Wrap Text
Preliminary summarised audited consolidated financial statements for the year ended 29 February 2016
Equites Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2013/080877/06)
JSE share code: EQU ISIN: ZAE000188843
(Approved as a REIT by the JSE)
("Equites" or "the company" or "the group")
Preliminary summarised audited consolidated financial statements
for the year ended 29 February 2016
Highlights
- Total distributions of 96.6 cents per share for the year ended
29 February 2016, which is 18.3% higher than the comparative year on
an adjusted full-year basis.
- NAV per share growth of 13.8% from R11.37 to R12.94 for the year.
- 187% growth in fair value of property portfolio from R1.4 billion
to R4.1 billion.
- R1.5 billion capital raised through a substantially oversubscribed
accelerated bookbuild in November 2015.
- Significant transactions concluded during the year and healthy
development pipeline established.
1. Nature of the business
Equites listed as the only specialist industrial property fund on the JSE on
18 June 2014. The company is a Real Estate Investment Trust ("REIT") and
both the property and asset management functions are managed internally.
Equites' value proposition includes a focus on the top-end of the logistics
sector and is based on sound property fundamentals. This is complemented by
its proven ability to develop A-grade industrial buildings internally and
unlock key logistics nodes.
2. Commentary on results
Following a strong first 6 months to the year, growth in distributable
earnings accelerated significantly in the 6 months to 29 February 2016 as a
result of:
- the acquisition of the Intaprop Proprietary Limited ("Intaprop") effective
1 July 2015;
- several other yield accretive acquisitions and redevelopments during the
course of the year;
- refinancing of the existing Intaprop bank loans from the beginning of
September 2015 at improved rates;
- a further reduction in already low vacancy levels to 0.6% of gross
lettable area;
- cost containment in the light of a significant growth in the portfolio
size;
- an effective hedging strategy; and
- a reduction in finance costs following the accelerated bookbuild
undertaken by the company during November 2015 that raised R1.5 billion.
Some 86% of revenue is derived from blue chip tenants on long leases and 90%
of completed properties by value are high quality logistics assets in key
locations in Cape Town and Gauteng. The company also continues to see strong
demand for modern distribution centres in the major logistics nodes. This
demand continues to be supported by the centralisation of distribution by
major retailers, increased levels of imports into South Africa and a shift
towards online retailing.
Following a successful acellerated bookbuild that raised R1.5 billion in
fresh equity, the company ended the year with a loan-to-value ratio of 11.8%.
This has put Equites in a good position to pursue further acquisitions of
logistics focussed portfolios in prime locations.
3. Distributable earnings
The board declared a final dividend of 51.18 cents per share on 5 May 2016
further to total interim dividends of 45.42 cents per share. This brings the
total distributions for the year ended 29 February 2016 to 96.6 cents per
share, which is a 57.7% growth over the prior year total distributions of
61.26 cents per share. As the prior year distributions were based on
earnings for a 9 month period, the distribution growth amounts to 18.3% on
an adjusted full year basis.
Dividends declared (cents per share) % change Feb 16 Feb 15
Interim dividends* 123.0% 45.42 20.37
Final dividend 25.2% 51.18 40.89
Total distributions for the period 57.7% 96.60 61.26
*In the financial year to 29 February 2016, the interim dividend was
composed of a special clean-out dividend of 29.03 cents per share declared
on
10 September 2015 and a final interim dividend of 16.39 cents per share
declared on 15 October 2015.
The net asset value per share of the company was 1 294 cents per share at
29 February 2016. This amounts to a 13.8% growth on the prior year closing
net asset value of 1 137 cents per share and a growth of 31.9% over the
21 months since listing.
4. Material transactions and acquisitions
4.1. Acquisition of Intaprop portfolio
Effective 1 July 2015, Equites acquired a portfolio of largely industrial
properties and vacant industrial land from Intaprop, one of the most
successful private property development companies in South Africa. This
transaction added R1.9 billion to the value of the company's portfolio and
gave it a substantial presence in Gauteng, whereas it had been exclusively
Cape Town based on listing. Of the 21 hectares of vacant industrial land
aquired with this transaction, 5.3 hectares have been applied to the Rohlig-
Grindrod development.
4.2. Acquisition of Lords View land
Equites acquired a total of 21 hectares of land in the Lords View Industrial
Park in Midrand for R180 million during the year. A new 22 227m2
distribution centre for The Foschini Group ("TFG") was recently completed on
a 4 hectare portion of this land. A further 3 hectares has been reserved for
a future extension to the TFG distribution centre. The servicing on the
remaining 14 hectares was recently completed and the company is currently
negotiating development opportunites on these sites.
4.3. Acquisition of Tunney Ridge Business Park
Equites acquired a logistics property known as the Tunney Ridge Business
Park (Gauteng) divided into 4 units with a total GLA of 13 808m2 during the
year. The total acquistion price was R137 million and Equites took transfer
of this property at the beginning of February 2016.
4.4. Atlantic Hills and Puma development
Equites acquired a 7 hectare industrial park adjacent to the Potsdam off-
ramp on the N7 highway in Cape Town for R92 million, effective 1 October
2015. The park includes one completed property let to JF Hillebrand with a
capital value of R35 million.
Equites has also concluded a 10 year development lease with Puma, the global
apparel and sportswear brand, for the construction of a new 16 262m2
distribution centre and head office at Atlantic Hills. The capital value of
the project is approximately R155 million and it is anticipated that the
Puma development will be completed in December 2016.
4.5. New Epping facility
The board of Equites approved the construction of a speculative distribution
centre development at 160 Gunners Circle, Epping, Cape Town. The modern
distribution facility has a total GLA of 8 000m2 and is expected to be
completed in September 2016. There is high demand for A-grade industrial
space in Epping and there has already been significant interest from
potential tenants.
4.6. Rohlig-Grindrod
Equites has concluded a joint venture agreement with Grindrod Property
Holdings Limited, a wholly owned subsidiary of Grindrod Limited, in terms of
which Equites will be developing a 25 000 square metre state-of-art
distribution centre and offices for Rohlig-Grindrod Proprietary Limited,
which is a joint venture company of Grindrod Limited. The Grindrod group,
which is listed on the JSE, is a fully integrated freight logistics and
shipping service provider with offices in 43 countries worldwide.
The completed development will be owned in equal shares by Equites and
Grindrod, with each party owning an undivided half share of the developed
property. The development will be situated on 5.3 hectares of vacant land
already owned by Equites in Meadowview Business Estate in Gauteng.
Following the above transactions, the company has approximately 36 hectares
of prime, serviced industrially zoned land available for development.
Equites is pursuing a number of opportunities for distribution centres on
these parcels of land, which will ultimately amount to a capital value of
approximately R2 billion.
5. Funding
During November 2015 Equites raised R1.5 billion through an accelerated
bookbuild. The company successfully placed 120 million shares at 1 250 cents
per share with investors. At this level, the bookbuild was heavily
oversubscribed.
The company had a loan-to-value of 11.8% at 29 February 2016 and undrawn
bank loans of some R1.6 billion. 79.6% of outstanding debt was hedged
against interest rate fluctuations at year end. The average effective fixed
rate was 8.96% as follows:
Description Effective
Amount rate Maturity
Interest rate swap 100 000 8.85% 31 August 2019
Embedded hedges in leases 306 000 9.00% 31 August 2022
Total 406 000 8.96%
% of bank loans at year end 79.6%
6. Vacancies
Equites' industrial portfolio remains fully let and its office portfolio has
a vacancy of only 7.0% of gross lettable area, which is in line with the
normal churn in multi-tenanted buildings. As the portfolio size has grown
substantially, total vacancies as a percentage of gross lettable area have
decreased from 2.9% in the prior year to 0.6% at the end of the current
financial year.
7. Prospects
The company's strong property fundamentals and low gearing provides
protection from the weak economic climate. Acquisitions of quality logistics
in South Africa and a healthy development pipeline will grow the portfolio
value and distributions above this baseline.
The board is confident that as a result of the strong property fundamentals,
the company will achieve 10% - 12% distribution growth over the next
financial year. This guidance is based on the assumptions that a stable
macro-economic environment will prevail, no major corporate failures will
occur and tenants will be able to absorb the recovery of rising utility
costs and municipal rates. This forecast has not been audited or reviewed by
Equites' auditors.
8. Subsequent events
The directors are not aware of any matters or circumstances arising
subsequent to 29 February 2016 that require any additional disclosure or
adjustments to the financial results.
9. Basis of preparation
The preliminary summarised consolidated financial statements are prepared in
accordance with the JSE Listings Requirements for preliminary reports and
the requirements of the Companies Act of South Africa. The JSE Listings
Requirements require preliminary reports to be prepared in accordance with
the framework concepts and the measurement and recognition requirements of
International Financial Reporting Standards ("IFRS"), the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and
Financial Pronouncements as issued by the Financial Reporting Standards
Council and to also, as a minimum, contain the information required by IAS
34, Interim Financial Reporting. Except for the adoption of revised and new
standards that became effective during the year, all accounting policies
applied in the preparation of these summarised consolidated financial
statements are in terms of IFRS and are consistent with those applied in the
previous consolidated financial statements. There was no material impact on
the annual financial statements as a result of the adoption of these
standards.
The auditors, Moore Stephens Cape Town Inc., have issued their opinion on
the group's annual financial statements for the year ended 29 February 2016.
The audit was conducted in accordance with International Standards on
Auditing. They have issued an unmodified audit opinion. These preliminary
summarised consolidated financial statements have been derived from the
group financial statements and are consistent, in all material respects,
with the group financial statements. The directors take full responsibility
for the preparation of the preliminary summarised consolidated financial
statements and for ensuring that the financial information has been
correctly extracted from the underlying audited annual financial statements.
This preliminary report has been audited by Moore Stephens Cape Town Inc.
and an unmodified audit opinion issued. The auditor's report does not
necessarily report on all of the information contained in this announcement.
Shareholders are therefore advised that in order to obtain a full
understanding of the nature of the auditor's engagement, they should obtain
a copy of that report together with the accompanying financial information
from Equites' registered address.
Bram Goossens (CA) SA, in his capacity as Financial Director, was
responsible for the preparation of these summarised consolidated financial
results.
10. Final dividend
Notice is hereby given of the declaration of the final dividend number 5 of
51.17587 cents per share.
As Equites is a REIT, the dividend meets the definition of a æqualifying
distribution' for the purposes of section 25BB of the Income Tax Act, No. 58
of 1962 (Income Tax Act). Qualifying distributions received by South African
tax residents will form part of their gross income in terms of section
10(1)(k)(i)(aa) of the Income Tax Act). Consequently, these dividends are
treated as income in the hands of the shareholders and are not subject to
dividends withholding tax. The exemption from dividends withholding tax is
not applicable to non-resident shareholders, but they may qualify for relief
under a tax treaty.
Holders of uncertificated shares have to ensure that they have verified
their residence status with their Central Securities Depository Participant
("CSDP") or broker. Holders of certificated shares will be asked to complete
a declaration to the company.
An announcement with further details regarding the tax treatment of the
dividend will be released separately on SENS.
The dividend is payable to shareholders in accordance with the timetable set
out below:
2016
Last day to trade cum dividend distribution Friday, 20 May
Shares trade ex dividend distribution Monday, 23 May
Record date Friday, 27 May
Payment date Monday, 30 May
Share certificates may not be dematerialised or rematerialised between
Monday, 23 May 2016 and Friday, 27 May 2016, both days inclusive.
In respect of dematerialised shareholders, the dividend will be transferred
to the CSDP account / broker accounts on Monday, 30 May 2016. Certificated
shareholders' dividend payments will be paid to certificated shareholders'
bank accounts on Monday, 30 May 2016.
By order of the Board
Equites Property Fund Limited
5 May 2016
Consolidated statement of financial position
Audited Audited
29 February 28 February
2016 2015
R'000 R'000
ASSETS
Non-current assets
Fair value of investment property
(excluding straight-lining) 4 017 578 1 416 949
Straight-lining lease accrual 93 581 14 928
Property, plant and equipment 1 786 1 847
4 112 945 1 433 724
Current assets
Current tax receivable - 91
Trade and other receivables 62 360 4 479
Financial assets held at fair value 47 100 4 489
Cash and cash equivalents 3 962 3 582
113 422 12 641
TOTAL ASSETS 4 226 367 1 446 365
EQUITY AND LIABILITIES
Equity and reserves
Stated capital 3 180 784 1 140 599
Accumulated profit 438 689 160 215
Shared-based payment reserve 1 366 201
3 620 839 1 301 015
Liabilities
Non-current liabilities
Financial liabilities 433 645 127 372
433 645 127 372
Current liabilities
Financial liabilities 94 103 -
Derivative financial liability - 512
Trade and other payables 77 780 17 466
171 883 17 978
TOTAL LIABILITIES 605 528 162 816
TOTAL EQUITY AND LIABILITIES 4 226 367 1 463 831
Consolidated statement of comprehensive income
Audited Audited
year ended year ended
29 February 28 February
2016 2015
R'000 R'000
Revenue
Contractual revenue and tenant recoveries 257 026 115 664
Straight-lining of leases adjustment 78 653 14 928
335 679 130 592
Other gains 1 248 158
Property operating and management expenses (42 454) (24 480)
Net property income 294 473 106 270
Administrative expenses (16 973) (7 742)
Operating profit 277 500 98 528
Fair value adjustments - investment property 138 529 115 609
Fair value adjustments - financial instruments 4 248 (512)
Finance costs (40 074) (15 628)
Finance income 3 667 2 425
Financial instrument capital loss - (1 490)
Formation and listing costs - (14 901)
Net profit before tax 383 870 184 031
Income tax expense - -
Profit for the period 383 870 184 031
OTHER COMPREHENSIVE INCOME - -
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 383 870 184 031
PROFIT ATTRIBUTABLE TO:
Owners of the parent 383 870 184 031
Non-controlling interest - -
383 870 184 031
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent 383 870 184 031
Non-controlling interest - -
383 870 184 031
Basic earnings per share (cents) 230.6 204.6
Diluted earnings per share (cents) 229.9 204.4
Consolidated statement of cash flows
Audited Audited
year ended year ended
29 February 28 February
2016 2015
R'000 R'000
Cash flows from operating activities
Profit before tax 383 870 184 031
Adjusted for:
Finance costs 40 074 15 628
Finance income (3 667) (2 425)
Straight-lining of leases adjustment (78 653) (14 928)
Fair value adjustments (138 529) (115 097)
Amortisation 346 58
Share based payment charge 1 165 201
Increase in trade and other receivables (44 573) (4 479)
Increase in trade and other payables 16 566 17 466
Cash generated from operations 176 599 80 455
Finance costs paid (65 484) (15 628)
Finance income received 606 2 238
Tax paid 91 (91)
Dividends paid (105 396) (23 816)
Net cash flows from operating activities 6 417 43 158
Cash flows utilised by investing activities
Acquisition of investment properties (398 246) (811 171)
Investment in financial instrument (180 000) (200 000)
Amount received from sale of financial instrument 144 000 195 698
Acquisition of property, plant and equipment (285) (1 905)
Cash acquired as part of acquisition 20 807 -
Net cash flows utilised by investing activities (413 725) (817 378)
Cash flows from financing activities
Proceeds from share issue 1 491 268 650 430
Proceeds from bank loans 1 482 532 127 372
Bank loans repaid (2 566 112) -
Net cash flows from financing activities 407 688 777 802
Net movement in cash and cash equivalents 380 3 582
Cash and cash equivalents at the
beginning of the year 3 582 -
Cash and cash equivalents at the end of the year 3 962 3 582
Consolidated statement of changes in equity
Audited February 2015
Reserves/
Stated Retained
capital earnings Total
Audited R'000 R'000 R'000
Balance at 1 March 2014 - - -
Total comprehensive income - 184 031 184 031
Shares issued for property and
subsidiary acquisitions 490 169 - 490 169
Shares issued for cash on listing 650 430 - 650 430
Share-based payment movement - 201 201
Dividends distributed to shareholders - (23 816) (23 816)
Balance at 28 February 2015 1 140 599 160 416 1 301 015
Audited February 2016
Reserves/
Stated Retained
capital earnings Total
Audited R'000 R'000 R'000
Balance at 1 March 2015 1 140 599 160 416 1 301 015
Total comprehensive income - 383 870 383 870
Shares issued for property and
subsidiary acquisitions 548 917 - 548 917
Shares issued for cash 1 500 000 - 1 500 000
Share-based payment movement - 1 165 1 165
Dividends distributed to shareholders - (105 396) (105 396)
Share issue costs (8 732) - (8 732)
Balance at 29 February 2016 3 180 784 440 055 3 620 839
Summarised operating segment information
Audited Audited
year ended year ended
29 February 28 February
2016 2015
R'000 R'000
Revenue
Industrial 214 777 93 851
Office 42 249 21 813
Non-property - -
Straight-lining of leases 78 653 14 928
335 679 130 592
Operating profit
Industrial 189 305 75 393
Office 26 515 15 949
Non-property (16 973) (7 742)
Straight-lining of leases 78 653 14 928
277 500 98 528
Total assets
Industrial 3 929 195 1 041 017
Office 152 529 383 327
Non-property 51 062 7 093
Straight-lining of leases 93 581 14 928
4 226 367 1 446 365
Selected explanatory notes to the results
1. Earnings per share - group
This note provides the obligatory information in terms of IAS 33 Earnings
per share and SAICA Circular 2/2015 for the group and should be read in
conjunction with note 2, where earnings are reconciled to distributable
earnings. Distributable earnings determine the dividend declared to
shareholders, which is a meaningful metric for a stakeholder in a REIT.
1.1 Basic earnings per share
2016 2015
Shares in issue Number Number
of shares of shares
Number of shares in issue at end of year 279 862 466 114 410 255
Weighted average number of shares in issues 166 498 769 89 935 947
Add: weighted potential dilutory impact
of condition shares 231 134 79 250
Diluted weighted average number of shares
in issues 166 965 077 90 015 198
Basic earnings per share cents cents
Basic earnings per share 230.6 204.6
Diluted earnings per share 229.9 204.4
1.2 Headline earnings per share
Reconciliation between basic earnings
and headline earnings: R'000 R'000
Earnings (profit attributable to owners
of the parent) 383 870 184 031
Adjusted for:
Fair value adjustments to investment properties (138 529) (115 609)
Headline earnings 245 341 68 422
Headline earnings per share: cents cents
Headline earnings per share 147.4 76.1
Diluted headline earnings per share 146.9 76.0
2. Reconciliation between earnings and distributable earnings - group
2.1 Distributable earnings
Audited Audited
year ended year ended
29 February 28 February
2016 2015
R'000 R'000
Earnings (profit attributable to owners
of the parent) 383 870 184 031
Adjusted for:
Fair value adjustments to investment properties (138 529) (115 609)
Headline earnings 245 341 68 422
Adjusted for:
Straight-lining of leases adjustment (78 653) (14 928)
Fair value adjustments to financial instruments (4 248) 512
Formation and listing costs - 14 901
Equity-settled share-based payment reserve 1 165 201
Financial instrument capital loss - 1 490
Antecedent dividend* 37 759 -
Distributable earnings 201 364 70 598
*In the determination of distributable earnings, the group elects to make an
adjustment for the antecedent dividend arising as result of the issue of
shares during the period for which the Company did not have full access to
the cash flow from such issue. The acquisition of Intaprop Hills (Pty) Ltd
on 1 October 2015 (2 880 313 shares), accelerated bookbuild on 19 November
2015 (120 000 000 shares) and the acquisition of Lord's View on 24 November
2015 (4 915 968 shares) all gave rise to antecedent dividends.
2.2 Dividends declared and distribution per share
Total distributions for the year - 2016 Cents per share R'000
Special clean-out distribution declared
on 10 September 2015 (Dividend number 3) 29.03 33 218
Interim dividend declared on 15 October 2016
(Dividend number 4) 16.39 24 924
Final dividend declared on 5 May 2016
(Dividend number 5) 51.18 143 222
Total distributions for the year ended
29 February 2016 96.60 201 364
Total distributions for the year - 2015 Cents per share R'000
Interim dividend declared 10 October 2014
(Dividend number 1) 20.37 23 131
Final dividend declared on 12 May 2015
(Dividend number 2) 40.89 46 782
Total distributions for the year ended
28 February 2015 61.26 69 913
Total distributable earnings for the year ended 28 February 2015 was R70 598
000. R685 000, however, related to the distributable earnings for the first
three months of the reporting period and was declared as a pre-listing
clean-out distribution to the vendor shareholders.
3. Investment property
(excluding straight-lining) 29 February 28 February
2016 2015
R'000 R'000
Investment property (note 3.1) 3 524 981 1 402 549
Investment property under development (note 3.2) 126 296 -
Freehold land available for development 366 301 14 400
4 017 578 1 416 949
3.1 Reconciliation of investment property
Opening balance 1 402 549 -
Additions arising from acquisitions 1 837 488 1 286 940
Completed projects transferred from
investment properties development 146 415 -
Redevelopment site transfered to investment
properties under development (18 100) -
Fair value adjustment 138 529 115 609
Fair value of investment properties
(excluding straight-lining) 3 524 981 1 402 549
3.2 Investment properties under development
Opening balance - -
Land cost and transfer of redevelopment site 159 677 -
Construction and development costs 113 034 -
272 711 -
Completed projects transferred to
investment property (146 415) -
Fair value of investment properties
under development 126 296
4. Property analysis
4.1 Tenant profile
Gross Gross
lettable lettable Number Number
area (m2) area % of tenants of tenants %
A - Large nationals,
large listeds
and government 250 050 87.4% 33 50.8%
B - Smaller
international
and -national tenants 19 880 6.9% 7 10.8%
C - Other local
tenants and
sole proprietors 14 591 5.1% 24 38.5%
Vacant 1 737 0.6% - 0.0%
286 258 100.0% 64 100.0%
4.2 Vacancy profile
Gross
lettable Vacant
area (m2) area (m2) Vacancy %
Industrial 261 496 - 0.0%
Commercial 24 762 1 737 7.0%
286 258 1 737 0.6%
4.3 Lease expiry profile
Lease expiry profile Based on Based
revenue on GLA
Vacant 0.00% 0.71%
Monthly 0.44% 1.27%
Expiry in the year to 29 February 2017 6.23% 7.17%
Expiry in the year to 28 February 2018 5.98% 4.37%
Expiry in the year to 28 February 2019 9.62% 10.88%
Expiry in the year to 28 February 2020 20.85% 23.69%
Thereafter 56.88% 51.91%
100.00% 100.00%
4.4 Weighted average escalations and yield
Sector Yield Escalation
Industrial 8.38% 7.98%
Commercial 8.71% 7.78%
8.40% 7.95%
Directorate and administration
Directors
A Taverna-Turisan (CEO)^, GR Gous (COO), B Goossens (CFO), PL Campher*+
(Chairman), G Lanfranchi* (Deputy Chairman), AJ Gouws*#, K Dreyer*,
N Khan*+, RE Benjamin-Swales*+
*Non-executive
+Independent
^Italian
#AJ Gouws was appointed on 1 September 2015 and JH Cullum resigned
on 21 July 2015.
Registered office
14th Floor
Portside Towers
4 Bree Street
Cape Town
8000
Contact details
info@equites.co.za
Company secretary
Riaan Gous
Transfer secretary
Trifecta Capital Services Proprietary Limited was appointed as
transfer secretary on 7 December 2015.
Auditors
Moore Stephens Cape Town Inc.
Sponsor
Java Capital
Bankers
Nedbank Limited
Attorneys
Cliffe Dekker Hofmeyr Inc.
Date: 05/05/2016 01:29:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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