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Unaudited Results For The 6 Months Ended 31 March 2016
INDLUPLACE PROPERTIES LIMITED
(Previously Arrowhead Residential Limited)
(Incorporated in the Republic of South Africa)
(Registration number: 2013/226082/06)
JSE share code: ILU ISIN: ZAE000201125
(Approved as a REIT by the JSE)
("Indluplace" or "the company")
UNAUDITED RESULTS FOR THE 6 MONTHS ENDED 31 March 2016
- Dividend of 46 cents per share;
- Portfolio growth of 29%;
- Positive uptake of units at Honey Park; and
- Ungeared portfolio.
NATURE OF BUSINESS
Indluplace is the only focused residential REIT listed on the JSE. The company listed on 19 June 2015 and owns a substantial
residential property portfolio from which it pays growing dividends to its shareholders. It is Indluplace's stated intention to
aggressively grow the portfolio by acquiring yield enhancing properties and portfolios that provide income from the date of
acquisition. Indluplace is positioned to assist in overcoming the shortage of rental housing in South Africa by providing an
exit for developers and owners of residential stock or portfolios who will reinvest the capital in additional stock. By
utilising specialist outsourced property managers for the respective portfolios, Indluplace assists in raising the bar around
providing excellent tenant management in a sector often characterised by poor and even abusive management practices.
Summarised distributable income analysis
Audited for
Unaudited for Unaudited for the year
the period the period ended
ended ended 30 September
R 31 March 2016 31 March 2015 2015
Revenue (excluding straight line rental income) 160 737 822 38 443 837 157 833 379
Property expenses (56 197 502) (13 926 733) (47 599 227)
Administration costs (5 797 274) (3 440) (4 105 869)
Finance expenses (499 304) (24 569 298) (55 411 443)
Finance income 8 418 801 55 634 5 345 529
Antecedent dividends 3 855 441 - 10 198 321
Distributable income 110 517 984 - 66 260 690
Reconciliation to amount distributable
Distributable income 110 517 984 - 66 260 690
Distributed:
Distribution for the quarter ended 30 June 2015 - - (12 005 262)
Distribution for the quarter ended 31 December 2015 (55 087 474) - -
Amount declared for quarter ended 31 March 2016 and
30 September 2015 55 430 510 - 54 255 428
Cents Cents Cents
Distribution per share for the quarter ended 31 December 2015 ### 22.93067 - -
Distribution per share for the quarter ended 31 March 2016 23.07346 - -
Distribution per share for the quarter ended 30 June 2015 - - # 6.20834
Distribution per share for the quarter ended 30 September 2015 - - ## 22.78348
46.00413 - 28.99182
Property expense ratio - Gross ^ 35.0% 36.2% 30.2%
Property expense ratio - Net ^ 24.2% 29.0% 20.8%
Net asset value per share (cents) 1 007.56 16 649 354.00* 1 000.58
* NAV was calculated on 100 shares in issue at 31 March 2015. All shares were owned by Arrowhead Properties Limited.
# Calculated on 193 373 003 shares in issue on 30 June 2015.
## Calculated on 238 134 907 shares in issue on 30 September 2015.
### Calculated on 240 234 907 shares in issue on 10 February 2016.
^ In prior periods Indluplace used the gross property expense ratio but has now adopted SA Reit best practice whereby the net property
expense ratio is recommended. On the net basis, utility expenses are deducted from utility recoveries and included in the property expenses when
calculating the ratio.
COMMENTARY
Indluplace has changed considerably since its prior comparable reporting period. As at 31 March 2015 Indluplace was a
wholly-owned subsidiary of Arrowhead Properties Limited ("Arrowhead") with a property portfolio valued at R785 million.
Indluplace listed on the Main Board of the JSE on 19 June 2015 with a property portfolio valued at R1.6 billion. Property
portfolios valued at R1.1 billion and R500 million were acquired over the 6 months to 30 September 2015 and 31 March 2016
respectively. These acquisitions increased the residential units from 1 659 units at 31 March 2015 to 3 690 units at
30 September 2015. Indluplace owned 5 037 units at 31 March 2016. Given the substantial increase in the property portfolio,
comparisons to the prior period may not be meaningful.
REVENUE
Revenue includes rental income and expenditure that is recoverable from tenants. Revenue has increased from R41.5 million
(31 March 2015) to R160.7 million (31 March 2016) as the full effect of the acquisitions concluded during the previous financial
year, together with the impact of acquisitions concluded during this period and annual escalations to the existing leases, are
taken into account.
PROPERTY PORTFOLIO
31 March 2016 30 September 2015
Buildings 109 95
Residential Units 5 037 3 690
Vacancy 6.2% * 3.0%
GLA - m(2) 12 647 9 469
Retail
Vacancy 5.1% 3.5%
* This excludes the units occupied by Monash SA at September 2015, subsequently handed back in December 2015. If these units
were included, the vacancy would increase to 9.4%.
We continue to focus on vacancies and are working closely with our property managers to implement agreed strategies to reduce
the percentage vacancies. These strategies have already shows positive results.
Residential unit spread
%
Johannesburg inner city 39
Johannesburg suburbs 32
Midrand 1
Pretoria 8
Benoni/Springs 4
Soweto 3
Vanderbijlpark 4
Witbank 9
100
Residential unit category
%
Rooms 5
Bachelors 21
One bed 15
Two bed 45
Three bed 11
Greater than three bed 3
100
Residential building type
%
High rise 39
Walk-up 61
100
PROPERTY EXPENSES
Property expenses have increased from R13.9 million to R56.2 million which is in line with the increased property portfolio.
The increase in the net property expense ratio from 20.8% at 30 September 2015 to 24.2% at 31 March 2016 is attributable to the
acquisition of the Connaught and Prime portfolios, additional maintenance at Highveld View and Bree Street and the
restructuring of the Monash head-lease, where 97 units and 236 units were handed back in July and December 2015 respectively.
ADMINISTRATIVE EXPENSES
Administrative costs have increased in line with the expansion of the company's management team. Previously, Indluplace was a
wholly-owned subsidiary of Arrowhead and pre-listing, corporate and head office expenses were borne by Arrowhead.
FINANCE INCOME
31 March 2016 31 March 2015 30 September 2015
R R R
Interest on Share Purchase and Option Scheme 8 087 966 - 5 096 200
Interest on cash balances 330 835 55 634 249 329
Total 8 418 801 55 634 5 345 529
Finance income relates to interest received on bank balances and interest on loans to participants of the Indluplace Share
Purchase and Option Scheme. The interest on the Share Purchase and Option Scheme loans is equal to the dividends paid on the
shares issued as part of the scheme.
FINANCE CHARGES
31 March 2016 31 March 2015 30 September 2015
R R R
Interest paid on secured financial liabilities - - 6 091 284
Interest paid to holding company 499 304 24 569 298 47 945 443
Amortisation of structuring fee - - 1 368 000
Other - - 6 716
Total 499 304 24 569 298 55 411 443
The interest charged in the current period relates to interest charged on the shareholder's loan from Arrowhead for the
acquisition of properties during the period. The interest paid to Arrowhead for the year ended 31 September 2015
relates to the pre-listing distributions paid to Arrowhead as Indluplace's parent company.
INVESTMENT PROPERTY
Investment property has increased from R1.7 billion (30 September 2015) to R2.2 billion (31 March 2016). The number of residential
properties within the portfolio has increased from 95 to 109. The following portfolios were acquired during the 6 months ended
31 March 2016:
Portfolio Effective date R Units Description
Prime 01 November 2015 68 500 000 166 Suburban walk-up
Connaught 01 November 2015 420 000 000 1 181 Inner city high rise
Total 488 500 000 1 347
As released on SENS on 4 April 2016, Indluplace, by mutual agreement with the South African Workforce Housing Fund managed by
the International Housing Solutions Group ("IHS"), has elected not to proceed with the R707 million transaction at this time.
The Indluplace investment policy determines that the company will only conclude acquisitions that are yield enhancing. Due to
the change in market conditions, the transaction between Indluplace and IHS, were it to proceed, would have been dilutionary.
Properties transferred after 31 March 2016:
R Units Description
Greenshanks 36 500 000 119 Suburban walk-up
JWS - Empire Gardens 27 200 000 84 Inner city high rise
Total 63 700 000 203
Properties in the process of transferring:
R Units Description
Longfellow 35 500 000 51 Student housing walk-up
JWS – 4 remaining properties 49 300 000 156 Inner city walk-up
Total 84 800 000 207
TRADE AND OTHER RECEIVABLES
Trade receivables, deposits and payments in advance and receivables from property managers, increased from R36.9 million to
R43.2 million in line with the increased portfolio. Of this amount, trade receivables amounted to R0.9 million. The balance
comprises municipal deposits, amounts receivable from our property managers and the interest element relating to the loans to
participants of the Indluplace Share Purchase and Option Scheme.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents decreased by R11.4 million to R24.0 million as a result of utilising available cash resources for
property acquisitions.
TRADE AND OTHER PAYABLES
Trade and other payables increased from R25.4 million to R31.3 million as result of the enlarged portfolio.
CHANGE IN DIRECTORATE
As released on SENS on 12 December 2015, with effect from 14 March 2016, Gerald Leissner stepped down as Chief Executive Officer
("CEO") but remains on the board as an executive director. Carel de Wit assumed the role of CEO and Terence (Terry) Kaplan was
appointed as Financial Director.
PROSPECTS
The company is on-track to achieve the forecast guidance of 92.55 cents for the year to 30 September 2016, as communicated in
November 2015. This forecast has not been reviewed or audited by the company's auditors, Grant Thornton.
The board is confident that Indluplace will grow the portfolio substantially over the next few years, notwithstanding current
market conditions. Acquisition prices still need to adjust as a result of the current financial climate. Indluplace aims to position
itself as an exit for developers or owners of residential stock or portfolios.
Payment of dividend for the quarter ended 31 March 2016
The board of directors has declared a gross dividend of 23.07346 cents per share (dividend number 4) for the quarter ended
31 March 2016, in accordance with the timetable set out below:
2016
Last date to trade cum dividend Friday, 27 May
Shares trade ex dividend Monday, 30 May
Record date Friday, 3 June
Payment date Monday, 6 June
Shares may not be dematerialised or rematerialised between Monday, 30 May 2016 and Friday, 3 June 2016, both days inclusive.
Payment of the dividend will be transferred to dematerialised shareholders' CSDP/broker accounts on Monday, 6 June 2016.
Certificated Shareholders' dividend payments will be paid to certificated shareholders' bank accounts on or about Monday, 6 June
2016.
TAX TREATMENT OF DISTRIBUTION
In accordance with Indluplace'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").
The distribution on shares will be deemed to be a dividend, for South African tax purposes, in terms of section 25BB of
the Income Tax Act.
The dividend received by or accrued to South African tax residents must be included in the gross income of such
shareholders and will not be exempt from income tax (in terms of the exclusion to the general dividend exemption,
contained in paragraph (aa) of section 10(1)(k)(i) of the Income Tax Act) because they are dividends distributed by a
REIT. This dividend is, however, exempt from dividends withholding tax in the hands of South African tax resident
shareholders, provided that the South African resident shareholders 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
company, 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 company, 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 company, 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.
Dividends received by non-resident shareholders will not be taxable as income and instead will be treated as dividends
which are exempt from income tax in terms of the general dividend exemption in section 10(1)(k)(i) of the Income Tax
Act. It should be noted that up to 31 December 2013 dividends received by non-residents from a REIT were not subject
to dividend withholding tax. From 1 January 2014, any dividend received by a non-resident from a REIT is 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 shareholders. Assuming dividend
withholding tax will be withheld at a rate of 15%, the net dividend amount due to non-resident shareholders is 19.61244 cents
per share. A reduced dividend withholding rate in terms of the applicable DTA, may only be relied on if the
non-resident shareholders have provided the following forms to their CSDP or broker, as the case may be, in respect of
uncertificated shareholders, or the company, in respect of certificated shareholders:
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 company, 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 company, 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.
Shares in issue at the date of declaration of this dividend: 240 234 907
Indluplace's income tax reference number: 9390/649/177
DIVIDEND DECLARATION AFTER REPORTING DATE
In line with IAS 10 Events after the Reporting Period, the declaration of the dividend occurred after the end of the reporting
period, resulting in a non-adjusting event which is not recognised in the financial statements.
DIVIDEND
Dividends will be paid in respect of the quarters ending 31 December, 31 March, 30 June and 30 September in March, June,
September and December respectively.
BASIS OF PREPARATION
The unaudited interim group financial statements for the six months ended 31 March 2016 have not been reviewed or reported on by
the company's independent auditors, Grant Thornton. The financial statements have been prepared in accordance with the
requirements of International Financial Reporting Standards, the SAICA Financial Reporting Guides as issued by the Financial
Practices Committee and the Financial Reporting pronouncement as issued by the Financial Reporting Standard Council, IAS 34:
Interim Financial Reporting, the JSE Listings Requirements and the requirements of the South African Companies Act, 2008. These
results have been prepared under the supervision of Terry Kaplan CA (SA), Indluplace's Financial Director.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited for Unaudited for
6 months ended 6 months ended Audited year ended
R 31 March 2016 31 March 2015 30 September 2015
Property portfolio revenue
Contractual rental income 137 845 868 38 443 837 139 109 134
Recoveries 22 891 954 - 18 724 245
Straight line rental income accrual - 3 095 030 1 412 296
Total revenue 160 737 822 41 538 867 159 245 675
Operating costs (56 197 502) (13 926 733) (47 599 227)
Administration costs (5 797 274) (3 440) (4 105 869)
Net operating profit 98 743 046 27 608 694 107 540 579
Changes in fair values - - 89 573 207
Profit from operations 98 743 046 27 608 694 197 113 786
Net finance income/(charges) 7 919 497 (24 513 664) (50 065 914)
Finance charges (499 304) (24 569 298) (55 411 443)
Finance income 8 418 801 55 634 5 345 529
Profit before taxation 106 662 543 3 095 030 147 047 872
Taxation - - -
Total comprehensive income for the year 106 662 543 3 095 030 147 047 872
Reconciliation of earnings, headline earnings and distributable earnings
Profit for the year attributable to equity holders 106 662 543 3 095 030 147 047 872
Change in fair value of investment properties - - (89 573 207)
Deferred tax thereon - - -
Headline profit attributable to equity holders 106 662 543 3 095 030 57 474 665
Straight line rental income accrual - (3 095 030) (1 412 296)
Deferred tax thereon - - -
Antecedent dividends 3 855 441 - 10 198 321
Amount avaliable for distribution 110 517 984 - 66 260 690
Reconciliation of amount avaliable for distribution
Amounts available for distribution to shareholders 110 517 984 - 66 260 690
Distributed for the quarter ended 30 June 2015 - - (12 005 262)
Distributed for the quarter ended 31 December 2015 (55 087 474) - -
Amount available for distribution for the quarter ended 31 March 2016 and the
year ended 30 September 2015 55 430 510 - 54 255 428
Number of shares in issue at period end 240 234 907 100 193 373 003
Number of shares in issue used for the calculation of distribution per share (last quarter) 240 234 907 100 238 134 907
Weighted average number of shares in issue used for the calculation of earnings and headline
earnings per share 232 742 844 100 52 280 618
Basic and diluted earnings per share (cents) 45.83 3 095 030.00 281.27
Headline and diluted earnings per share (cents) 45.83 3 095 030.00 109.93
Dividends per share (cents) 46.00 - 28.99
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited
Unaudited Unaudited at
at at 30 September
R 31 March 2016 31 March 2015 2015
ASSETS
Non-current assets 2 382 936 624 787 847 840 1 887 250 990
Investment property 2 207 142 994 787 847 840 1 711 457 360
Fair value of property portfolio for accounting purposes 2 206 458 363 785 480 475 1 710 772 729
Straight line rental income accrual 684 631 2 367 365 684 631
Loans to participants of Indulplace Share Purchase and Option Scheme 175 793 630 - 175 793 630
Current assets 68 889 694 15 618 203 73 023 938
Trade and other receivables 43 192 306 1 159 304 36 986 915
Loan to shareholder 1 684 008 - 631 214
Cash and cash equivalents 24 013 380 14 458 899 35 405 809
Total assets 2 451 826 318 803 466 043 1 960 274 928
EQUITY AND LIABILITIES
Shareholders interest 2 420 522 500 16 649 354 1 934 848 508
Stated capital 2 274 606 016 100 1 786 251 674
Reserves 145 916 484 16 649 254 148 596 834
Other non current liabilities - 758 322 454 -
Loan from shareholder - 758 322 454 -
Current liabilities 31 303 818 28 494 235 25 426 420
Trade and other payables 31 303 818 3 924 937 25 426 420
Loan from shareholder - 24 569 298 -
Total equity and liabilities 2 451 826 318 803 466 043 1 960 274 928
Number of shares in issue 240 234 907 100 193 373 003
Net asset value per ordinary share (cents) 1 007.56 16 649 354.00 1 000.58
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
R Stated capital Reserves Total
Balance at 30 September 2014 100 13 554 224 13 554 324
Total comprehensive income for the 6 months - 3 095 030 3 095 030
Balance at 30 March 2015 100 16 649 254 16 649 354
Issue of shares 1 786 251 574 - 1 786 251 574
Dividends: - (12 005 262) (12 005 262)
1 month ended 30 June 2015 - (12 005 262) (12 005 262)
Total comprehensive income for the 6 months - 143 952 842 143 952 842
Balance at 30 September 2015 1 786 251 674 148 596 834 1 934 848 508
Issue of shares 488 354 342 - 488 354 342
Dividends: - (109 342 893) (109 342 893)
Quarter ended 30 September 2015 - (54 255 419) (54 255 419)
Quarter ended 31 December 2015 - (55 087 474) (55 087 474)
Total comprehensive income for the 6 months - 106 662 543 106 662 543
Balance at 30 March 2016 2 274 606 016 145 916 484 2 420 522 500
CONDENSED CONSOLDIATED STATEMENTS OF CASH FLOW
Unaudited for Unaudited for Audited for the
the 6 months the 6 months year ended
ended ended 30 September
R 31 March 2016 31 March 2015 2015
Net cash generated from operating activities (3 008 343) 4 780 543 34 511 522
Net cash utilised in investing activities (474 685 634) (2 889 704) (1 100 522 562)
Net cash generated from financing activities 466 301 548 2 099 180 1 090 947 969
Net movement in cash and cash equivalents (11 392 429) 3 990 019 24 936 929
Cash and cash equivalents at the beginning of the period 35 405 809 10 468 880 10 468 880
Cash and cash equivalents at the end of the period 24 013 380 14 458 899 35 405 809
CONSOLIDATED CONDENSED SEGMENTAL ANALYSIS
The entity has two reportable segments based on the geographic split of the country which are the entity's strategic business segments. For each strategic business segment, the entity's
executive directors review internal management reports on a monthly basis. All segments are located in South Africa. There are no single major tenants. The following summary describes
the operations in each of the entity's reportable segments.
Period ended 31 March 2016 Period ended Year ended 30 September 2015
31 March 2015
R Gauteng Mpumalanga Total Gauteng and Total Gauteng Mpumalanga Total
Property portfolio revenue
Rental income and recoveries 141 019 838 19 717 984 160 737 822 38 443 837 140 532 283 17 301 096 157 833 379
Straight line rental income accrual - - - 3 095 030 1 412 296 - 1 412 296
Total revenue 141 019 838 19 717 984 160 737 822 41 538 867 141 944 579 17 301 096 159 245 675
Operating costs (51 271 839) (4 925 663) (56 197 502) (13 926 733) (44 981 256) (2 617 971) (47 599 227)
Segmental profit 89 747 999 14 792 321 104 540 320 27 612 134 96 963 323 14 683 125 111 646 448
Administration costs (5 797 274) (3 440) (4 105 869)
Net operating profit 98 743 046 27 608 694 107 540 579
Changes in fair values - - 89 573 207
Profit from operations 98 743 046 27 608 694 197 113 786
Net finance income/(charges) 7 919 497 (24 513 664) (50 065 914)
Finance charges (499 304) (24 569 298) (55 411 443)
Finance income 8 418 801 55 634 5 345 529
Profit before taxation 106 662 543 3 095 030 147 047 872
Taxation - - -
Total comprehensive income for the year 106 662 543 3 095 030 147 047 872
Reportable segment assets 2 138 460 814 313 365 504 2 451 826 318 803 466 043 1 648 139 180 312 135 748 1 960 274 928
Reportable segment liabilities (28 154 218) (3 149 600) (31 303 818) (786 816 689) (22 388 834) (3 037 586) (25 426 420)
(2 110 306 596) (310 215 904) (2 420 522 500) (16 649 354) (1 625 750 346) (309 098 162) (1 934 848 508)
By order of the Board
11 May 2016
Directors
T Adler (Chairperson)*, C Abrams*^, C de Wit (CEO), M Kaplan, T Kaplan (FD), G Kinross*^ (Lead independent director),
G Leissner, S Noik*, A Rehman*^, I Suleman.
* Non-executive, ^ Independent. All directors are South African.
Registered office
2nd Floor, 18 Melrose Boulevard, Melrose Arch, Melrose, Johannesburg, 2196.
PO Box 685, Melrose Arch, 2076.
Transfer secretaries
Computershare Investor Services Proprietary Limited.
Sponsor
Java Capital
Company secretary
CIS Company Secretaries Proprietary Limited.
Website
www.indluplace.co.za
Date: 11/05/2016 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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