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Condensed unaudited consolidated interim financial statements for the six months ended 30 September 2015
LODESTONE REIT LIMITED
(PREVIOUSLY LODESTONE PROPERTIES LIMITED)
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA
REGISTRATION NUMBER 2010/017830/06
JSE SHARE CODE: LDO ISIN ZAE000197935
(APPROVED AS A REIT BY THE JSE)
(“LODESTONE” OR “THE COMPANY”)
CONDENSED UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX
MONTHS ENDED 30 SEPTEMBER 2015
DIRECTORS’ COMMENTARY
1 NATURE OF BUSINESS
Lodestone listed on the AltX of the JSE Limited on 25 February 2015.
Lodestone’s primary objective is to identify value enhancing opportunities
with good growth prospects in all sectors of the real estate market.
Lodestone continues to adopt a disciplined and proactive approach to the
asset management of its portfolio and actively takes advantage of buying
and selling prospects as they arise.
2 RESULTS
The board has declared a dividend of 21,58000 cents per share for the six
month period ended September 2015 in line with the trading statement
released on 14 October 2015. The results can be attributed to the solid
performance of the core property portfolio which will continue to improve
through accretive acquisitions.
3 PROPERTY PORTFOLIO
Lodestone’s property portfolio consists of 32 properties valued at R1,1
billion and comprises 55,6% retail and 44,4% industrial based on value.
Geographically, the properties are located in the following provinces:
Gauteng 60,3%
KwaZulu-Natal 8,7%
Northern Cape 8,5%
Limpopo 7,9%
Western Cape 7,1%
North West 6,4%
Mpumalanga 1,1%
Acquisitions
Lodestone has noted a significant increase in the number of properties
available for sale that fall within its mandate. Lodestone continues to
focus primarily on the retail and industrial sectors as detailed below.
Lodestone has also agreed to a joint venture for a residential development
in Rivonia comprising 94 two bedroom units and 62 one bedroom units with
associates of both Renprop and Probuild.
The company entered into a joint venture with Maizeys (Selby) Proprietary
Limited (“Maizeys”) in terms of which Lodestone acquired a 50% undivided
share in the properties listed below and entered into 10 year leases on
each property with Maizeys. The properties were acquired as a parcel at an
initial yield of 9,75% costing R55,2 million. All of the properties have
transferred.
Purchase
price
Property name GLA(m2) R’000 Effective date
15 Progress Road New Germany 3 922 9 004 Aug-15
40 Beechfield Crescent Springfield 965 2 486 Aug-15
312 Mitchell Street Pretoria West 1 741 4 248 Aug-15
216 Winze Road Stormill 1 466 2 486 Sept-15
25 Angus Crescent Longmeadow 1 680 6 153 Aug-15
100 Dekema Road Wadeville 7 500 11 624 Aug-15
44 Neptune Street Paarden Eiland 1 785 3 144 Aug-15
15 Kouga Street Stikland 800 1 462 Aug-15
19A Dorsetshire Street Paarden Eiland 1 350 4 057 Aug-15
20 Industrial Crescent Witbank 2 680 6 909 Aug-15
37 Kindon Road Robertsham 3 400 3 659 Oct-15
Total 27 289 55 232
The following properties were acquired and transfer is pending:
Property name Purchase
price
GLA(m2) R’000 Effective date
1338 Staal Road Stormill 3 560 14 500 Transfer date
16th Street Midrand 3 569 21 000 Oct-15
Fatima Bhayat Street Rustenburg 4 562 42 000 Transfer date
Yarona Shopping Centre 5 979 80 000 Transfer date
Total 17 670 157 500
Disposals
Post the financial reporting period, a portion of Moody Avenue, Epping
(erf 110901 Cape Town) was sold for R10,7 million to an owner-occupier.
4 VACANCIES AND ARREARS
The portfolio vacancy at September 2015 was 3,7%, an increase from 2,7% at
March 2015. Industrial vacancies increased to 4,3% from 2,2% and retail
vacancies decreased to 2,4% from 3,6%. Management placed particular
emphasis on tenant retention and letting vacant space and this will
continue to be a focus area. No significant increase in vacancies is
anticipated for the remainder of the financial year. There were no
material changes in arrears and potential bad debts are well provided for.
5 FUNDING
During the period, Lodestone accepted new facilities from Standard Bank of
R34 million.
FACILITIES
Amount Margin over
Expiry R’million Jibar
Mar 2018 514 1,70%
INTEREST RATE DERIVATIVES
Amount Average swap
Expiry R’million rate
Mar 2018 100 6,10%
Mar 2019 50 7,23%
Mar 2020 50 7,32%
Mar 2021 50 7,62%
Total 250 6,87%
Variable rate instruments R’000
Loan to BEE vehicle 106 477
Cash and cash equivalents 670
Interest-bearing borrowings (386 165)
Total (279 018)
Total interest rate derivatives 250 000
Percentage hedged 111,6%
The all-in weighted average cost of funding of Lodestone was 8,47% at
September 2015 and the average hedge term was 3,1 years.
6 SUMMARY OF FINANCIAL PERFORMANCE
For the six For the nine
months ended months ended
Sep 2015 Mar 2015
Dividend per share (cents) 21,58 12,99
Shares in issue 143 461 366 143 461 366
Net asset value R5,49 R5,38
Loan-to-value ratio* 32,6% 29,9%
Interest-bearing debt to asset ratio** 36,2% 33,2%
Net property expense ratio 16,8% 13,8%
Gross property expense ratio 39,4% 39,1%
Net total expense ratio 26,1% 20,7%
Gross total expense ratio 46,1% 43,7%
* The loan-to-value ratio is calculated by dividing interest-bearing
borrowings net of cash on hand by the total of investment property and
loans advanced.
** The interest-bearing debt to asset ratio is calculated by dividing
interest-bearing borrowings net of cash on hand by total property assets.
7 OUTLOOK
The board is confident that Lodestone will grow distributions to between
47,60 cents and 48,50 cents per share for the financial year ending March
2016. This is well ahead of the forecast contained in the prospectus.
The projected performance and leasing activity of the company is based on
the assumptions that a stable macro-economic environment will prevail, no
significant tenant failures will occur and that tenants will be able to
absorb the recovery of rising utility costs and municipal rates. Budgeted
rental income is based on existing contractual escalations and market
related renewals. This forecast has not been audited or reviewed by
Lodestone’s auditors.
By order of the board
Jason Cooper Inge Pick
Managing director Financial director
Johannesburg
4 November 2015
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Audited
Sep 2015 Mar 2015
R'000 R'000
ASSETS
Non-current assets 1 181 048 1 122 164
Investment property 1 038 242 986 906
Straight-lining of rental revenue adjustment 26 152 24 574
Investment property under development 1 479 1 370
Loans to employees 8 698 8 698
Loan to BEE vehicle 106 477 100 616
Current assets 13 628 11 605
Trade and other receivables 12 300 7 582
Loans to employees 658 272
Cash and cash equivalents 670 3 751
Total assets 1 194 676 1 133 769
EQUITY AND LIABILITIES
Total equity attributable to equity holders 786 968 772 332
Stated capital 751 077 751 077
Reserves 35 891 21 255
Total liabilities 407 708 361 437
Non-current liabilities 387 640 315 092
Interest-bearing borrowings 386 166 314 550
Deferred tax 1 474 542
Current liabilities 20 068 46 345
Trade and other payables 15 835 17 139
Income tax payable 4 233 4 233
Interest-bearing borrowings - 24 973
Total equity and liabilities 1 194 676 1 133 769
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Audited
for the six for the nine
months ended months ended
Sep 2015 Mar 2015
R'000 R'000
Net rental and related revenue 45 730 66 293
Recoveries and contractual rental revenue 72 845 107 785
Straight-lining of rental revenue adjustment 1 578 705
Rental revenue 74 423 108 490
Property operating expenses (28 693) (42 197)
Distributable income from investments - 1 736
Fair value gain on investment property
and investments (1 578) 70 143
Fair value gain on investment property - 54 752
Adjustment resulting from straight-lining
of rental revenue (1 578) (705)
Fair value gain on investments - 16 096
Administrative expenses (5 029) (5 647)
Listing costs - (5 459)
Profit before net finance costs 39 123 127 066
Net finance costs (4 919) (30 384)
Finance income 9 516 1 516
Interest received 6 265 1 516
Fair value adjustment on interest
rate derivatives 3 251 -
Finance costs (14 435) (31 900)
Interest on borrowings (14 495) (30 837)
Capitalised interest 60 284
Fair value adjustment on
interest rate derivatives - (1 347)
Profit before income tax 34 204 96 682
Income tax (932) 80 980
Profit for the period attributable
to equity holders 33 272 177 662
Total comprehensive income for the period 33 272 177 662
Basic earnings per ordinary share (cents) 23,91 161,84
RECONCILIATION OF PROFIT FOR THE PERIOD TO HEADLINE EARNINGS
Unaudited Audited
for the six for the nine
months ended months ended
Sep 2015 Mar 2015
R’000 R’000
Basic earnings (shares) - profit for the
period attributable to equity holders 33 272 177 662
Adjusted for: 1 557 (137 652)
- Fair value gain on investment property 1 578 (54 047)
- Income tax effect (21) (83 605)
Headline earnings 34 829 40 010
Headline earnings per ordinary share (cents) 24,28 36,45
Basic earnings per share and headline earnings per share are based on the
weighted average of 143 461 366 (Mar 2015: 109 778 334) shares in issue
during the period.
Lodestone has no dilutionary instruments in issue.
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Audited
for the six for the nine
months ended months ended
Sep 2015 Mar 2015
R’000 R’000
Cash inflow/(outflow) from operating activities 9 530 (10 610)
Cash (outflow)/inflow from investing activities (59 254) 73 309
Cash inflow/(outflow) from financing activities 46 643 (60 854)
(Decrease)/increase in cash and cash equivalents (3 081) 1 845
Cash and cash equivalents at beginning of period 3 751 1 906
Cash and cash equivalents at end of period 670 3 751
Cash and cash equivalents consist of:
Current accounts 670 3 751
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-
Stated distributable Retained
Capital reserves earnings Total
R'000 R'000 R’000 R'000
Balance at Jun 2014 200 390 117 - 390 317
Issue of ordinary shares
- 105 762 736 on
26 January 2015 528 614 (528 614) -
Issue of ordinary shares
- 24 000 000 on
25 February 2015 122 322 122 322
Issue of shares
- 13 698 630 on
12 March 2015 99 941 99 941
Total comprehensive
income for the period 177 662 177 662
Dividend paid (17 910) (17 910)
Transfer from non-
distributable reserves (390 117) 390 117 -
Balance at Mar 2015 751 077 - 21 255 772 332
Total comprehensive
income for the period 33 272 33 272
Dividend paid (18 636) (18 636)
Balance at Sep 2015 751 077 - 35 891 786 968
NOTES
1 PREPARATION AND ACCOUNTING POLICIES
The condensed unaudited consolidated interim financial statements have
been prepared in accordance with International Financial Reporting
Standards, IAS 34 Interim Financial Reporting, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and
Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council, the JSE Listings Requirements and the requirements of
the Companies Act of South Africa. This report was compiled under the
supervision of Inge Pick CA(SA), the financial director.
The group’s investment properties are valued internally by the directors
at interim reporting periods and externally by an independent valuer for
year-end reporting. In terms of IAS 40 and IFRS 7, the group’s investment
properties are measured at fair value and are categorised as level 3
investments. In terms of IAS 39 and IFRS 7, the group’s interest rate
derivatives are measured at fair value through profit or loss and are
categorised as level 2 investments. There were no transfers between levels
1, 2 and 3 during the period. The valuation methods applied are consistent
with those applied in preparing the previous consolidated financial
statements. The accounting policies applied in the preparation of the
consolidated interim financial statements are in terms of International
Financial Reporting Standards and are consistent with the accounting
policies applied in the preparation of the previous consolidated financial
statements, with the exception of the adoption of new and revised
standards which became effective during the period.
The directors are not aware of any matters or circumstances arising
subsequent to 30 September 2015 that require any additional disclosure or
adjustment to the financial statements.
The interim financial statements have not been reviewed or reported on by
the company’s auditors.
2 SECTORAL SPLIT
Based on: GLA Book value
Retail 32,3% 55,6%
Industrial 67,7% 44,4%
100,0% 100,0%
3 LEASE EXPIRY PROFILE (unaudited)
Rental
Based on: GLA revenue
Vacant 3,7%
Mar 2016 10,9% 9,0%
Mar 2017 16,9% 20,3%
Mar 2018 11,5% 15,3%
Mar 2019 10,0% 11,3%
Mar 2020 14,5% 15,3%
> Mar 2020 32,5% 28,8%
100,0% 100,0%
4 SEGMENTAL ANALYSIS
Unaudited Audited
Sep 2015 Mar 2015
R’000 R’000
Segmental revenue - recoveries and contractual
rental revenue
Industrial 31 897 47 004
Retail 40 948 60 781
Total 72 845 107 785
Property operating expenses
Industrial (12 328) (16 365)
Retail (16 365) (25 832)
Total (28 693) (42 197)
Segmental revenue - rental revenue
Industrial 32 815 48 560
Retail 41 608 59 930
Total 74 423 108 490
Profit for the period
Industrial 19 569 51 633
Retail 24 583 68 707
Corporate (10 880) 57 322
Total 33 272 177 662
5 RECONCILIATION OF PROFIT FOR THE PERIOD TO DIVIDEND DECLARED
Unaudited Audited
Sep 2015 Mar 2015
R’000 R’000
Profit for the period 33 272 177 662
Fair value gain on investment property - (54 752)
Fair value gain on investments - (16 096)
Fair value adjustment on interest rate derivatives (3 251) 1 347
Income tax 932 (80 980)
Antecedent dividend - 3 907
Listing costs - 5 459
Amount available for distribution
under best practice 30 953 36 547
Dividend declared – interim (30 953) (17 910)
Dividend declared – final (18 637)
- -
6 PAYMENT OF INTERIM DIVIDEND
The board has approved and notice is hereby given of an interim dividend
of 21,58000 cents per share for the six months ended 30 September 2015.
The dividend is payable to Lodestone shareholders in accordance with the
timetable set out below:
Last day to trade cum dividend Friday, 27 November 2015
Shares trade ex dividend Monday, 30 November 2015
Record date Friday, 4 December 2015
Payment date Monday, 7 December 2015
Share certificates may not be dematerialised or rematerialised between
Monday, 30 November 2015 and Friday, 4 December 2015, both days inclusive.
An announcement informing shareholders of the tax treatment of the
dividend will be released separately on SENS.
Registered office:
3rd Floor, Rivonia Village, Rivonia Boulevard, Rivonia, 2191 (PO Box 6063,
Rivonia, 2128)
Transfer Secretaries:
Link Market Services South Africa Proprietary Limited, 13th Floor, Rennie
House, 19 Ameshoff Street, Braamfontein, 2001 (PO Box 4844, Johannesburg,
2000)
Sponsor:
Java Capital
Company Secretary: Leonie Gindan
Directors: Annalese Manickum (chairperson)*; Jason Cooper (managing
director); Craig Hallowes*; Michael McNamara*; Inge Pick; Ndhlabole
Shongwe*; Gidon Trope; Jacques van Wyk*; Herman Zolty (*Independent non-
executive director)
Changes to the board of directors:
There were no changes to the board of directors since 6 May 2015, the date
of the previous results announcement.
Date: 04/11/2015 03:59:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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