Wrap Text
Audited Consolidated Results for the Group for the year ended 30 June 2015
Orion Real Estate Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/021085/06)
Share code: ORE ISIN: ZAE000075651
("Orion Real Estate" or "the company" or "the Group")
Audited Consolidated Results for the Group
for the year ended 30 June 2015
Consolidated Statement of Financial Position
as at 30 June 2015
Group
Restated Restated
Figures in Rand 2015 2014 2013
ASSETS
Investment property 772 015 611 783 223 689 733 823 518
Fair value of property portfolio 762 593 997 772 177 808 724 648 448
Straight-line rental income
adjustment 9 421 614 11 045 881 9 175 070
Property, plant and equipment 1 337 724 1 289 050 564 705
Trade and other receivables – 20 007 034 10 922 285
Total non-current assets 773 353 335 804 519 773 745 310 508
Loans to related parties 19 923 506 14 508 175 5 740 324
Loans to directors – 160 071 –
Stock on hand 4 321 – –
Trade and other receivables 43 139 146 14 959 234 19 703 737
Cash and cash equivalents 3 606 291 774 188 4 187 424
Investment properties held for sale – – 24 650 000
Total current assets 66 673 264 30 401 668 54 281 485
Total assets 840 026 599 834 921 441 799 591 993
EQUITY AND LIABILITIES
Capital and reserves
Share capital and share premium 114 336 674 74 235 526 74 235 526
Debenture reserve – 10 675 886 10 675 886
Retained earnings 504 392 314 369 012 064 329 090 478
Total equity attributable to owners
of the parent 618 728 988 453 923 476 414 001 890
Non-controlling interest (286 933) (270 127) (271 212)
Total equity 618 442 055 453 653 349 413 730 678
Linked debentures – 54 974 397 54 438 419
Borrowings 127 353 881 167 250 231 169 992 645
Deferred tax liabilities 1 856 393 79 800 174 73 403 399
Total non-current liabilities 129 210 274 302 024 802 297 834 463
Current income tax liabilities 8 610 355 11 005 713 13 064 856
Loans from directors 18 248 18 508 18 508
Loans from related parties 21 012 435 360 2 126 356
Tenant deposits 6 961 064 6 563 381 6 371 863
Trade and other payables 47 452 023 38 718 411 30 141 534
Borrowings 25 758 076 17 923 438 33 846 265
Bank overdraft 3 553 492 4 578 479 2 457 470
Current liabilities 92 374 271 79 243 290 88 026 852
Total liabilities 221 584 544 381 268 092 385 861 315
Total equity and liabilities 840 026 599 834 921 441 799 591 993
Consolidated Statement of Comprehensive Income
for the year ended 30 June 2015
Group
Figures in Rand 2015 2014
Revenue 99 547 277 96 708 822
Property revenue 101 171 545 94 838 010
Straight-line rental income accrual (1 624 268) 1 870 812
Other income 13 080 160 3 049 775
Other direct property operating costs (74 886 055) (68 146 174)
Adminstrative and management expenses – (200 760)
Repairs and maintenance (5 877 678) (7 982 122)
Profit distribution from controlled trust – –
Fair value adjustment 13 372 211 38 816 938
Gross change in fair value of investment property 11 747 942 40 687 749
Straight-line lease adjustment 1 624 268 (1 870 812)
Fair value adjustment to debtors 446 238 4 656 177
Operating profit before interest 45 682 153 66 902 656
Finance income 4 492 671 3 171 429
Linked debenture interest – (535 978)
Finance costs (17 284 790) (19 534 947)
Profit before taxation 32 890 034 50 003 160
Taxation 76 924 274 (10 080 489)
Profit for the year 109 814 308 39 922 671
Other comprehensive income – –
Total comprehensive income for the year 109 814 308 39 922 671
profit/(Loss) and total comprehensive income/(loss) for the
year attributable to:
Owners of the parent 109 831 115 39 921 586
Non-controlling interest (16 806) 1 085
109 814 308 39 922 671
Earnings per share
Basic earnings per share (cents) 17.52 6.37
Diluted earnings per share (cents) 17.52 6.37
Consolidated Statement of Cash Flows
for the year ended 30 June 2015
Group
Figures in Rand 2015 2014
Cash flows from/(to) operating activities 7 700 193 25 433 111
Cash generated by operations 22 839 234 30 351 996
Interest received 4 492 671 3 171 429
Interest paid (17 284 790) (1 454 054)
Taxation paid (2 346 922) (6 636 260)
Cash flows to investing activities 28 632 958 7 469 774
Loans advanced to related parties (5 415 331) (8 767 851)
Loans (advanced)/repaid to directors 159 811 (160 071)
Additions to investment property – (11 600 000)
Proceeds on sale of investment property 34 250 000 29 098 006
Purchases of property, plant and equipment (361 522) (1 100 310)
Cash flows (to)/from financing activities (32 476 060) (38 437 130)
Repayment of loans from related parties (414 348) (1 690 996)
Interest paid – (18 080 893)
Repayment of interest-bearing borrowings (32 061 712) (18 665 241)
Net increase in cash, cash equivalents and bank overdrafts 3 857 090 (5 534 245)
Cash, cash equivalents and bank overdrafts at the beginning of
the year (3 804 291) 1 729 954
Cash, cash equivalents and bank overdrafts at the
end of the year 52 799 (3 804 291)
Statement of Changes in Equity
for the year ended 30 June 2015 GROUP
Total share Non-
Share Share capital Debenture Retained controlling
Figures in Rand capital premium and premium reserve earnings Total interest Total equity
Balance at 30 June 2013 6 270 098 67 965 428 74 235 526 10 675 886 329 090 478 414 001 890 (271 212) 413 730 678
Total comprehensive income for the year – profit/(loss) as previously stated – – – – 34 819 171 34 819 171 1 085 34 820 256
Restatement for discounting of debtors – – – – 5 102 415 5 102 415 – 5 102 415
Balance at 30 June 2014 6 270 098 67 965 428 74 235 526 10 675 886 369 012 064 453 923 476 (270 127) 453 653 349
Total comprehensive income for the year – – – – 109 831 115 109 831 115 (16 806) 109 814 309
REIT conversion of debentures reserve – – – (10 675 886) 10 675 886 – – –
REIT conversion of debentures valuation premium – – – – 14 873 249 14 873 249 – 14 873 249
REIT conversion of share premium 67 965 428 (67 965 428) – – – – – –
REIT conversion of debenture capital and premium 40 101 148 – 40 101 148 – – 40 101 148 – 40 101 148
Balance at 30 June 2015 114 336 674 – 114 336 674 – 504 392 314 618 728 988 (286 933) 618 442 055
Segment Report
for the year ended 30 June 2015
2015 2014
R % R %
Revenue (excluding recoveries)
Commercial 37 315 186 46 35 088 213 47
Industrial 8 173 053 10 9 216 222 12
Retail 24 535 908 31 24 057 345 33
Hospitality 9 344 550 12 4 246 290 6
Residential 668 198 1 1 158 981 2
80 036 895 100 73 767 051 100
The Group does not have any
inter-segment revenue.
profit before taxation
Commercial 16 431 477 50 24 473 062 49
Industrial 9 096 397 28 11 413 154 23
Retail 17 518 975 53 6 625 057 13
Hospitality (1 736 825) (5) 10 733 998 21
Residential (8 419 989) (26) (3 242 111) (6)
32 890 035 100 50 003 160 100
Property values (including
properties held for sale, before
adjustment for straight-lining
of leases)
Commercial 339 235 830 44 329 978 783 43
Industrial 87 896 177 11 86 843 163 11
Retail 161 663 471 21 182 559 352 23
Hospitality 80 874 438 10 81 999 571 10
Residential 48 945 695 6 48 442 817 6
Land 53 400 000 7 53 400 000 7
772 015 611 100 783 223 686 100
Borrowings (excluding instalment
sales and loans)
Commercial 72 530 231 53 71 554 364 43
Industrial 22 800 003 17 25 597 334 15
Retail 23 069 847 17 49 138 070 30
Hospitality 9 505 847 7 11 281 707 7
Residential 7 613 790 6 8 441 724 5
135 519 718 100 166 013 199 100
Rating of tenants (rental income)
Commercial A 4 231 515 6 3 583 868 6
B 13 661 821 20 8 819 767 15
C 18 474 674 28 13 380 752 22
Industrial A – – – –
B 5 945 293 9 5 285 476 9
C 1 547 200 2 2 644 652 4
Retail A 2 974 139 5 2 999 091 5
B 8 920 070 13 4 849 775 8
C 8 365 052 12 13 254 761 22
Hospitality A – – – –
B 2 712 974 4 3 944 524 7
C – – – – –
Residential A – – – – –
B – – – – –
C 668 199 1 1 173 669 2
67 500 937 100 59 936 335 100
A: Represents major listed companies.
B: Represents smaller listed companies and big unlisted companies.
C: Represents smaller unlisted companies and private businesses.
Restatement of comparative figures
Disclosure on investment properties previously reported
In prior years the disclosure on the Statement of Financial Position indicated the reconciliation from
gross investment properties to net investment properties and the straight-line lease asset was shown
separately and split between the long-term and short-term portion. There was also a calculation error
on the fair value adjustment on properties in 2014 and has been adjusted for accordingly.
The effected figures for the 2015 Statement of Financial Position, Statement of Comprehensive Income
and the Statement of Cash Flows, as well as the related notes, have been restated and presented in
the financials for 30 June 2015. The effect of the change in restatement is:
Group
2014 2013
Statement of financial position
Disclosure on investment properties previously reported
Gross investment properties previously reported 783 223 686 733 823 518
Straight-line rental income adjustment previously reported (11 045 881) (9 175 070)
Net investment properties previously reported 772 177 808 724 648 448
Straight-line lease asset – Non-current assets as previously reported 10 193 238 9 175 070
Straight-line lease asset – Current assets as previously reported 852 643 –
783 223 689 733 823 518
Disclosure on investment properties restated as:
Investment property 783 223 689 733 823 518
Fair value of property portfolio 772 177 808 724 648 448
Straight-line rental income adjustment 11 045 881 9 175 070
Events after the reporting period
Purchase of Safari Lodge from related party
The Board of Directors has approved, in principle, the purchase of Portion 161 of the Farm Town and
Townlands of Rustenburg 272, Registration division J.Q. in the North West Province with all land and
buildings and other improvements (known as Safari Lodge) together with all contracts in the form of lease
agreements, from Gmeiner Investment Holding Proprietary Limited. The total purchase price is expected to
be R100 million which will be funded by way of a R42 million mortgage bond and the remainder of R58 million
by the creation of a loan account in the financial records of the seller. A portion of this loan account
amount equivalent to the cumulative amount owing by Franz Gmeiner private group of companies to
Orion Real Estate at the time of the transfer will be used to extinguish all debts due and owing by
Franz Gmeiner private group of companies to Orion Real Estate. The transaction is subject to the necessary
approval process and is expected to be finalised within the next 12 months.
Dividend distribution
A distribution of R10 921 746 will be made by the holding company to all its shareholders before
31 December 2015.
1. Commentary
The Board of Directors presents the Group’s audited results for the year ended 30 June 2015. The consolidated
financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements
for abridged reports and the requirements of the Companies Act of South Africa. The financial statements have
been prepared in accordance with the framework concepts and the measurement and recognition requirements of IFRS
and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Pronouncements as issued by Financial Reporting Standards Council and as a minimum, contains the information
required by IAS 34 Interim Financial Reporting.
The accounting policies are consistent with those applied in the annual financial statements for the year ended
30 June 2015 from which this report is extracted. The results have been prepared by Janie Jansen van Vuuren
BCom (Hons) Professional Accountant (SA). These abridged consolidated financial statements have been extracted from
the audited annual financial statements upon which BDO South Africa Incorporated have issued an unqualified report,
but is not itself audited. The directors take full responsibility for the preparation of the abridged financial
statements and confirm that the financial information has been correctly extracted from the underlying annual
financial statements. The Group annual financial statements are available for inspection at the Company’s
registered office. The auditors’ report does not necessarily cover all of the information contained in this
financial report. Shareholders are therefore advised that in order to obtain a full understanding of the nature of
the auditors’ work they should obtain a copy of that report together with the accompanying financial information
from the registered office of the Company.
Nature of business
Orion Real Estate is a JSE main board listed Real Estate Investment Trust (REIT) listed under the diversified
REIT’s sector. Its primary focus is on long-term investment in quality, rental generating properties situated
in strategic nodes.
Capital structure
To align the Company’s capital structure with the REIT standard in South Africa and to comply with JSE
Listings Requirements for REITs, Orion Real Estate Limited converted its linked unit capital structure into an
all share capital structure within the scheme of arrangement framework provided for in terms of section 114 of
the Companies Act of South Africa. The implementation date of the scheme was 8 April 2015 resulting in a
R40 101 148 increase in total share capital.
Financial and operational overview
South African economic growth for the year under review remained sluggish and the recovery process has not
materialised. The South African economy is still facing a number of challenges that are inhibiting the
recovery process.
It is a privilege to report to shareholders that Orion Real Estate has shown growth and positive results in
a number of areas. The REIT conversion has significantly bolstered the balance sheet and streamlined the
capital structure.
The gross property revenue grew from R96.7 million in 2014 to R99.5 million in 2015. This represents a growth
of 2.9% despite the reduction in the number of properties. Other direct property operating cost, administrative
and management expenses and repairs and maintenance were, however, well contained and increased only
from R76.3 million in 2014 to R80.7 million in 2015. This 5.5% increase includes significant costs incurred in
the REIT conversion.
The average vacancy factor of the portfolio has increased from 12.4% in June 2014 to 19.8% in June 2015.
A number of initiatives are in progress to substantially reduce this.
The total comprehensive income for the year attributable to equity holders of the Group has increased from a
profit of R39.9 million in 2014 to a profit of R109.8 million in 2015. Headline earnings have decreased for the
same period from a profit of R9 million to a loss of R3.6 million.
Headline earnings per share have decreased from 1.44 cents in 2014 to -0.57 cents in 2015. Basic earnings
per share have increased from 6.37 cents per share to 17.52 cents per share. The NAV has improved from
81.16 cents to 98.68 cents.
Due to disposals of some properties the value of the property portfolio has decreased from R783.2 million in
2014 to R772.0 million in 2015.
Bank borrowings decreased from R189.8 million in 2014 to R156.7 million in 2015. This is a reduction of
R33.1 million or 17.4%.
We will continue in the future to evaluate our property portfolio and acquire properties where we consider
value and good revenue streams. Underperforming properties or properties that have achieved peak value
will be disposed of.
Various opportunities for development and acquisitions are being pursued at present.
2015 2014
Earnings per share
Basic earnings per share/linked unit (cents) 17.52 6.37
Diluted earnings per share/linked unit (cents) 17.52 6.37
Headline (loss)/earnings per share/linked unit(cents) (0.57) 1.44
Diluted headline (loss)/earnings per share/linked unit (cents) (0.57) 1.44
Net asset value per share/linked unit (cents) 98.68 81.16
Weighted average number of shares/linked units in issue 627 009 822 627 009 822
Reconciliation of basic earnings and headline earnings
Profit attributable to equity holders 109 831 115 39 921 586
Fair value adjustment to investment properties (11 747 942) (40 687 749)
Linked debenture interest – 535 978
Deferred tax (reversed)/raised on fair value adjustment (90 356 633) 7 594 287
Deferred tax (reversed) on linked debenture interest – (150 074)
(Profit) on disposal of investment property (11 293 982) (1 560 426)
Capital gains tax raised on disposal of investment property – 3 365 964
Headline (loss)/earnings (3 567 442) 9 019 566
The insourcing of maintenance and tenant installations from external service providers to an associate
company has continued to deliver a reduction in these costs.
The initiative to utilise available green technologies to reduce energy consumption and the utilisation of
digital technology to measure energy consumption online had a beneficial effect in delivering reduction in
costs and a saving in the consumption of energy. The utilisation of the digital technology to measure
energy consumption is enabling us to efficiently manage our energy consumption.
The Group has continued with the initiative to redevelop a number of buildings to keep in line with market
developments and changing needs.
The Group has on a continuous basis been busy looking for new business opportunities; Strategies have been
developed and implemented to ensure that such identified business opportunities have minimal potential risks.
2. Acquisitions and disposals
During the year under review we have disposed of three properties namely Mountain View Shopping Centre,
Marlboro 142 and Score Mfuleni. A combined capital gain of R11.3 million was made on these transactions.
3. Dividends
No dividends were paid or declared during the financial period.
4. Change to Board of Directors
Dr AC Gmeiner and Mr RS Wilkinson were re-elected as directors on 24 November 2014.
Prof Viruly has resigned as director on 18 March 2015. Mr CN Nolte passed away during the current year and
was removed as director on 28 May 2015. Mr DPW Andre was elected to the Board of Directors on 28 May
2015 and has subsequently resigned as director on 22 September 2015.
5. Prospects
South African economic growth is forecasted to remain sluggish for the next financial year and the recovery
process will not materialise during the next financial year. The South African economy is still facing a
number of challenges that are inhibiting the recovery process.
Despite these challenges we remain confident that even in such an environment enough business opportunities
are available to ensure business success.
We will continue our efforts to expand Orion Real Estate’s portfolio and redevelop our properties.
We believe that maintaining our strategy and focus will enable us to continue producing growth.
6. Notice of general meeting
Shareholders are advised that the annual general meeting will be held at 10:00 on Friday, 25 November 2015,
in the Boardroom, 16th Floor, Orion House, 49 Jorissen Street, Braamfontein, Johannesburg.
Directors
RS Wilkinson*, MDK Mthembu*, AC Gmeiner+, F Gmeiner (MD)~,
*Independent non-executive
+Non-executive
~Executive
Company secretary and registered office
Corporate Governance Facilitators CC
Sponsor
Arbor Capital Sponsors (Pty) Ltd
Transfer office
Computershare Investor Services (Pty) Ltd
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