portfolio
from which it will pay distributions to shareholders. Indluplace believes that this sector of the property market is under-represented
in the listed sector and that there is an opportunity for significant growth.
COMMENTARY
RENTAL INCOME
Revenue includes rental income and expenditure that is recoverable from tenants. Revenue has increased from R4,0 million
(31 March 2014) to R41,5 million (31 March 2015) as the full effect of the acquisitions concluded during the previous financial year,
together with the partial impact of acquisitions concluded during this period and annual escalations to the existing leases, are taken
into account. As at 31 March 2014, Indluplace owned a single residential complex (Honey Park), comprising of 333 units. At 31 March 2015,
Indluplace owned 36 residential buildings.
PROPERTY EXPENSES
Property expenses have increased from R0,1 million to R13,9 million which is in line with the recently enlarged portfolio.
As at 31 March 2014 the single residential complex (Honey Park) was let to Monash University ("Monash") with Indluplace being only responsible
for insurance and some external maintenance.
ADMINISTRATIVE EXPENSES
Indluplace was a wholly-owned subsidiary of Arrowhead. The corporate and head office expenses were borne by Arrowhead up to the listing of
Indluplace. Post the listing, the costs will be borne by Indluplace.
FINANCE INCOME
Finance income relates to interest received on bank balances.
FINANCE CHARGES
Finance charges relate to interest charged on the shareholders loan from Arrowhead.
INVESTMENT PROPERTY
Investment property has increased from R520,0 million (30 September 2014) to R787,9 million (31 March 2015). The number of residential
properties within the portfolio has increased from 30 to 36. An additional 60 residential properties valued at R831,5 million were acquired
in April 2015 taking total investment property to R1,6 billion.
Indluplace made the following acquisitions during the 6 month period ended 31 March 2015:
Property Transfer date R
Amberfield 1 November 2014 47 926 641
Park Village 1 January 2015 86 232 059
Golden Views 1 March 2015 61 400 990
Molrow House 1 March 2015 10 158 125
Bree Street Block 1 March 2015 55 759 000
261 476 815
Indluplace acquired the following properties after the 6 month period ended 31 March 2015:
Property Transfer date R
Jika Properties 1 April 2015 545 000 000
Highveld View 1 April 2015 286 500 000
831 500 000
TRADE AND OTHER RECEIVABLES
Trade receivables, deposits and payments in advance decreased from R3,7 million to R1,2 million. All trade receivables outstanding for
more than 90 days (in addition to specific trade receivables that are deemed to be impaired) have been provided for.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents increased from R10,5 million to R14,5 million as a result of cash generated by the property portfolio.
SHAREHOLDERS LOAN
The shareholders loan from Arrowhead increased from R518,9 million to R782,9 million. The increase in the loan was to fund property
acquisitions and interest on shareholders loan. Pursuant to the listing of Indluplace in June 2015, the shareholders loan was
subsequently repaid.
TRADE AND OTHER PAYABLES
Trade and other payables increased from R1,7 million to R3,9 million. The increase was a result of the enlarged portfolio.
EVENTS AFTER REPORTING PERIOD END
Indluplace listed on the JSE on 19 June 2015 under share code ILU and ISIN: ZAE000201125 and is in the Sector: Financial Services – Real Estate
Investment Trusts (Residential REITs).
Indluplace purchased Jika Properties Proprietary Limited for R545,0 million and Highveld View for R286,5 million with effect from 1 April 2015.
Indluplace has cancelled a lease it has with Monash University due to non-payment of rent. The lease is in respect of 333 apartments used for
student accommodation. Rental on these units have not been taken into account in the forecast.
Indluplace shareholders are referred to the Indluplace announcement released on SENS on 25 June 2015, where shareholders were advised that Arrowhead
had concluded an agreement with Connaught Properties (Pty) Ltd. ("Connaught"), in terms of which Connaught had agreed to sell a R420,0 million
residential property portfolio ("the Connaught portfolio") to either Indluplace or, if Indluplace did not agree to become bound as purchaser under
the agreement by 30 June 2015, to Arrowhead ("the acquisition"). Shareholders are advised that, as announced on SENS on 30 June 2015, Indluplace
agreed to be bound as purchaser under the agreement.
There were changes to the composition of the board - refer to directorships below.
PROSPECTS
The board is confident that the group will grow the portfolio substantially over the next few years. There is currently a shortage of affordable,
well managed rental housing, as evidenced in the relatively low vacancy rates in this market. Similarly good demand exists for affordable student
accommodation. The group aims to position itself as an exit for developers or owners of residential stock or portfolios. As set out in the
prospectus the forecast is 26,6 cents per share for the 4 months ended 30 September 2015. Refer to the prospectus which is available on line
at www.indluplace.co.za for an in-depth review of the forecast.
DISTRIBUTION
The board of directors have resolved not to declare a distribution for the period ended 31 March 2015. The next distribution will be for the quarter
ending 30 June 2015. Distributions will be paid on a quarterly basis.
LITIGATION STATEMENT
Further to Indluplace's acquisition of Honey Park from Standard Bank of South Africa Limited, the bank ceded and assigned all of its rights and
obligations in terms of its lease agreement with Monash to Indluplace. In April 2015, Monash withheld the payment of rental and wrongfully claimed
an entitlement to remission of past rentals. This conduct amounted to a repudiation of the Monash lease agreement which was accepted by Indluplace.
The lease agreement was consequently cancelled by Indluplace. Monash is disputing the cancellation and Indluplace has commenced proceedings in
the High Court in order to resolve the dispute. The parties have since commenced and are in discussion with a potential settlement.
Save for the above, there are no other legal or arbitration proceedings, including any proceedings that are pending or threatened, of which
Indluplace is aware, that may have or have had in the recent past, being the previous 12 months, a material effect on the group's
financial position.
DIRECTORSHIPS
The following directors were appointed during the period:
Executive directors Date appointed
- Gerald Leissner (CEO) 3 December 2014
- Carel de Wit (CFO) 19 June 2015
- Mark Kaplan 3 December 2014
- Imraan Suleman 3 December 2014
Non–executive directors Date appointed
- Gregory Kinross*#~ 25 February 2015
- Taffy Alder ^ 25 February 2015
- Selwyn Noik 25 February 2015
- Clifford Abrams*~ 18 March 2015
- Ayesha Rehman*~ 18 March 2015
* Member of the audit and risk committee
# Lead independent director
^ Chairman
~ Independent non-executive
SEGMENTAL REPORT
No segmental report has been inserted for the period ended 31 March 2015 as the asset distribution is all located in Gauteng. The group will have
two reportable segments based on the geographic split of the company in future. The segment report will be tabled in the 30 September 2015 annual report.
BASIS OF PREPARATION
The unaudited results for the six months ended 31 March 2015 have not been reviewed or reported on by the company`s independent auditors, Grant Thornton.
The financial statements have been prepared in accordance with the requirements of International Financial Reporting Standards, the SAICA Financial
Reporting Guides as issued by the Financial Practices Committee as issued by the Financial Reporting Standard Council, IAS 34: Interim Financial Reporting,
the JSE Listings Requirements and the requirements of the South African Companies Act, 2008. These results have been prepared under the supervision of
Carel de Wit, Indluplace's Chief Financial Officer.
The first-time adoption of new standards, are consistent with those applied in the previous annual financial statements for the year-ended 30 September 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; and
- IFRIC 21 Levies.
None of these standards had a material impact on these interim results. The accounting policies adopted are consistent with those applied in the
prior period.
By order of the Board
10 July 2015
Directors
T Adler$ (Chairperson) , G Leissner (CEO) , C de Wit (CFO) , M Kaplan^, I Suleman^, G Kinross* (Lead independent director) , S Noik$, C Abrams*, A Rehman*.
* Independent non-executive ^ Executive directors $ Non-executive directors.
All directors are South African. There were changes to the board of directors during this period.
Registered office
2nd Floor, 18 Melrose Boulevard, Melrose Arch, Melrose, Johannesburg, 2196.
PO Box 685, Melrose Arch, 2076.
Transfer secretaries
Computershare Investor Services Proprietary Limited.
Sponsor
Java Capital.
Company secretary
CIS Company Secretaries Proprietary Limited.
Website
www.indluplace.co.za
Date: 10/07/2015 05:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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