Wrap Text
Summarised unaudited consolidated financial statements for the six months ended 31 August 2015
THE PIVOTAL FUND LIMITED (“Pivotal” or “the group”)
(Incorporated in the Republic of South Africa)
JSE share code: PIV ISIN: ZAE000196440
Registration number: 2005/030215/06
Summarised unaudited consolidated financial results for
the six months ended 31 August 2015
Net asset value excluding deferred tax per share increased
year-on-year by 26% to R19.60 (Aug 2014: R15.55)
Concluded the first acquisition in Nigeria, with Pivotal’s
share of asset value on completion of USD104 million
Acquired additional development pipeline of 275 000m2
taking total pipeline to 608 000m2
Prime developments construction commenced at Loftus Park,
Kyalami Corner and Wonderboom Junction redevelopment
and expansion
Reduced weighted average cost of debt to 9.34% (Aug 2014: 9.85%)
Summarised consolidated statement of financial position
at 31 August 2015
Unaudited Reviewed Audited
Aug 2015 Aug 2014 Feb 2015
R’000 R’000 R’000
Assets
Non-current assets 11 420 623 3 621 322 9 812 489
Investment property 8 197 831 3 304 289 7 992 125
Straight-line rental income accrual 350 497 110 470 318 287
Lease costs and incentives 49 074 18 110 39 285
Fair value of investment property 8 597 402 3 432 869 8 349 697
Investment property under construction 1 596 027 156 649 907 964
Interest in associate 679 612 31 744 1 472
Intangibles and goodwill 544 270 — 551 670
Plant and equipment 3 312 60 1 686
Current assets 384 818 175 467 497 665
Trade and other receivables 86 542 32 738 197 540
Loans receivable 101 770 121 339 56 885
Cash and cash equivalents 196 506 21 390 243 240
Total assets 11 805 441 3 796 789 10 310 154
Equity and liabilities
Capital and reserves 5 177 707 1 624 487 4 849 504
Stated capital 4 004 089 1 147 620 3 979 559
Share-based payment reserve 2 027 — 290
Foreign currency translation reserve 65 800 — —
Reserves 1 105 791 476 867 869 655
Non-current liabilities 5 801 349 2 126 062 5 031 038
Interest-bearing liabilities 5 105 260 1 830 900 4 306 947
Interest rate swaps 2 181 25 733 76 101
Deferred taxation 693 908 269 429 647 990
Current liabilities 826 385 46 240 429 612
Trade and other payables 98 310 16 486 236 930
Loans from shareholders — 7 448 1 306
Interest-bearing liabilities 728 075 22 306 191 376
Total equity and liabilities 11 805 441 3 796 789 10 310 154
Summarised consolidated statement of comprehensive income
for the six months ended 31 August 2015
Unaudited Reviewed Audited
Aug 2015 Aug 2014 Feb 2015
R’000 R’000 R’000
Revenue, excluding straight-line
rental income accrual 374 630 150 982 460 863
Straight-line rental income accrual 38 935 13 673 88 308
Revenue 413 565 164 655 549 171
Property expenses (59 995) (27 788) (77 098)
Net property income 353 570 136 867 472 073
Other operating expenses (23 913) (3 872) (29 788)
Operating profit 329 657 132 995 442 285
Equity-accounted investment
(loss)/profit — net of tax (2 882) 5 182 9 229
Amortisation of intangibles (7 400) — (1 759)
Changes in fair values 164 959 83 718 434 683
— Investment properties 91 038 113 011 504 316
— Financial instruments 73 921 (29 293) (69 633)
Income from operations 484 334 221 895 884 438
Finance charges (208 350) (91 157) (268 748)
Finance and other investment income 6 069 1 526 5 136
Profit before taxation 282 053 132 264 620 826
Taxation (45 917) (25 749) (121 523)
— Current — — (199)
— Deferred (45 917) (25 749) (121 324)
Profit after taxation 236 136 106 515 499 303
Other comprehensive income
Items that may be reclassified to
profit and loss:
Translation of foreign operations 65 800 — —
Total comprehensive income 301 936 106 515 499 303
Earnings per share
Basic profit is reconciled to headline
earnings as follows:
Profit after taxation 236 136 106 515 499 303
— Profit on disposal of associate — — (5 641)
— Fair value adjustment on
investment property (91 038) (113 011) (504 316)
— Deferred tax 16 994 21 095 94 139
Headline earnings 162 092 14 599 83 485
Number of shares in issue (adjusted
for treasury shares) 298 850 823 118 411 003 298 233 827
Weighted average number of shares in
issue 298 500 048 118 411 003 177 411 886
Basic earning per share (cents)* 79 90 281
Headline earnings per share (cents)* 54 12 47
* There are no dilutionary instruments in issue.
Summarised consolidated statement of cash flows
for the six months ended 31 August 2015
Unaudited Reviewed Audited
Aug 2015 Aug 2014 Feb 2015
R’000 R’000 R’000
Cash flows from operating activities
Cash generated from operations 301 792 147 086 435 301
Finance and other investment income 4 266 1 526 5 136
Finance charges (227 048) (91 157) (267 277)
Taxation paid — — (199)
Net cash generated from operating
activities 79 010 57 455 172 961
Net cash utilised in investing
activities (1 448 149) (150 312) (1 984 776)
Net cash generated from financing
activities 1 322 405 51 076 1 991 884
Net (decrease)/increase in cash and
cash equivalents (46 734) (41 781) 180 069
Cash and cash equivalents at the
beginning of the period 243 240 63 171 63 171
Cash and cash equivalents at the end
of the period 196 506 21 390 243 240
Summarised consolidated statement of changes in equity
Unaudited Reviewed Audited
Aug 2015 Aug 2014 Feb 2015
R’000 R’000 R’000
Opening balance 4 849 504 1 157 139 1 157 139
Total comprehensive income — profit
after taxation 236 136 106 515 499 303
Total comprehensive income — other
comprehensive income 65 800 — —
Share-based payment expenses 1 737 — 290
Issue of ordinary shares 19 935 360 833 3 213 747
Share issue costs — — (21 951)
Issue of preference shares 4 595 — 976
Closing balance 5 177 707 1 624 487 4 849 504
Condensed segmental analysis
Retail Office
Six months ended 31 August 2015 — unaudited
Revenue, excluding straight-line
lease income adjustment 171 161 197 857
Property expenses (39 051) (19 754)
Net property income 132 110 178 103
Profit before taxation 128 229 242 912
Changes in fair values — investment property 40 306 41 829
Investment properties 4 106 302 5 609 308
Six months ended 31 August 2014 — reviewed
Revenue, excluding straight-line lease income
adjustment 94 179 55 598
Property expenses (20 365) (6 933)
Net property income 73 814 48 665
Profit before taxation 62 773 112 148
Changes in fair values — investment property 28 285 79 030
Investment properties 2 142 462 1 426 683
Year ended 28 February 2015 — audited
Revenue, excluding straight-line lease income
adjustment 269 231 187 566
Property expenses (52 079) (22 417)
Net property income 217 152 165 149
Profit before taxation 364 617 553 469
Changes in fair values — investment property 128 817 354 202
Investment properties 3 916 740 5 194 221
Other Total
Six months ended 31 August 2015 — unaudited
Revenue, excluding straight-line lease income
adjustment 5 612 374 630
Property expenses (1 190) (59 995)
Net property income 4 422 314 635
Profit before taxation (89 088) 282 053
Changes in fair values — investment property 8 903 91 038
Investment properties 477 819 10 193 429
Six months ended 31 August 2014 — reviewed
Revenue, excluding straight-line lease income
adjustment 1 205 150 982
Property expenses (490) (27 788)
Net property income 715 123 194
Profit before taxation (42 657) 132 264
Changes in fair values — investment property 5 696 113 011
Investment properties 20 373 3 589 518
Year ended 28 February 2015 — audited
Revenue, excluding straight-line lease income
adjustment 4 066 460 863
Property expenses (2 602) (77 098)
Net property income 1 464 383 765
Profit before taxation (297 260) 620 826
Changes in fair values — investment property 21 297 504 316
Investment properties 146 700 9 257 661
Commentary
1. Profile
Pivotal is a development-focused investment fund listed on the JSE main
board, focusing on delivering sustainable capital returns through A-grade
property developments and investments in South Africa and other selected
countries. Pivotal’s property portfolio is divided into completed income
producing properties and developments (including property under development
and land held for future development) and 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 value 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 R10.8 billion at 31 August 2015. During the
period under review, Pivotal acquired properties to the value of R459 million,
which included strategic land for development and additional shares in
buildings not already owned. Pivotal also concluded the purchase of its
first asset in Nigeria, with Pivotal’s share of asset value on completion
of USD104 million.
2. Financial results
Pivotal’s net asset value per share, excluding deferred tax (“NAVPS”), increased
year-on-year by 26% to R19.60 at 31 August 2015 (31 August 2014: R15.55).
NAVPS for the six months ended 31 August 2015 grew by 6.5%. 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”). The growth was further driven by net working capital
generated from operating activities. Included in the current NAVPS are positive
fair value adjustments on financial instruments to the amount of R73.9 million,
and a gain on foreign currency translation of R65.8 million.
3. Property portfolio
Number of properties
Retail Office Industrial Africa Total
Income producing 10 23 3 0 36
Current development* 3 8 0 1 12
Land and available development
bulk* 11 3 2 0 16
* Only includes new properties not already included under income
producing properties.
Independent property portfolio value at 31 August 2015
R billion Retail Office Industrial Africa Total
Income producing 3.77 4.67 0.15 — 8.59
Current development 0.05 0.76 — 0.63 1.44
Land and available development
bulk 0.21 0.25 0.33 — 0.79
Total 4.03 5.68 0.48 0.63 10.82
4. Lease expiry profile by GRA (%)
August August August August August
2016 2017 2018 2019 2020>
Retail 9% 11% 8% 22% 50%
Office 5% 14% 17% 10% 54%
Industrial - - - - 100%
5. Vacancies
% of GRA vacant
Sector Aug 2015 Aug 2014
Retail 1.8 2.4
Office 2.8 2.0
Portfolio 2.2 2.2
6. Property transactions
The following transactions were concluded during the period:
6.1 S&J land acquisition of prime industrial development land,
ideally located on the N3 highway with a total net useable land
area of 1 600 919m2. Pivotal acquired a 45% undivided share for an
amount of R313 million.
6.2 Acquisition of a 37.1% shareholding in Wings, a 27 000m2 office
development in Lagos, Nigeria valued at USD104 million on completion.
Post 31 August 2015, Pivotal entered into the following agreements
to acquire properties:
6.3 A 20% undivided share in Galleria for R100 million. Galleria is an
80 000m2 mixed use development located in the heart of Rosebank CBD,
opposite the Rosebank Mall, The Firs and in close proximity to the
Gautrain Station. The transaction is subject to Competition Commission
approval.
6.4 55% undivided share in Atlantic Hills for R98 million. The
development is industrial-focused, situated 15km north of Cape Town
on the N7. The transaction is subject to Competition Commission approval.
7. Current and future developments
7.1 Alice Lane building 3, 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.
7.2 The first building of Westend Office Park in Centurion measuring
3 677m2 was completed in May 2015 and is fully let. The second building of
5 079m2 is due to be completed during November 2015. Westend Office Park is
a 27 000m2 A-grade development which provide excellent security, is easily
accessible from the N1 freeway and other major routes and situated within
walking distance of the Centurion Gautrain station and Centurion Mall.
7.3 Pivotal commenced construction on building E measuring 4 240m2 at
Hertford Office Park, ideally located on the corner of Allandale and
Bekker Roads, opposite the Mall of Africa development. The park comprise
approximately 54 000m2 of gross rentable area, of which four buildings
totalling 12 000m2 have been completed and fully let. Two further buildings
measuring 5 000m2 and 7 000m2 will commence construction in the later part
of 2015 with expected completion and occupation at the end of 2016.
7.4 Construction commenced on the second building at Monte Circle Office
Park in Fourways measuring 4 363m2 and is due to be completed in August
2016. This is a 52 000m2 A-grade office park development which will form
part of the Monte Casino Precinct. The building will provide excellent
security and is easily accessible from the N1 freeway and other major
transport routes. Pivotal has concluded an agreement for the acquisition
of a further 5.86% undivided share in the Monte Circle Office Park and
7.50% undivided share in the Monte Place development, effective
1 September 2015.
7.5 Construction commenced at Kyalami Corner shopping centre. The 29 160m2
retail development is located at a busy arterial intersection and will offer
upscale convenience shopping and dining. The centre will be anchored by
Woolworths, Checkers and Virgin Active. The lower level will focus on
convenience retail and select restaurants, while the upper level is earmarked
for home and lifestyle-oriented tenants. The centre is anticipated to commence
trading mid-2017.
7.6 The expansion and upgrade at Wonderboom Junction commenced and due for
final phase completion during November 2017. The expansion will provide
for both upgrade of the existing mall and additional 28 000m2 which will
bring the mall to a total GRA of 60 000m². The additional floor-area will
provide for an enhanced retail offering, including a wider variety in the
apparel category and a newly refurbished restaurant and family area.
7.7 Construction commenced at Loftus Park, adjacent to the iconic Loftus
Versfeld rugby stadium, of phase 1 measuring 21 833m2. The development
will be phased, with a total GRA of 54 000m2. This mixed use precinct will
include offices of 35 000m2, a retail component of 7 800m2, a 150-key hotel
and gym of 3 500m2. Phase 1 is expected to be completed during November 2017.
8. Interest in associate
During the six months ended 31 August 2015, Pivotal incorporated a wholly-owned
Mauritian entity, SB Wings Development Limited, which acquired 37.10% of the
issued share capital of Oando Wings Development Limited, incorporated in Nigeria.
The agreement became unconditional on 15 July 2015 (“effective date”). SB Wings
Development Limited serves as the vehicle through which Pivotal holds its interest
in the Oando Wings development in Lagos, Nigeria. The investment in Oando Wings
Development Limited is equity accounted in the group financial statements.
The functional currency of both the aforementioned entities is US Dollar.
At 31 August 2015, translation to the reporting currency resulted in a gain
on translation of foreign operations to the amount of R65.8 million.
9. Interest-bearing liabilities and interest rate swaps
Pivotal currently has borrowings of R5.8 billion which represents 51.8% of the
current property portfolio value (including the investment in Oando Wings
Development, Lagos). At 31 August 2015, the average cost of funding was 9.34%
(31 August 2014: 9.85%) and interest rates have been fixed in respect of 81%
of borrowings for an average period of four years. During the period, debt
facilities of over R1 billion were restructured which included cross
collateralising of security, which resulted in a reduction in the overall
weighted average cost of debt. Pivotal has unutilised committed bank
facilities amounting to R314 million, which together with the R600 million
capital raised post 31 August 2015, provides assurance that it will be able
to meet its commitments over the next 12 months. Pivotal has consistently
applied its policy on fair value measurement in respect of derivatives and
there has been no change in valuation techniques, nor have there been any
transfers between level 1, level 2 and level 3 during the period under review.
10. Net asset value per share
The table below details the net asset value calculation per share:
Aug 2015 Feb 2015 Aug 2014
R’000 R’000 R’000
Total equity 5 177 706 4 849 504 1 624 487
Adjusted for:
— Equity of preference shareholders (15 163) (10 568) (52 200)
Total equity (net asset value)
attributable to ordinary
shareholders 5 162 543 4 838 936 1 572 287
Total number of ordinary shares
in issue (adjusted for treasury
shares) 298 850 823 298 233 827 118 411 003
Net asset value per ordinary share R17.27 R16.23 R13.28
Reconciliation of net asset value,
excluding deferred tax, per
ordinary share to total equity
Total equity (net asset value)
attributable to ordinary
shareholders 5 162 543 4 838 936 1 572 287
Adjusted for:
— Total deferred tax liability 693 908 647 991 269 429
Net asset value attributable to
ordinary shareholders 5 856 451 5 486 927 1 841 716
Total number of ordinary shares
in issue (adjusted for treasury
shares) 298 850 823 298 233 827 118 411 003
Net asset value per ordinary share,
excluding deferred tax R19.60 R18.40 R15.55
11. Changes in fair value
The portfolio, including investment properties and properties under
development, was independently valued at 31 August 2015 which resulted
in an increase in the portfolio value of R91 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.
The group measures its investment property at fair value. The investment
property is disclosed as Level 3 in terms of the fair value hierarchy
with valuation inputs which are not based on observable market data
(unobservable inputs).
Key unobservable inputs used in determining property valuations
are set out below:
12-month
forward Capitalisation
Sector Rate/m2 yield (%) rate (%)
Retail 16 609 7.9 7.6
Retail convenience 16 034 8.5 8.1
Small regional/regional 16 826 7.8 7.5
Office and industrial 24 204 8.3 7.8
Offices — PTA/JHB 24 052 8.3 7.8
Offices — CPT 25 923 7.3 7.4
Industrial 7 553 9.7 8.5
Total portfolio 19 553 8.1 7.7
Weighted average
Reversionary Discount
Sector rate (%) rate (%)
Retail 8.1 13.1
Retail convenience 8.6 13.6
Small regional/regional 8.0 13.0
Office and industrial 8.3 13.3
Offices — PTA/JHB 8.3 13.3
Offices — CPT 7.9 12.9
Industrial 9.0 14.0
Total portfolio 8.2 13.2
The property portfolio has been independently valued by Jones Lang LaSalle
Proprietary Limited.
12. Changes to the board
During the period, a valued member of the board, Angus Mackay, passed away
on 3 June 2015. Angus served on the board since August 2013.
13. Prospects
Notwithstanding the challenging and uncertain economic environment in which
we operate, we strive to maintain an above-average growth in NAVPS as a
development-focused investment fund. We are pleased with the return the
portfolio has delivered over the period which is a culmination of several
key developments and acquisitions over this period.
Pivotal remains focused on creating long-term value for its stakeholders,
through the successful completion of its existing developments and the
on-going rollout of its development pipeline of 608 000m2, in prime
locations throughout South Africa.
Pivotal will continue to re-invest in its portfolio of properties to
ensure delivery of sustainable growth with focused attention being
placed on the key fundamentals.
In furtherance of its growth and diversification strategy, Pivotal also
plans to pursue opportunities to expand and diversify its investment
portfolio by selective investment in the rest of Africa and Australia.
Due to the stage of completion of current developments, growth in
NAVPS is forecast to be higher in the second half of the current
financial year. Increased contributions to fair value are anticipated
from completed projects comprising Hertford Office Park Building E,
Monte Circle Office Park Building A, West end Office Park Building A
and Stoneridge Office Park Building D.
In addition, fair value enhancements are expected from developments that
have commenced or are due to commence at Alice Lane 3, Hill on Empire
Office Park, Kyalami Corner, Loftus mixed use development Phase 1 and
Wonderboom Junction Phase 2.
14. Statement of compliance
The summarised unaudited consolidated financial results for the period
ended 31 August 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 periods, and are consistent with those applied
in the previous annual financial statements for the year ended
28 February 2015.
Segmentation is based on the group’s internal organisation and reporting
to the entity’s chief operating decision makers (Exco). The reportable
operating segments were identified based on the different sectors in
which the entity operates, being Retail and Commercial. Other segments,
including industrial assets and corporate costs, were aggregated in
accordance with the guidelines set out in IFRS 8.
Segment results that are reported to Exco include items directly
attributable to a segment, as well as those that can be allocated
on a reasonable basis.
15. Post balance sheet events
On 29 September 2015 Pivotal raised R600 million in equity by placing
31 578 948 new Pivotal shares at R19.00 per share. The capital raised
was used to pay down debt and will be used to fund strategic future
acquisitions and developments.
16. Financial Statements
These financial results have not been reviewed or reported on by the
group’s auditors. The results were approved by the Board of directors
on 30 October 2015.
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
2 November 2015
Directors: A Dixon*# , C Ewing*#, 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
Website: 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: admin@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
Transfer secretaries: Computershare Investor Services Proprietary Limited
Property managers: Abreal Proprietary Limited
Date: 02/11/2015 07:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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