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Unaudited interim financial results for six months to 31 December 2015 and dividend distribution declaration
Emira Property Fund Limited
(Incorporated in the Republic of South Africa)
Registration number: 2014/130842/06
Share code: EMI ISIN: ZAE000203063
(“Emira” or “the Fund” or “the Company”)
Tax number: 9995/739/15/9
(Approved as a REIT by the JSE)
Unaudited interim financial results
For six months to 31 December 2015 and dividend distribution declaration
Growth in distributions +8,8%
Distribution per share 70,34c
Net asset per value share 1 801c
Fixed debt 84,9%
Commentary
The Emira board of directors is pleased to announce that a dividend of
70,34 cents per share has been declared for the six months to 31 December
2015. This is an increase of 8,8% on the previous comparable period and
in line with expectations.
Vacancies and tenant renewals
Vacancies have decreased from 5,1% (December 2013) to 4,9% (December 2014)
to 4,7% (December 2015) over the past two years. The steady level of low
vacancies is the result of focussed leasing in the office sector,
retaining tenants within the portfolio as well as the strategic sale
of properties such as Braamfontein Centre in Braamfontein and 122 Pybus
Road in Sandton. The industrial sector vacancy of 1,7% remains substantially
lower than the latest SAPOA national levels of 4,0% with a 0% vacancy recorded
across the Cape Town and Durban regions. Similarly, the office sector vacancy
of 9,3% and retail sector vacancy of 3,0% remain below SAPOA national levels of
10,5% and 5,3% respectively.
A total of 82% by GLA (or 82% by revenue) of expiring tenants were renewed
during the six months to December 2015.
Major leases concluded
The largest new leases concluded were at Technohub in Midrand (2 753m²),
Universal Industrial Park in Durban (1 242m²) and Industrial Village Kya Sands
(1 062m²). The largest renewals were Defy at the Defy Appliances building in
Denver (10 100m²), Salga at Menlyn Corporate Park in Menlyn (5 939m²) and
Spoor and Fisher at Highgrove Office Park in Centurion (5 814m²).
Acquisitions
Acquisitions during the period comprised (i) a 50% undivided share in Mitchells
Plain Shopping Centre in the Western Cape for a purchase price of R75,3m at an
initial yield of 9,3% and (ii) a 50% undivided share in five buildings comprising
Summit Place, the P-grade commercial development in Menlyn, Pretoria, for an
amount of R403,0m at an average yield of 8,14%. Summit Place 1 and Summit Place 2,
being the two completed office buildings in the Summit Place development,
transferred in December 2015 at a cost of R86,4m. The balance of Summit Place,
which comprises both office and retail space, will be developed by Emira and its
partners with a final completion date of January 2017. By 31 December 2015,
R110,0m had been paid for the land and development costs to date for Summit
Place 3 and Summit Place 4.
Disposals
The transfer of Brandwag Shopping Centre and Kosmos Woonstelle was concluded in
September 2015. The property was sold at a sizeable premium to book value at a
forward yield of 6,5%.
Four non-core buildings with a total disposal value of R171,5m, representing a
forward yield of 10,8% and a discount to book value of 5,2%, were sold at
31 December 2015 but have yet to be transferred.
The successful execution of the Fund’s disposal strategy is nearing completion
with very few non-core properties remaining on its disposals list.
Refurbishments and extensions
Projects to modernise, extend and redevelop 13 buildings totalling approximately
R515,1m, are currently underway, the most significant of which are the redevelopment
of Knightsbridge Manor office park in Bryanston and the upgrade and refurbishment
of Kramerville Corner in Marlboro.
The first phase of the redevelopment of the prime located Knightsbridge Manor
office park in Bryanston commenced in November 2015 and on final completion the
development will offer 29 352m² of prime P-grade office space. The R795m project
is being undertaken in three phases, with the first of seven new buildings set to
be complete in May 2017 at a cost of R368m with 50% pre-let. The new office park
will boast a minimum 4-Star Green Star SA rating from the Green Building Council
South Africa.
The R69,4m upgrade and refurbishment of Kramerville Corner is expected to be
completed by the end of March 2016.
The number of projects underway reflects the Fund’s strategy to continually
upgrade the portfolio and extract value from existing bulk.
Gearing
Despite liquidity in the debt capital markets remaining tight, Emira continued
to successfully access funding at competitive rates.
Funding activities during the six month period included:
Amount All-in-rate
Date (Rm) (%)
19 Aug 15 Repayment of 4-year domestic medium term
notes 500 7,53
19 Aug 15 Issue of 3-year domestic medium term notes 430 8,09
19 Aug 15 Issue of 5-year domestic medium term notes 70 8,28
24 Aug 15 Repayment of 6-month commercial paper 175 7,15
24 Aug 15 Issue of 6-month commercial paper 42 7,38
24 Aug 15 Issue of 12-month commercial paper 158 7,78
01 Sep 15 Extension of RMB 7th term loan to 3 years 500 8,23
01 Sep 15 Extension of RMB 8th term loan to 4 years 385 8,33
11 Sep 15 Drawdown of 2-year ABSA facility 165 7,90
05 Nov 15 Repayment of 12-month commercial paper 250 7,25
05 Nov 15 Issue of 3-month commercial paper 10 7,03
05 Nov 15 Issue of 6-month commercial paper 70 7,48
05 Nov 15 Issue of 12-month commercial paper 170 7,76
Total debt as at 31 December 2015 was R4,8bn with the weighted average
duration to expiry increasing to 2,2 years following the extension of the
RMB 7th and 8th term loans and the successful refinancing of the 4-year DMTN
note into 3- and 5-year notes.
Fixed interest rate hedges in place for a total R4,04bn at 31 December 2015,
equated to 84,9% of the Fund’s total debt balance. The hedging percentage is
expected to be maintained at or around this level. Further interest rate
hedges are expected to be acquired as new debt is drawn down on the
Knightsbridge and Summit Place development projects. As at 31 December 2015
the interest rate swap expiries ranged from 0,5 to 9,0 years with a
weighted average duration of 3,1 years.
During the period the Fund entered into two, two-year cross currency swaps
for a total of AUD25,5m at a fixed AUD interest rate of 2,09% in respect
of the Growthpoint Australia investment to align the currency of the debt
funding with that of the underlying assets.
A new ABSA R250m two-year secured facility was concluded in September 2015.
Post 31 December 2015 Emira concluded a R155m two-year secured facility
with the Bank of China. A further R200m unsecured two-year backup facility
is being finalised with Nedbank and this, together with the new Bank of
China facility, will provide the Fund with additional liquidity to take
advantage of opportunities as they arise.
Growthpoint Australia Limited (GOZ)
As at 31 December 2015, GOZ’s unit price was AUD3,08 resulting in Emira’s
investment of 27 225 813 units, comprising 4,9% of the total units in issue,
being valued at R942,7m compared with the initial cost price of R372,0m.
Results
The recent acquisitions and the contractual escalations on the bulk of the
portfolio, together with the good leasing progress made and stringent cost
control, has resulted in the Fund achieving an increase in distributable
income during the period.
Excluding the straight-lining adjustments in respect of future rental
escalations, revenue rose by 5,4% over the comparable period. This was
positively impacted by the leasing of vacant space, acquisitions and organic
growth from the existing portfolio and increased recoveries of municipal
expenses, offset by disposals.
Rental income includes an accrual of R9,3m for Worley Parsons who is in
dispute with the Fund in regard to them prematurely vacating their leased
premises at Emira’s Corobay Corner building in Menlyn, Pretoria. This accrual
represents the contractual rental due for the six months to 31 December 2015,
less rentals achieved on subletting portions of the area previously occupied
by Worley Parsons.
Property expenses were well contained with the gross cost-to-income ratio
marginally higher at 35,7% (December 2014: 34,7%).
Management and administration expenses have remained stable at R43,0m
(December 2014: R42,9m).
As previously disclosed, lease commission costs are no longer expensed in
full in the year in which they are incurred for distribution calculation
purposes, but are rather spread over the life of the lease. This resulted
in the distribution being R8,6m higher (1,68 cents per share) than it would
have been had this change not taken place.
Income from the Fund’s listed investment in Growthpoint Australia increased
by 21,8% due to an increase in the distribution per unit received from GOZ
and the depreciation of the rand against the Australian dollar (“AUD”).
Net finance costs decreased by 1,6% from the comparable period. The decrease
was due to a combination of lower rates achieved on the new interest rate
swaps that replaced those that were early settled in the period to
31 December 2014 and the favourable AUD interest rates achieved on the
cross currency swaps.
Net asset value increased by 2,9%, from 1 751 cents per share at 30 June 2015,
to 1 801 cents per share at 31 December 2015, following the revaluation of
investment properties and the investment in GOZ as well as the acquisition
and development of further properties.
Distribution statement
Half-year Half-year
ended ended %
R’000 31 Dec 2015 31 Dec 2014 change
Operating lease rental income
and tenant recoveries excluding
straight-lining of leases 882 934 837 473 5,4
Net property expenses (315 121) (290 600) 8,4
Property expenses excluding
amortised upfront lease costs (323 703) (290 600) 11,4
Amortised lease commissions 8 582 — 100,0
Net property income 567 813 546 873 3,8
Income from listed property
investment 28 715 23 570 21,8
Management expenses
Asset management costs (16 989) (16 252) 4,5
Administration expenses (25 962) (26 678) (2,7)
Depreciation (134) — (100,0)
Net finance costs (194 322) (197 443) (1,6)
Finance income 5 075 5 651 (10,2)
Finance costs (199 397) (203 094) (1,8)
Interest paid and amortised
borrowing costs (199 986) (208 204) (4,0)
Interest capitalised to the cost
of developments 589 5 110 (89,3)
Dividend payable to shareholders 359 121 330 070 8,8
No. of shares in issue 510 550 084 510 550 084 —
Dividend per share (cents) 70,34 64,65 8,8
Disposals
In accordance with the strategy of the Fund, certain properties that are
underperforming or pose excessive risk are earmarked for disposal.
Properties transferred out of Emira during the six months to 31 Dec 2015
GLA
Property Sector Location (m2)
Brandwag Shopping Centre and Kosmos
Woonstelle Retail Bloemfontein CBD 12 328
12 328
Valuation Sale Exit
Jun 2014 price yield Effective
Property (Rm) (Rm) (%) date
Brandwag Shopping Centre and
Kosmos Woonstelle 159,0 250,0 6,5 Sep 2015
159,0 250,0 6,5
Properties sold but not yet transferred out of Emira at 31 Dec 2015
GLA
Property Sector Location (m2)
Omni Centre Office Bloemfontein CBD 5 447
Iustitia Building Office Bloemfontein CBD 5 360
Southern Life Plaza Office Bloemfontein CBD 10 697
1289 Heuwel Avenue Retail Centurion, Pretoria 2 049
23 553
Valuation Sale Anticipated
Jun 2015 price effective
(Rm) (Rm) date
Property
Omni Centre 29,7 40,5 Apr 2016
Iustitia Building 41,2 39,9 Apr 2016
Southern Life Plaza 100,0 79,6 Apr 2016
1289 Heuwel Avenue 10,0 11,5 Feb 2016
180,9 171,5
Vacancies
Number of GLA Vacancy
buildings Jun 2015 Jun 2015
Jun 2015 (m2) (m2) %
Office 62 395 492 30 968 7,8
Retail 37 408 275 11 237 2,8
Industrial 46 373 292 5 284 1,4
Total 145 1 177 059 47 489 4,0
Number of GLA Vacancy
buildings Dec 2015 Dec 2015
Dec 2015 (m2) (m2) %
Office 62 396 064 36 735 9,3
Retail 39 412 479 12 383 3,0
Industrial 45 366 505 6 087 1,7
Total 146 1 175 048 55 205 4,7
Valuations
Total portfolio movement
Jun 2015 Dec 2015
Sector (R’000) R/m2 (R’000)
Office 5 660 604 14 313 5 915 304
Retail 5 139 666 12 589 5 167 564
Industrial 1 940 823 5 199 1 914 330
12 741 093 12 997 198
Difference Difference
Sector R/m2 (%) (R’000)
Office 14 935 4,5 254 700
Retail 12 528 0,5 27 898
Industrial 5 223 (1,4) (26 493)
2,0 256 105
Debt
Emira has a moderate level of gearing with interest bearing debt to total
property assets of 33,7% as at 31 December 2015. The Fund has fixed 84,9%
of its debt for periods of between 0,5 and 9,0 years, with a weighted
average duration of 3,1 years.
Weighted Weighted Amount % of
average rate % average term (Rm) debt
Debt — Swap 8,8 3,1 years 4 043,7 84,9
Debt — Floating 8,1 719,8 15,1
Total 8,6 4 763,5 100,0
Less: Costs capitalised
not yet amortised (4,6)
Per statement of
financial position 4 758,9
Changed distribution policy — lease commission costs
In line with IFRS, Emira amortises lease commission costs over the
life of a lease rather than expensing them upfront. Historically,
for distribution calculation purposes, lease commission costs were
expensed in full in the month in which they were incurred. As
previously disclosed to investors, in the distributable income
calculation, lease commission costs incurred from 1 July 2015 are
amortised over the life of the lease rather than being expensed
upfront, bringing Emira in line with the rest of the listed
property sector.
Worley Parsons update
As previously advised, Emira is currently in dispute with Worley
Parsons, a major tenant at Corobay Corner in Menlyn, Pretoria,
regarding its lease obligations contracted for until February 2022.
Worley Parsons vacated the premises on 31 May 2015. Settlement
discussions have been rejected by both parties and the case has
moved to arbitration. The matter is expected to be heard during
May 2016 and Emira remains confident of its legal position.
The contractual income due from Worley Parsons, less sublease
rental income received, has been accounted for in the six months
to 31 December 2015 and will continue to be accrued for until the
end of June 2016. All portfolio statistics mentioned in this
commentary are based on the assumption that Worley Parsons have
remained in occupation at Corobay Corner in accordance with the
terms and conditions of their existing lease.
Directorate
As was announced on 2 October 2015, Greg Booyens was appointed as
executive director and Chief Financial Officer of the Fund with
effect from 1 January 2016.
Conversion to a corporate REIT
Emira Property Fund Scheme was successfully converted to a
corporate REIT — Emira Property Fund Limited — with effect from
1 July 2015. The management company, Strategic Real Estate Managers
(Pty) Limited (“STREM”) has become a wholly owned subsidiary and
the necessary transfers from the old Emira Property Fund Scheme
to the new Emira Property Fund Limited are nearing completion.
Prospects
While market conditions are expected to be more trying in the next
six months, Emira is appropriately positioned to continue its past
performance and deliver a similar distribution growth per share for
the full 12 month period to 30 June 2016.
This forecast has not been reviewed and reported on by the Company’s
external auditors.
Dividend distribution declaration
The Board has approved and notice is hereby given that an interim
dividend of 70,34 cents per share has been declared (2014: 64,65 cents),
payable to the registered shareholders of Emira Property Fund Limited
on 14 March 2016. The issued share capital at the declaration date is
510 550 084 listed ordinary shares. The source of the dividend comprises
net income from property rentals, income earned from the Fund’s listed
property investment and interest earned on cash on deposit. Please refer
to the Statement of Comprehensive Income for further details.
Tax implications
In accordance with Emira’s status as a REIT, shareholders are advised
that the dividend meets the requirements of a “qualifying distribution”
for the purposes of section 25BB of the Income Tax Act, No. 58 of 1962
(“Income Tax Act”). Accordingly, qualifying distributions received by
local tax residents must be included in the gross income of such
shareholders (as a non-exempt dividend in terms of section 10(1) (k) (aa)
of the Income Tax Act), with the effect that the qualifying distribution
is taxable as income in the hands of the shareholder. These qualifying
distributions are, however, exempt from dividend withholding tax in
the hands of South African tax resident shareholders, provided that
the South African resident shareholders have provided the following
forms to their Central Securities Depository Participant (“CSDP”) or
broker, as the case may be, in respect of uncertificated shares,
or the Transfer Secretaries, in respect of certificated shares:
a) a declaration that the dividend is exempt from dividends tax; and
b) a written undertaking to inform the CSDP, broker or the Transfer
Secretaries, as the case may be, should the circumstances affecting
the exemption change or the beneficial owner cease to be the beneficial
owner, both in the form prescribed by the Commissioner for the South
African Revenue Service. Shareholders are advised to contact their CSDP,
broker or the Transfer Secretaries, as the case may be, to arrange for
the abovementioned documents to be submitted prior to payment of the
dividend, if such documents have not already been submitted.
Qualifying dividends received by non-resident shareholders will
not be taxable as income and instead will be treated as ordinary
dividends but which are exempt in terms of the usual dividend
exemptions per section 10(1) (k) of the Income Tax Act. It should
be noted that until 31 December 2013 qualifying distributions
received by non-residents were not subject to dividend withholding
tax. From 1 January 2014, any qualifying distribution received by
a non-resident from a REIT will be subject to dividend withholding
tax at 15%, unless the rate is reduced in terms of any applicable
agreement for the avoidance of double taxation (“DTA”) between
South Africa and the country of residence of the shareholder. Assuming
dividend withholding tax will be withheld at a rate of 15%, the net
amount due to non-resident shareholders will be 59,7890 cents per share.
A reduced dividend withholding tax rate in terms of the applicable DTA,
may only be relied on if the non-resident shareholder has provided the
following forms to their CSDP or broker, as the case may be, in respect
of the uncertificated shares, or the Transfer Secretaries, in respect
of certificated shares:
a) a declaration that the dividend is subject to a reduced rate as a
result of the application of a DTA; and
b) a written undertaking to inform their CSDP, broker or the Transfer
Secretaries, as the case may be, should the circumstances affecting
the reduced rate change or the beneficial owner cease to be the
beneficial owner, both in the form prescribed by the Commissioner
for the South African Revenue Service. Non-resident shareholders are
advised to contact their CSDP, broker or the Transfer Secretaries, as
the case may be, to arrange for the abovementioned documents to be
submitted prior to payment of the dividend if such documents have not
already been submitted, if applicable.
Local tax resident shareholders as well as non-resident shareholders
are encouraged to consult their professional advisors should they be
in any doubt as to the appropriate action to take.
Last day 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.
By order of the Emira Property Fund Limited Board
Martin Harris Ben van der Ross Geoff Jennett
Company Secretary Chairman Chief Executive Officer
Bryanston, 17 February 2016
Basis of preparation and accounting policies
These unaudited condensed consolidated interim financial statements have
been prepared in accordance with International Financial Reporting
Standards (“IFRS”) including IAS 34: Interim Financial Reporting, the
SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee, Financial Pronouncements as issued by the Financial Reporting
Standards Council, the JSE Listings Requirements and the requirements
of the South African Companies Act, No. 71 of 2008 (as amended). The
accounting policies used in the preparation of these interim financial
statements are consistent with those used in the audited annual financial
statements for the year ended 30 June 2015.
This report was compiled under the supervision of Greg Booyens CA (SA),
the Chief Financial Officer of Emira.
These condensed consolidated interim financial statements have not
been reviewed or audited by Emira’s independent auditor,
PricewaterhouseCoopers Inc.
Condensed consolidated statement of financial position
Unaudited Unaudited Audited
31 Dec 2015 31 Dec 2014 30 Jun 2015
R’000 R’000 R’000 R’000
Assets
Non-current assets 13 876 168 12 656 493 13 274 255
Investment properties 12 516 954 11 707 105 12 090 944
Allowance for future rental
escalations 282 516 186 188 286 762
Unamortised upfront lease costs 27 728 40 553 44 387
Fair value of investment
properties 12 827 198 11 933 846 12 422 093
Listed property investment 942 712 707 306 796 930
Accounts receivable 40 775 — 39 177
Derivative financial instruments 65 483 15 341 16 055
Current assets 328 661 307 349 247 809
Accounts receivable 222 419 219 629 181 726
Derivative financial instruments 32 998 11 632 12 872
Cash and cash equivalents 73 244 76 088 53 211
Investment properties held for
sale 170 000 541 900 319 000
Total assets 14 374 829 13 505 742 13 841 064
Equity and liabilities
Share capital and reserves 9 195 474 8 424 367 8 940 015
Non-current liabilities 3 845 191 3 302 627 3 463 985
Interest-bearing debt 3 801 905 3 260 617 3 448 396
Derivative financial instruments 43 286 42 010 15 589
Current liabilities 1 334 164 1 778 748 1 437 064
Short-term portion of interest-
bearing debt 957 000 1 399 738 1 061 965
Accounts payable 372 427 364 200 362 070
Derivative financial instruments 2 960 14 810 11 252
Taxation 1 777 — 1 777
Total equity and liabilities 14 374 829 13 505 742 13 841 064
Condensed consolidated statement of changes in equity
Revaluation
and other Retained
R’000 Shares reserves earnings
Balance at 30 June 2014 3 435 434 3 573 200 (3 549)
Shares issued 374 268 — (14 193)
Total comprehensive income for
the period — — 1 062 734
Transfer to fair value reserve — 737 934 (737 934)
Balance at 31 December 2014 3 809 702 4 311 134 307 058
Balance at 1 July 2015 3 795 509 4 808 755 341 013
REIT restructure costs (3 970) — —
Acquisition of non-controlling
interest in STREM — (5 262) —
Total comprehensive income for
the period — — 614 874
Transfer to fair value reserve — 261 381 (261 381)
Dividends paid — — (355 445)
Balance at 31 December 2015 3 791 539 5 064 874 339 061
Non-
controlling
R’000 interest Total
Balance at 30 June 2014 (1 300) 7 003 785
Shares issued — 360 075
Total comprehensive income for the period (2 227) 1 060 507
Transfer to fair value reserve — —
Balance at 31 December 2014 (3 527) 8 424 367
Balance at 1 July 2015 (5 262) 8 940 015
REIT restructure costs — (3 970)
Acquisition of non-controlling interest in STREM 5 262 —
Total comprehensive income for the period — 614 874
Transfer to fair value reserve — —
Dividends paid — (355 445)
Balance at 31 December 2015 — 9 195 474
Condensed consolidated statement of comprehensive income
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
R’000 31 Dec 2015 31 Dec 2014 30 Jun 2015
Revenue 878 818 864 403 1 811 968
Operating lease rental income and
tenant recoveries 882 934 837 473 1 686 670
Allowance for future rental
escalations (4 116) 26 930 125 298
Income from listed property
investment 28 715 23 570 47 388
Property expenses (331 530) (294 882) (581 752)
Fee paid on cancellation of
interest-rate
swap agreements — (31 839) (36 641)
Administration expenses (39 863) (45 157) (86 341)
Depreciation (8 850) (5 271) (9 324)
Operating profit 527 290 510 824 1 145 298
Net fair value adjustments 225 771 745 377 1 113 841
Net fair value gain on investment
properties 84 530 699 133 983 226
Change in fair value as a result
of straight-lining lease rentals 4 116 (26 930) (125 298)
Change in fair value as a result
of amortising upfront lease costs 16 409 4 282 996
Change in fair value as a result
of property appreciation in value 64 005 721 781 1 107 528
Revaluation of derivative financial
instrument relating to
share appreciation rights scheme (4 541) 4 930 6 350
Impairment charge — — (6 673)
Unrealised gain on fair valuation
of listed property investment 145 782 41 314 130 938
Profit before finance costs 753 061 1 256 201 2 259 139
Net finance costs (138 187) (195 694) (351 137)
Finance income 5 075 5 651 10 833
Interest received 5 075 5 651 10 833
Finance costs (143 262) (201 345) (361 970)
Interest paid and amortised
borrowing costs (199 986) (208 204) (401 133)
Interest capitalised to the cost
of developments 589 5 110 5 110
Unrealised surplus on revaluation
of interest-rate swaps 56 135 1 749 34 053
Profit before income tax charge 614 874 1 060 507 1 908 002
Income tax charge — — (1 777)
SA normal taxation — — (1 777)
Profit for the period 614 874 1 060 507 1 906 225
Attributable to Emira shareholders 614 874 1 062 734 1 910 187
Attributable to non-controlling
interests — (2 227) (3 962)
614 874 1 060 507 1 906 225
Total comprehensive income
Attributable to Emira shareholders 614 874 1 062 734 1 910 187
Attributable to non-controlling
interests — (2 227) (3 962)
614 874 1 060 507 1 906 225
Reconciliation between earnings and headline earnings
and distributable earnings
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
R’000 31 Dec 2015 31 Dec 2014 30 Jun 2015
Profit for the period
attributable to shareholders 614 874 1 060 507 1 906 225
Adjusted for:
Net fair value gain on
revaluation of investment
properties (84 530) (699 133) (983 226)
Headline earnings 530 344 361 374 922 999
Adjusted for:
Allowance for future rental
escalations 4 116 (26 930) (125 298)
Amortised upfront lease costs 16 409 4 282 996
Unrealised surplus on revaluation (56 135) (1 749) (34 053)
of interest-rate swaps Revaluation
of share appreciation rights
scheme derivative
financial instrument 4 541 (4 930) (6 350)
Unrealised gain on listed
property investment (145 782) (41 314) (130 938)
(Credit)/charge in respect of
leave pay provision and share
appreciation rights scheme (3 088) 2 227 3 962
Depreciation 8 716 5 271 9 107
Impairment charge — — 6 673
Fee paid on cancellation of
interest-rate swap agreements — 31 839 36 641
SA normal taxation — — 1 777
Distributable earnings 359 121 330 070 685 516
Dividend per share
Interim (cents) 70,34 64,65 64,65
Final (cents) — — 69,62
70,34 64,65 134,27
Number of shares in issue at the
end of the period 510 550 084 510 550 084 510 550 084
Weighted average number of
shares in issue 510 550 084 505 886 788 508 199 272
Earnings per share (cents) 120,44 209,63 375,09
The calculation of earnings
per share is based on net profit
for the period of R614,9m
(2014: R1 060,5m), divided by
the weighted average number of
shares in issue during the
period of 510 550 084
(2014: 505 886 788).
Headline earnings per share
(cents) 103,87 71,43 181,62
The calculation of headline
earnings per share is based on
net profit for the period,
adjusted for non-trading items,
of R530,3m (2014: R361,4m),
divided by the weighted average
number of shares in issue during
the period of 510 550 084
(2014: 505 886 788).
Diluted headline earnings per
share (cents) 103,87 71,43 181,62
Condensed consolidated statement of cash flows
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
R’000 31 Dec 2015 31 Dec 2014 30 Jun 2015
Cash generated from operations 526 025 509 331 1 037 433
Finance income 5 075 5 651 10 833
Interest paid (199 986) (208 204) (401 133)
Fee paid on cancellation of — (31 839) (36 641)
interest-rate swap agreements
Derivative acquired in respect of
share appreciation rights
scheme — (3 716) (3 636)
Dividends paid (355 445) (323 248) (639 126)
Net cash utilised in operating
activities (24 331) (52 025) (32 270)
Acquisition of, and additions
to, investment properties and
fixtures and fittings (450 210) (257 258) (368 607)
Proceeds on disposal of
investment properties and
fixtures and fittings 250 000 93 828 326 732
Acquisition of subsidiaries — (448 279) (448 279)
Net cash utilised in investing
activities (200 210) (611 709) (490 154)
Shares issued — 374 268 360 075
REIT restructure costs (3 970) — —
Interest-bearing debt raised 2 543 906 1 586 731 2 512 808
Interest-bearing debt repaid (2 295 362) (1 266 480) (2 342 551)
Net cash generated from
financing activities 244 574 694 519 530 332
Net increase in cash and cash
equivalents 20 033 30 785 7 908
Cash and cash equivalents at the
beginning of the period 53 211 45 303 45 303
Cash and cash equivalents at the
end of the period 73 244 76 088 53 211
Segmental information
R’000 Office Retail Industrial
Sectoral segments
Revenue 352 324 391 673 134 821
Revenue 380 312 369 635 132 987
Allowance for future rental
escalations (27 988) 22 038 1 834
Segmental result
Operating profit 193 831 235 368 88 050
Investment properties 5 915 304 5 167 564 1 914 330
Geographical segments
Revenue
— Gauteng 251 472 260 723 89 079
— Western and Eastern Cape 54 733 39 016 25 911
— KwaZulu-Natal 28 899 66 616 19 831
— Free State 17 220 25 318 —
352 324 391 673 134 821
Investment properties
— Gauteng 4 516 720 3 710 155 1 300 930
— Western and Eastern Cape 858 958 567 036 373 550
— KwaZulu-Natal 379 626 674 373 239 850
— Free State 160 000 216 000 —
5 915 304 5 167 564 1 914 330
Administrative
R’000 and corporate Total
Sectoral segments
Revenue — 878 818
Revenue — 882 934
Allowance for future rental escalations — (4 116)
Segmental result
Operating profit 10 041 527 290
Investment properties — 12 997 198
Geographical segments
Revenue
— Gauteng — 601 274
— Western and Eastern Cape — 119 660
— KwaZulu-Natal — 115 346
— Free State — 42 538
— 878 818
Investment properties
— Gauteng — 9 527 805
— Western and Eastern Cape — 1 799 544
— KwaZulu-Natal — 1 293 849
— Free State — 376 000
— 12 997 198
Measurements of fair value
1. Financial instruments
The financial assets and liabilities measured at fair value in the statement
of financial position are grouped into the fair value hierarchy as follows:
Level 1 Level 2 Level 3 Total
R’000 Dec 2015 Dec 2015 Dec 2015 Dec 2015
Group
Assets
Investments 942 712 — — 942 712
Derivative financial instruments — 89 941 8 540 98 481
Total 942 712 89 941 8 540 1 041 193
Liabilities
Derivative financial instruments — 46 246 — 46 246
Total — 46 246 — 46 246
Net fair value 942 712 43 695 8 540 994 947
Level 1 Level 2 Level 3 Total
R’000 Dec 2014 Dec 2014 Dec 2014 Dec 2014
Group
Assets
Investments 707 306 — — 707 306
Derivative financial instruments — 12 076 14 897 26 973
Total 707 306 12 076 14 897 734 279
Liabilities
Derivative financial instruments — 56 820 — 56 820
Total — 56 820 — 56 820
Net fair value 707 306 (44 744) 14 897 677 459
The methods and valuation techniques used for the purpose of measuring
fair value are unchanged compared to the previous reporting period.
Investments
This comprises shares held in a listed property company at fair value
which is determined by reference to quoted closing prices at the
reporting date.
Derivative financial instruments
The fair values of the interest rate swap contracts are determined using
discounted cash flow projections based on estimates of future cash flows,
supported by the terms of the relevant swap agreements and external evidence
such as the ZAR 0-coupon perfect-fit swap curve.
The call option contracts to the value of R8,5m are valued using a Black
Scholes option pricing model.
The expected volatility of the unit price used in the model ranged between
20% and 29%, and the risk free discount rate used between 7% and 9%. A 10%
change in the underlying unit price would impact the valuation by R3,0m.
2. Non-financial assets
The following table reflects the levels within the hierarchy of non-
financial assets measured at fair value at 31 December 2015:
2015 2014
R’000 Level 3 Level 3
Assets
Investment properties 12 827 198 12 422 093
Investment properties held for sale 170 000 319 000
Fair value measurement of investment properties
The fair value of commercial buildings are estimated using an income approach
which discounts the estimated rental income stream, net of projected operating
costs, as well as an exit value, using a discount rate derived from market yields.
The estimated rental stream takes into account current occupancy levels,
estimates of future vacancy levels, the terms of in-place leases and expectations
of rentals from future leases over the remaining economic life of the buildings.
The most significant inputs, all of which are unobservable, are the estimated
rental value, assumptions regarding vacancy levels, the discount rate and the
reversionary capitalisation rate. The estimated fair value increases if the
estimated rentals increase, vacancy levels decline or if discount rates (market
yields) and reversionary capitalisation rates decline. The overall valuations are
sensitive to all four assumptions. Management considers the range of reasonable
possible alternative assumptions to be greatest for reversionary capitalisation
rates, rental values and vacancy levels and that there is also an interrelationship
between these inputs. The inputs used in the valuations at 31 December 2015 were:
* The range of the reversionary capitalisation rates applied to the portfolio
are between 7,0% and 16,0% with the weighted average being 10,2% (2014: 9,2%).
* The discount rates applied range between 13,0% and 16,5% with the weighted
average being 15,0% (2014: 14,0%).
* Changes in discount rates and reversionary capitalisation rates attributable
to changes in market conditions can have a significant impact on property
valuations. A 25 basis points increase in the discount rate will decrease the
value of investment property by R180,1m (1,39%) and a 25 basis points decrease
will increase the value of investment property by R186,5m (1,44%). A 25 basis
points decrease in the capitalisation rate will increase the value of investment
property by R190,6m (1,47%) and a 25 basis points increase will decrease the
value of investment property by R180,3m (1,39%).
Fair values are estimated twice a year, whereafter they are reviewed by the
executive directors and approved by the board of directors.
Fair value measurement of investment properties held for sale
The fair value of investment properties held for sale is based on the
expected sale price.
Directors: BJ van der Ross (Chairman)*, GM Jennett (CEO), MS Aitken**,
GS Booyens (CFO), BH Kent**, V Mahlangu**, NE Makiwane*, W McCurrie**,
MSB Neser**, V Nkonyeni**, U van Biljon (COO), G van Zyl** *Non-executive
Director **Independent Non-executive Director
Registered address: Optimum House, Epsom Downs Office Park, 13 Sloane
Street, Bryanston, 2191
Sponsor: Rand Merchant Bank (a division of FirstRand Bank Limited)
Transfer Secretaries: Computershare Investor Services (Pty) Ltd,
70 Marshall Street, Johannesburg, 2001
www.emira.co.za
Date: 17/02/2016 10:44:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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