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Condensed unaudited consolidated interim financial statements for the six months ended 31 December 2015
FORTRESS INCOME FUND LIMITED
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA
REG NO 2009/016487/06
JSE SHARE CODES "FFA" ISIN ZAE000192787 AND "FFB" ISIN ZAE000192795
(APPROVED AS A REIT BY THE JSE)
("FORTRESS" OR "THE GROUP")
CONDENSED UNAUDITED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
for the six months ended 31 December 2015
DIRECTORS' COMMENTARY
1 CAPITAL STRUCTURE
Fortress, an internally asset managed Real Estate Investment Trust (REIT),
is listed on the Johannesburg Stock Exchange with A and B shares.
The Fortress A shares have a preferential right to income distribution and
to capital participation in the event of winding-up. The Fortress B shares
are entitled to the residual distributable income and capital
participation on winding-up. The growth on the A share dividend is the
lower of 5% or CPI.
Fortress was recently included in the JSE Top 40 and Morgan Stanley
Capital International (MSCI) world indices. The B share was rated the top
performing listed security in South Africa in 2015 by the Sunday Times.
The group successfully acquired all the issued shares of Capital Property
Fund Limited by scheme of arrangement at a swap ratio of 0,35 Fortress A
and 0,35 Fortress B shares for each Capital share, effective from 1
December 2015.
Following the implementation of the merger with Capital, Fortress
repurchased 105 482 144 Fortress B shares held by Capital, which shares
were cancelled. The current issued share capital of Fortress comprises
1 091 747 728 Fortress A shares and 986 265 584 Fortress B shares.
In terms of the authority granted by shareholders, Fortress repurchased
7 100 000 A shares. These shares were acquired at an average price of
R14,76 per share and are held in treasury.
2 NATURE OF BUSINESS
Fortress was established as a hybrid fund, investing in both physical
property and listed property securities.
The group has a direct portfolio of 325 properties consisting
predominantly of retail centres and large logistics warehouses. Fortress
will continue to focus on these sectors. Further investments will be made
in strategic land acquisitions for the development of logistics
warehouses. The board will continue its strategy of disposing of offices
and non-core industrial properties.
The equity portfolio consists of both locally listed REIT's and
international listed property securities.
3 DISTRIBUTABLE EARNINGS AND COMMENTARY ON RESULTS
The dividend growth for the interim period attributable to the A share was
calculated using data supplied by Statistics SA. The growth was 4,8%,
being the lower of CPI or 5%, and consequently the dividend for the A
share for the six months ended 31 December 2015 is 64,72 cents.
The dividend for the B share is 62,81 cents, which is an increase of
101,2% over the previous comparable period. Of the substantial growth in
the dividend of the B share, 39,1% is attributable to the Capital
acquisition funded with equity issued at a lower yield than the yield of
the Capital portfolio. Growth was further enhanced by the continued
depreciation of the Rand against the British Pound, the Euro and the US
Dollar to which Fortress has exposure through its investments in
Hammerson, Nepi and Rockcastle respectively.
The direct property portfolio performed ahead of budget with retail
properties recording sales growth ahead of national averages. The effects
of both Black Friday and December sales were particularly pleasing.
Fortress hedged the projected December 2015 dividend income from its
investments in Hammerson, Nepi and Rockcastle limiting benefits from the
decline in the value of the Rand during this interim period. Currency
hedges were entered into at R20,23, R14,27 and R12,86 against the British
Pound, the Euro and the US Dollar respectively.
4 DIRECT PROPERTY INVESTMENTS
Fortress has received approval for its Environmental Impact Assessment of
the proposed Clairwood Logistics Park. This planned 358 000m2 of A-grade
logistics facilities adjacent to the Durban Maydon Wharf is awaiting
zoning approval which is anticipated shortly. Negotiations with a number
of corporate tenants are well advanced.
The following logistics developments were completed and fully let:
Description % owned 100% GLA Yield Completion
Montague Business Park 25% 31 376m2 7,8% Oct 2015
Montague Business Park 25% 5 294m2 7,6% Dec 2015
Pomona Logistics 100% 20 660m2 9,3% Nov 2015
CiplaMED Rivergate 100% 18 214m2 8,3% Oct 2015
N1 Business Park 20% 8 260m2 9,0% Aug 2015
The 31 692m2 Linbro Logistics Park was completed in January 2016 at an
anticipated yield of 9,0%. Negotiations are at an advanced stage with a
corporate tenant to occupy the entire facility.
The following new logistics developments have commenced:
Estimated Estimated
Description % owned 100% GLA yield completion
Westlake Logistics 100% 19 000m2 9,0% Jan 2017
N1 Business Park 20% 9 940m2 9,0% Jun 2016
Louwlardia Logistics 100% 8 469m2 9,0% Mar 2016
Fortress owns the following land for future logistics and office/hotel
developments:
Estimated
Description % owned 100% GLA Intended use commencement
Clairwood
Logistics Park 100% 358 000m2 Logistics April 2016
Louwlardia
Logistics Park 100% 80 000m2 Logistics Mar 2016 #
Montague Business Park 25% 70 000m2 Logistics *
Sandton 80% 60 000m2 Office/Hotel *
Tradeport City Deep 100% 55 000m2 Logistics *
Rivergate Cape Town 100% 30 000m2 Logistics *
Linbro Logistics 50% 23 000m2 Logistics May 2016 #
Westlake Logistics 100% 20 000m2 Logistics Apr 2016
* Subject to pre-leasing.
# Acquisition agreement concluded, not yet transferred.
Of the retail property portfolio, Lephalale CBD, Botlokwa Plaza, Nelspruit
Plaza, The Galleria and Biyela Square are being redeveloped and extended
at a cost of R151 million with an estimated combined yield of 6,2%.
5 PROPERTY DISPOSALS
The following non-core properties were disposed of during the interim
period:
Book Net
value proceeds Exit Transfer
Property name Sector R,000 R,000 yield date
Anvil Road $ Industrial 56 342 73 800 10,2% #
Appleton's $ Retail 58 800 65 000 7,9% Sep 2015
Queenstown Mall Retail 48 500 54 750 10,0% #
Westmead Road
Pinetown $ Logistics 43 228 54 000 8,0% #
70 Lechwe
Street $ Logistics 27 803 29 500 7,7% #
Greenbushes
Units $ Logistics 19 550 24 000 5,1% Nov 2015
Lees Street
Wynberg $ Logistics 22 641 23 700 10,2% Dec 2015
20 Alexander
Road $ Logistics 19 574 22 000 9,3% #
79 Willowfield
$ Logistics 18 950 20 500 8,3% #
Greenbushes
Erf 116 $ Land 1 637 2 451 * Dec 2015
Greenbushes
Erf 121 $ Land 1 599 2 274 * Dec 2015
Greenbushes
Erf 126 $ Land 1 656 1 984 * Dec 2015
TOTAL 320 280 373 959
# Held for sale at 31 December 2015. Transferred in 2016.
* Vacant land.
$ Details of these properties, previously owned by Capital, were included in the revised listings particulars.
6 VACANCIES
At 31 December 2015 the total vacancy was 6,2%. Following the merger, the
combined lettable area has increased from 784 294m2 (100% GLA) at 30 June
2015 to 3 183 653m2 (100% GLA) at 31 December 2015.
% of property portfolio
Sectoral vacancy by GLA Dec 2015 by book value
Logistics 5,9% 46,0%
Retail 4,2% 31,3%
Office 12,8% 17,6%
Industrial 4,4% 3,5%
Other 8,3% 1,6%
Management has undertaken the refurbishment of several office buildings to
increase the let-ability of vacant space. Three logistics warehouses
became vacant in the fourth quarter of 2015 which impacted the total
vacant area by 44 643m2 (1,4% vacancy). One of these, the 15 893m2 (0,5%
vacancy) logistics facility in Tiger Moth Road, Aeroton, has since been
let on a new ten year lease. Management is confident that the remaining
two logistics facilities will be let during the first quarter of 2016.
7 LISTED PORTFOLIO
Dec 2015 Jun 2015
Number of Fair value Number of Fair value
Counter shares R,000 shares R,000
Capital (CPF) - - 80 633 816 1 153 064
Nepi (NEP) 51 800 000 9 210 558 24 902 939 3 426 644
Resilient (RES) 38 100 000 4 400 550 18 347 639 1 769 630
13 611 108 6 349 338
Hammerson
(HMSO UK)# 15 740 405 2 170 911 15 700 000 1 867 829
Rockcastle (ROC)*339 450 000 11 846 805 172 026 261 4 639 548
27 628 824 12 856 715
# The Hammerson position is held through equity derivatives.
* Rockcastle was treated as an associate (equity accounted) and was thus
not fair valued in the financial statements. The carrying value of
Rockcastle was R8 520 million and R3 213 million at 31 December 2015 and
30 June 2015 respectively.
The board's policy is to hedge up to 35% of Fortress' foreign currency
exposure to its investments in Hammerson, Nepi and Rockcastle.
The following hedges were in place at the date of this report:
Foreign
ZAR fair exchange Foreign
value of fair value of exchange
investment investment hedged Exchange
'000 '000 '000 rate
Hammerson R2 170 911 GBP94 442 GBP40 115 GBP - R20,12
Nepi R9 210 558 EUR543 961 EUR91 904 EUR - R15,25
Rockcastle R11 846 805 USD762 868 USD269 172 USD - R14,83
R23 228 274
Currently 26,7% of Fortress' offshore equity exposure is hedged with the
main purpose being the alignment of the funding risk profile to both the
currency and income streams of the group's offshore holdings. This results
in 26,7% of these investments being funded at interest rates applicable to
the currencies of these investments.
8 FACILITIES AND INTEREST RATE DERIVATIVES
On 30 November 2015, Moody's Investors Service assigned an A3.za, P-2.za
investment grade rating to Fortress with a stable outlook. A total of R5,5
billion has been issued under Fortress' R10 billion unsecured Domestic
Medium Term Note Programme.
Fortress extended R1 billion of its funding facilities from Standard Bank
which matured in February 2016 for a further two to four years. Fortress'
RMB facilities totalling R5,1 billion were restructured and the maturities
were extended to tenures of three to six years.
The Siyakha Education Trust repaid R1 billion of its loan from Fortress
after the interim reporting period.
Average margin
Facility expiry Amount R' million over Jibar
June 2016 1 336 1,16%
June 2017 3 145 1,43%
June 2018 743 1,54%
June 2019 4 412 1,60%
June 2020 2 325 1,63%
June 2021 1 025 1,76%
June 2022 1 025 1,90%
14 011 1,56%
Interest rate swap expiry Amount R' million Average swap rate
June 2016 100 7,95%
June 2017 610 7,48%
June 2018 1 500 7,36%
June 2019 700 6,46%
June 2020 1 100 6,95%
June 2021 700 8,16%
June 2022 600 7,99%
June 2023 300 7,79%
June 2024 200 7,47%
June 2025 100 7,78%
5 910 7,39%
Interest rate cap expiry Amount R' million Average cap rate
June 2019 300 7,40%
June 2020 200 7,52%
June 2021 400 7,80%
June 2022 400 7,76%
June 2023 300 7,71%
June 2024 400 7,98%
2 000 7,73%
Variable rate instruments Amount R'000
Loans to BEE vehicle (2 597 110)
Loans to co-owners (213 199)
Cash and cash equivalents (14 392)
Hammerson equity derivative margin (350 948)
Interest-bearing borrowings
(including gross-up of Hammerson equity derivatives) 15 121 781
Currency derivatives (gearing in foreign currency) (6 200 471)
Capital commitments contracted for 568 040
6 313 701
Total interest rate derivatives 7 910 000
Percentage hedged 125,3%
Capital expenditure approved by the board 35 021
Percentage hedged inclusive of approved capital expenditure 124,6%
The all-in weighted average cost of funding of Fortress was 8,34% at
31 December 2015 and the average hedge term was 4,2 years.
The information contained in note 4, 6, 8 and the "Fair value information"
section of note 9 has been compiled using proportionate consolidation.
This results in Fortress accounting for its share of the assets and
liabilities of associates (Arbour Crossing, The Galleria and Mthatha
Residential). It further recognises the Rockcastle investment at fair
value and the Hammerson equity derivative position on a gross basis.
9 SUMMARY OF FINANCIAL PERFORMANCE
Dec 2015 Jun 2015 Dec 2014 Jun 2014
Dividend per
A share (cents) 64,72 61,38 61,75 58,81
Dividend per
B share (cents) 62,81 39,20 31,21 24,39
A shares in issue and used
for dividend per share
calculation 1 091 747 728 466 251 105 466 251 105 424 290 288
A shares held
in treasury 7 100 000 - - -
B shares in issue and used
for dividend per share
calculation 986 265 584 466 251 105 466 251 105 424 290 288
Fair value information
Net asset
value per A share* R16,61 R15,72 R16,19# R14,58#
Net asset
value per B share R24,14 R16,21 R12,04# R9,07#
Interest-bearing debt
to asset ratio** 25,3% 27,3% 19,3% 22,1%
Net property expense ratio 15,2% 15,8% 14,2% 14,1%
Gross property
expense ratio 35,3% 35,6% 34,6% 33,9%
Net total expense ratio 13,3% 10,9% 12,2% 13,6%
Gross total expense ratio 27,4% 23,1% 26,6% 28,6%
IFRS accounting
Net asset value
per A share* R16,61 R15,72 R16,19# R14,58#
Net asset value
per B share R20,77 R13,15 R8,63# R8,08#
# Net asset value includes total equity attributable to equity holders
and linked debentures.
* 60-day volume weighted average traded price at reporting date limited
to combined net asset value.
** The interest-bearing debt to asset ratio is calculated by dividing
total interest-bearing borrowings adjusted for cash on hand by the total
of investments in property, listed securities and loans advanced.
Fair value information
SUMMARISED STATEMENT Dec 2015 Jun 2015 Dec 2014
OF FINANCIAL POSITION R'000 R'000 R'000
ASSETS
Investment property 25 113 762 7 335 459 7 060 873
Investment property
under development 1 578 090 98 689 134 280
Investments 27 628 824 12 856 715 9 059 537
Fortress Share
Purchase Trust loans 1 196 038 514 652 594 713
Loans to BEE vehicle 2 597 110 283 700 749 996
Loans to co-owners 213 199 194 858 186 631
Current assets 647 076 168 843 106 709
Total assets 58 974 099 21 452 916 17 892 739
EQUITY AND LIABILITIES
Total equity attributable
to equity holders 41 827 632 14 887 104 8 966 071
Linked debentures - - 4 196 260
Interest-bearing borrowings
net of cash on hand 14 756 441 5 801 915 3 432 485
Deferred tax 907 316 559 433 391 639
Linked debenture
interest payable - - 433 427
Current liabilities 1 482 710 204 464 472 857
Total equity and liabilities 58 974 099 21 452 916 17 892 739
SUMMARISED STATEMENT OF
COMPREHENSIVE INCOME 6 months 12 months 6 months
Recoveries and
contractual rental revenue 653 414 880 503 423 140
Property operating expenses (230 799) (313 278) (146 433)
Distributable income
from investments 252 988 367 164 147 374
Fair value gain on investment
property, investments and
currency derivatives 1 501 177 2 262 943 1 912 354
Profit on sale of
interest in associate 23 781 20 885 -
Administrative expenses (30 567) (36 997) (17 018)
Impairment of goodwill
on Capital merger (8 846 837) - -
(Loss)/profit before
net finance income/costs (6 676 843) 3 181 220 2 319 417
Net finance income/(costs) 174 080 (523 424) (510 600)
(Loss)/profit before income tax (6 502 763) 2 657 796 1 808 817
Income tax 48 296 (244 083) (75 730)
(Loss)/profit for the period
attributable to
equity holders (6 454 467) 2 413 713 1 733 087
10 BROAD-BASED BLACK ECONOMIC EMPOWERMENT
Fortress issued 23 300 000 A shares and 23 300 000 B shares to The Siyakha
Education Trust on 2 December 2015 under the authority approved by
shareholders. The sole objective of Siyakha is the promotion of quality
education for previously disadvantaged individuals.
11 PROSPECTS
Fortress continues to operate in a market faced with challenging macro-
economic conditions. The decline in infrastructure and unreliability of
essential services remain a key concern of the board.
The quality of the property portfolio together with Fortress' large
offshore exposure should enable the group to continue to grow
distributions in this challenging environment.
On the assumption that the A dividend will grow at 5%, the board
anticipates that the B share dividend will increase by approximately 95%
for the 2016 financial year.
The projected dividend income for June 2016 from the group's holdings in
Hammerson, Nepi and Rockcastle is hedged at the following exchange rates.
GBP EUR USD
Forward rate against ZAR R20,80 R14,84 R13,34
The growth is further based on the assumptions that a stable macro-
economic environment will prevail, no major corporate failures will occur
and that tenants will be able to absorb the recovery of rising utility
costs and municipal rates. Budgeted rental income was based on contractual
escalations and market-related renewals. This forecast has not been
audited or reviewed by Fortress' auditors.
By order of the board
Mark Stevens Rual Bornman
Managing director Financial director
Johannesburg
9 February 2016
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Reclassified Reclassified
Dec 2015 Jun 2015 Dec 2014
R'000 R'000 R'000
ASSETS
Non-current assets 52 558 843 17 799 299 15 799 503
Investment property 23 993 467 6 452 089 6 249 973
Straight-lining of
rental revenue adjustment 181 494 155 949 146 585
Investment property
under development 1 578 090 98 689 134 280
Investment in and loans
to associate and
joint ventures 9 258 263 3 935 521 3 044 409
Investments 13 611 108 6 349 338 4 869 568
Fortress Share Purchase
Trust loans 1 172 485 502 269 583 470
Loans to BEE vehicle 2 597 110 283 700 749 996
Loans to co-owners 166 826 21 744 21 222
Current assets 1 286 084 597 301 513 371
Investment property
held for sale 253 456 57 936 -
Straight-lining of
rental revenue adjustment 1 094 642 -
Fortress Share
Purchase Trust loans 23 553 12 383 11 243
Loans to co-owners - 126 589 118 841
Trade and other receivables 644 512 167 836 105 337
Hammerson equity derivative 350 948 227 229 272 369
Cash and cash equivalents 12 521 4 686 5 581
Total assets 53 844 927 18 396 600 16 312 874
EQUITY AND LIABILITIES
Total equity attributable to
equity holders 38 500 291 13 460 811 7 374 349
Stated capital/share capital 40 863 094 7 441 388 9 326
Share premium - - 3 235 984
Treasury shares (104 827) - -
Currency translation reserve 5 535 - -
Reserves (2 263 511) 6 019 423 4 129 039
Total liabilities 15 344 636 4 935 789 8 938 525
Non-current liabilities 11 421 088 3 034 806 7 595 939
Linked debentures - - 4 196 260
Interest-bearing borrowings 10 506 863 2 468 464 3 008 040
Deferred tax 914 225 566 342 391 639
Current liabilities 3 923 548 1 900 983 1 342 586
Trade and other payables 1 474 440 201 937 450 715
Linked debenture interest payable - - 433 427
Income tax payable 5 101 - -
Interest-bearing borrowings 2 444 007 1 699 046 458 444
Total equity and liabilities 53 844 927 18 396 600 16 312 874
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Audited Unaudited
for the six for the year for the six
months ended ended months ended
Dec 2015 Jun 2015 Dec 2014
Income statement R'000 R'000 R'000
Net rental and related revenue 424 352 554 900 279 108
Recoveries and contractual
rental revenue 615 223 805 398 386 032
Straight-lining of rental
revenue adjustment 25 997 37 095 27 089
Rental revenue 641 220 842 493 413 121
Property operating expenses (216 868) (287 593) (134 013)
Income from investments 148 443 229 228 113 870
Fair value gain on investment
property, investments and
currency derivatives 647 435 1 841 196 840 936
Fair value gain on
investment property 8 000 304 329 691
Adjustment resulting from straight-lining
of rental revenue (25 997) (37 095) (27 089)
Fair value gain on investments 2 175 372 1 893 464 1 025 161
Fair value loss on
currency derivatives (1 509 940) (319 502) (157 827)
Administrative expenses (30 504) (36 852) (16 967)
Impairment of goodwill
on Capital merger (8 846 837) - -
Profit on sale of interest
in associate 23 781 20 885 -
Income from associate
and joint ventures (400 793) 733 154 44 939
- distributable 130 974 191 524 60 299
- non-distributable (531 767) 541 630 (15 360)
(Loss)/profit before net
finance income/costs (8 034 123) 3 342 511 1 261 886
Net finance income/(costs) 171 848 (527 737) (512 758)
Finance income 461 793 251 629 91 367
Interest from loans 209 873 251 629 91 367
Fair value adjustment on interest
rate derivatives 251 920 - -
Finance costs (289 945) (779 366) (604 125)
Interest on borrowings (307 329) (357 232) (153 144)
Capitalised interest 17 384 14 824 8 307
Fair value adjustment on interest
rate derivatives - (3 531) (25 861)
Interest to linked debenture holders
- A linked units (287 910) (287 910)
- B linked units (145 517) (145 517)
(Loss)/profit
before income tax (7 862 275) 2 814 774 749 128
Income tax 48 296 (250 992) (75 730)
(Loss)/profit for the
period attributable
to equity holders (7 813 979) 2 563 782 673 398
Total comprehensive
(loss)/income for the period (7 813 979) 2 563 782 673 398
Basic earnings per A share (cents) (694,69) 285,89 78,16
Basic earnings per B share (cents) (694,69) 285,89 78,16
Basic earnings per A
linked unit (cents) 144,99
Basic earnings per B
linked unit (cents) 111,93
Fortress has no dilutionary instruments in issue.
RECONCILIATION OF (LOSS)/PROFIT FOR THE PERIOD TO HEADLINE EARNINGS
Unaudited Audited Unaudited
for the six for the year for the six
months ended ended months ended
Dec 2015 Jun 2015 Dec 2014
R'000 R'000 R'000
Basic earnings - (loss)/profit
for the period attributable
to equity holders (7 813 979) 2 563 782 673 398
- interest to
A linked debenture holders 287 910
- interest to
B linked debenture holders 145 517
Basic earnings (7 813 979) 2 563 782 1 106 825
Adjusted for: 8 815 856 (326 374) 4 025
- fair value loss/(gain) on investment
property 17 997 (267 234) 26 398
- profit on sale of associate (23 781) (20 885) -
- fair value gain on investment property
of joint ventures - (94) -
- impairment of goodwill
on Capital merger 8 846 837 - -
- income tax effect (25 197) (38 161) (22 373)
Headline earnings 1 001 877 2 237 408 1 110 850
Headline earnings per
A share (cents) 89,07 249,50 78,62
Headline earnings per
B share (cents) 89,07 249,50 78,62
Headline earnings per
A linked unit (cents) 145,46
Headline earnings per
B linked unit (cents) 112,40
Basic earnings per share, basic earnings per linked unit, headline
earnings per share and headline earnings per linked unit are based on the
following weighted average shares/linked units in issue during the period:
- A share 570 310 401 448 380 144 430 800 557
- B share 554 501 720 448 380 144 430 800 557
Given Fortress' capital conversion, detailed in the circular issued to
shareholders on 3 February 2015, linked debentures no longer exist within
Fortress' capital structure.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Reclassified
for the six Reclassified for the six
months for the year months
ended ended ended
Dec 2015 Jun 2015 Dec 2014
R'000 R'000 R'000
Cash (outflow)/inflow from
operating activities (226 084) (32 251) 273 499
Cash outflow from
investing activities (2 356 179) (2 377 096) (1 981 107)
Cash inflow from
financing activities 2 590 098 2 410 337 1 709 493
Increase in cash and
cash equivalents 7 835 990 1 885
Cash and cash equivalents at
beginning of period 4 686 3 696 3 696
Cash and cash equivalents at end
of period 12 521 4 686 5 581
Cash and cash equivalents consist of:
Current accounts 12 521 4 686 5 581
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Stated Equity
capital/ Currency attributable
share Treasury Share translation to equity
capital shares premium reserve Reserves holders
R'000 R'000 R'000 R'000 R'000 R'000
Balance at
Jun 2014 8 486 2 330 270 3 455 641 5 794 397
Issue of
linked units 840 905 714 906 554
Total comprehensive
income for
the period 673 398 673 398
Balance
at Dec 2014 9 326 3 235 984 4 129 039 7 374 349
Total comprehensive
income for the period 1 890 384 1 890 384
Costs relating to listing
of units (182) (182)
Capitalisation of
linked
debentures 4 196 260 4 196 260
Transfer to
stated
capital 3 235 802 (3 235 802) -
Balance at
Jun 2015 7 441 388 - 6 019 423 13 460 811
Total comprehensive
loss for the period (7 813 979)(7 813 979)
Issue of shares (equal
number of A and
B shares) 37 678 965 37 678 965
- Issue of 592 196 623 shares on
30 Nov 2015 35 885 628 35 885 628
- Issue of 23 300 000 shares on
2 Dec 2015 1 281 079 1 281 079
- Issue of 10 000 000 shares on
8 Dec 2015 512 258 512 258
Repurchase of
A shares (104 827) (104 827)
Repurchase and
cancellation of
B shares
- 105 482 144 on
3 Dec 2015 (4 257 259) (4 257 259)
Exchange differences
on translation of
Rockcastle associate 5 535 5 535
Dividends paid (468 955) (468 955)
Balance at
Dec 2015 40 863 094 (104 827) - 5 535 (2 263 511) 38 500 291
NOTES
1 PREPARATION AND ACCOUNTING POLICIES
The condensed unaudited consolidated interim financial statements have
been prepared in accordance with International Financial Reporting
Standards ("IFRS"), 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 Limited Listings Requirements and the
requirements of the Companies Act of South Africa. This report complies
with the SA REIT Association Best Practice Recommendations. This report
was compiled under the supervision of Rual Bornman CA(SA), the financial
director.
The accounting policies applied in the preparation of the condensed
consolidated interim financial statements are in terms of IFRS 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 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: Investment Property and IFRS 7:
Financial Instruments: Disclosure, the group's investment properties are
measured at fair value and are categorised as level 3 investments. In
terms of IAS 39: Financial Instruments: Recognition and measurement and
IFRS 7, the group's currency and interest rate derivatives as well as the
Hammerson equity derivative are measured at fair value through profit or
loss and are categorised as level 2 investments. In terms of IAS 39,
investments are measured at fair value being the quoted closing price at
the reporting date and are categorised as level 1 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 board has resolved to impair the R8,8 billion of goodwill that arose
on the Capital merger due to all the cash flows from Capital's assets
being carried at fair value.
The directors are not aware of any matters or circumstances arising
subsequent to
31 December 2015 that require any additional disclosure or adjustment to
the financial statements. The interim financial statements have not been
audited or reviewed by Fortress' auditors.
2 LEASE EXPIRY PROFILE
Based on
Based on contractual
rentable rental
Lease expiry area revenue
Vacant 6,2%
June 2016 13,1% 12,1%
June 2017 21,0% 19,4%
June 2018 21,4% 23,2%
June 2019 15,8% 17,5%
June 2020 6,6% 9,3%
> June 2020 15,9% 18,5%
100,0% 100,0%
3 SEGMENTAL ANALYSIS
Unaudited Audited Unaudited
for the six for the year for the six
months ended ended months ended
Dec 2015 Jun 2015 Dec 2014
R'000 R'000 R'000
Segmental revenue - recoveries and
contractual rental revenue
Logistics 106 235 - -
Industrial 53 010 93 584 48 106
Office 44 132 3 915 2 163
Retail 408 528 707 899 335 763
Other 3 318 - -
Total 615 223 805 398 386 032
Property operating expenses
Logistics (32 039) - -
Industrial (20 901) (34 108) (17 160)
Office (12 545) (1 394) (748)
Retail (150 428) (252 091) (116 105)
Other (955) - -
Total (216 868) (287 593) (134 013)
Segmental revenue - rental revenue
Logistics 112 844 - -
Industrial 54 931 97 453 49 620
Office 45 986 3 891 2 143
Retail 422 231 741 149 361 358
Other 5 228 - -
Total 641 220 842 493 413 121
(Loss)/profit before net finance
income/costs
Logistics 76 034 - -
Industrial 32 550 100 073 30 140
Office 31 587 4 270 2 964
Retail 282 535 752 527 239 277
Other 2 742 - -
Residential 7 336 18 946 7 124
Corporate (8 466 907) 2 466 695 982 381
Total (8 034 123) 3 342 511 1 261 886
Reconciliation of (loss)/profit for the
period to dividend declared
(Loss)/profit for the period (7 813 979) 2 563 782 673 398
Fair value gain on
investment property (8 000) (304 329) (691)
Fair value gain on investments (2 175 372) (1 893 464) (1 025 161)
Fair value loss on
currency derivatives 1 509 940 319 502 157 827
Impairment of goodwill
on Capital merger 8 846 837 - -
Profit on sale of interest
in associate (23 781) (20 885) -
Non-distributable income from associate
and joint ventures 531 767 (541 630) 15 360
Fair value adjustment on interest
rate derivatives (251 920) 3 531 25 861
Interest to linked
debenture holders 433 427 433 427
Income tax (48 296) 250 992 75 730
Antecedent dividend 710 776 33 583 33 580
Dividends accrued 48 080 57 873 44 096
Amount available for distribution under
best practice 1 326 052 902 382 433 427
Dividend declared - A shares (706 579) (286 185)
Dividend declared - B shares (619 473) (182 770)
Interest to linked debenture holders
- A linked units (287 910) (287 910)
Interest to linked debenture holders
- B linked units (145 517) (145 517)
- - -
The antecedent dividend includes five months' performance of Capital prior
to 1 December 2015.
4 PAYMENT OF INTERIM DIVIDENDS
The board has approved and notice is hereby given of interim dividends of
64,72000 cents per A share and 62,81000 cents per B share for the six
months ended 31 December 2015. The dividends are payable to Fortress
shareholders in accordance with the timetable set out below:
Last date to trade cum dividend Friday, 4 March 2016
Shares trade ex dividend Monday, 7 March 2016
Record date Friday, 11 March 2016
Payment date Monday, 14 March 2016
Share certificates may not be dematerialised or rematerialised between
Monday, 7 March 2016 and Friday, 11 March 2016, both days inclusive.
In respect of dematerialised shareholders, the dividend will be
transferred to the CSDP accounts/broker accounts on Monday, 14 March 2016.
Certificated shareholders' dividend payments will be posted on or about
Monday, 14 March 2016. An announcement informing shareholders of the tax
treatment of the dividend will be released separately on SENS.
Directors
Iraj Abedian (chairman); Jeff Zidel (deputy chairman); Mark Stevens*; Rual
Bornman*; Kura Chihota; Nontando Mahlati; Jan Potgieter; Wiko Serfontein*;
Andrew Teixeira*; Banus van der Walt; Djurk Venter; Tshiamo Vilakazi
(*executive director)
Changes to the board of directors
Pursuant to the merger with Capital, the Fortress board was reconstituted
on 1 December 2015 as above and further detailed in the SENS announcement
released on 1 December 2015.
Company secretary
Bernita Schaper
Registered address
3rd Floor Rivonia Village, Rivonia Boulevard, Rivonia 2191 (PO Box 2555,
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
Date: 09/02/2016 03:02:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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