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Preliminary summarised audited consolidated financial statements for the year ended 31 March 2016
LODESTONE REIT LIMITED
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA
REG NO 2010/017830/06)
JSE SHARE CODE LDO ISIN ZAE000197935
(APPROVED AS A REIT BY THE JSE)
(“LODESTONE” OR “THE COMPANY”)
PRELIMINARY SUMMARISED AUDITED CONSOLIDATED FINANCIAL
STATEMENTS FOR THE YEAR ENDED 31 MARCH 2016
DIRECTORS’ REPORT
1. NATURE OF THE BUSINESS
Lodestone’s primary objective is to invest in real estate assets with
strong growth prospects across all sectors. Lodestone is looking to
diversify into global markets that demonstrate favourable returns on a
risk-weighted basis.
Lodestone proactively takes advantage of buying and selling prospects as
they arise and maintains a disciplined approach to the asset management of
its portfolio.
2. RESULTS
The board has declared a dividend of 26,04 cents per share for the six
months ended March 2016. The total dividends for the year amounted to
47,62 cents per share. The property portfolio performed in line with
projections.
3. PROPERTY PORTFOLIO
Lodestone’s property portfolio consists of 37 properties valued at
R1 316,8 million and comprises 57,3% retail, 40,7% industrial and 2,0%
residential based on value. Geographically, the properties are located in
the following provinces:
Gauteng 63,7%
North West 9,3%
KwaZulu-Natal 8,1%
Northern Cape 6,6%
Limpopo 6,3%
Western Cape 4,5%
Mpumalanga 1,5%
Lodestone continues to focus primarily on the retail and industrial
sectors where management has identified better yield and capital growth
opportunities.
Development commenced on The Prism, a joint venture with Renprop and
Probuild, for the development of 94 two-bedroom units and 62 one-bedroom
units in Rivonia. Completion is scheduled for March 2017.
Construction of the bridge and infrastructure commenced at Union Park
subsequent to the granting of access in March 2015. Lodestone plans to
develop 30 000m2 of A-grade logistics warehouses at Union Park in two
phases. The first phase will be a unit of 13 500m2 and construction is
anticipated to commence in August 2016 with completion estimated in July
2017.
All of the properties acquired during the year were transferred and have
performed in line with expectations.
Property name GLA (m2) Purchase price
% owned (100%) R’000 Transfer date
15 Progress Road
New Germany 50% 3 922 9 004 Aug 15
40 Beechfield Crescent
Springfield 50% 965 2 486 Aug 15
312 Mitchell Street
Pretoria West 50% 1 741 4 248 Aug 15
216 Winze Road
Stormill 50% 1 466 2 486 Sep 15
25 Angus Crescent
Longmeadow 50% 1 680 6 153 Aug 15
100 Dekema
Road Wadeville 50% 7 500 11 624 Aug 15
44 Neptune Street
Paarden Eiland 50% 1 785 3 144 Aug 15
15 Kouga Street
Stikland 50% 800 1 462 Aug 15
19A Dorsetshire Street
Paarden Eiland 50% 1 350 4 057 Aug 15
20 Industrial
Crescent Witbank 50% 2 680 6 909 Aug 15
37 Kindon Road
Robertsham 50% 3 400 3 659 Oct 15
1338 Staal
Road Stormill 100% 3 560 14 500 Nov 15
16th Street Midrand 100% 3 569 21 000 Oct 15
Fatima Bhayat Street
Rustenburg 100% 4 562 42 000 Dec 15
Yarona Shopping Centre 100% 5 979 80 000 Dec 15
Total 44 959 212 732
Given the inherent downside risks to growth locally, management is of the
view that sellers have not adequately adjusted pricing expectations.
Both the erven at Moody Avenue, Epping were sold and transferred for a
total consideration of R19,1 million. The property was acquired for R13,0
million in 2013 and the book value at March 2015 was R17,5 million.
4. VACANCIES AND ARREARS
At March 2016, the overall vacancy was 2,5% which is an improvement from
the 3,7% reported at September 2015. The industrial vacancy at March 2016
was 3,2% which has decreased from 4,3% at September 2015 and the retail
vacancy was 1,3% compared to 2,4% at September 2015. Given the current
economic environment in South Africa, management placed particular
emphasis on tenant retention and letting vacant space and this will
continue to be a focus area.
No significant increase in vacancies is anticipated in the next financial
year. There were no material changes in arrears and potential bad debts
are well provided for.
5. CAPITAL RAISING
On 19 November 2015, Lodestone issued 59 259 259 shares at R6,75 per share
in a book build to finance the acquisition of various properties. The book
build was substantially oversubscribed.
6. EQUITY INVESTMENTS
Lodestone purchased 2 476 410 shares worth R3,2 million in Greenbay
Properties Limited which will form part of Lodestone’s offshore investment
strategy going forward. Greenbay Properties Limited has its primary
listing on the Stock Exchange of Mauritius and its secondary listing on
the AltX of the Johannesburg Stock Exchange.
7. BLACK ECONOMIC EMPOWERMENT
On 26 November 2015, Lodestone issued a further 21 428 571 shares to The
Siyakha Education Trust at R7,00 per share. The sole objective of The
Siyakha Education Trust is the promotion of black education.
8. FACILITIES AND INTEREST RATE DERIVATIVES
Margin over
Facility expiry R' million Jibar
2018 514 1,39%
Total 514 1,39%
Lodestone is finalising a R70 million 3-year facility with Standard Bank.
Average
Interest rate swap expiry R' million swap rate
2018 100 6,10%
2019 50 7,23%
2020 50 7,32%
2021 50 7,61%
Total 250 6,87%
Variable rate instruments R’000
Loans to BEE vehicle (269 273)
Cash and cash equivalents (5 901)
Interest-bearing borrowings 175 468
Capital commitments 290 000
190 294
Total interest rate derivatives 250 000
Percentage hedged 131,4%
The all-in weighted average cost of funding of Lodestone was 9,24% at
March 2016 and the average hedge term was 2,58 years.
9. GEARING
Lodestone’s gearing at year-end was 10,2% which is below the board’s
target range of between 30% to 40%. Gearing is expected to increase as the
developments progress and the offshore strategy gains traction.
Lodestone’s strong balance sheet will allow it to effectively take
advantage of opportunities as they arise.
The information contained in notes 3, 4, 8, 9 and the “Fair value
information” section of note 10 has been compiled using proportionate
consolidation. This results in Lodestone accounting for its share of the
property investment that is not held in undivided shares (The Prism).
10. SUMMARY OF FINANCIAL PERFORMANCE
Mar 2016 Sep 2015 Mar 2015
Dividend per share (cents) 26,04 21,58 12,99
Shares in issue 235 149 196 143 461 366 143 461 366
Net asset value R 6,36 R 5,49 R5,38
Fair value information
Loan-to-value ratio* 10,2% 32,6% 29,9%
Net property expense ratio 16,7% 16,8% 13,8%
Gross property expense ratio 38,9% 39,4% 39,1%
Net total expense ratio 25,5% 26,1% 20,7%
Gross total expense ratio 45,3% 46,1% 43,7%
*The loan-to-value ratio is calculated by dividing interest-bearing
borrowings net of cash by the total of investment property, investments
and loans advanced.
Fair value information
Summarised statement of financial position
Mar 2016 Mar 2015
R’000 R’000
ASSETS
Investment property 1 266 887 1 011 480
Investment property under development 49 875 1 370
Investments 3 201 -
Share purchase scheme loans 81 032 -
Loans to BEE vehicle 269 273 100 616
Other assets - 8 698
Current assets 16 697 7 854
Total assets 1 686 965 1 130 018
EQUITY AND LIABILITIES
Total equity attributable to equity holders 1 494 700 772 332
Interest-bearing borrowings net of cash on hand 169 567 335 772
Deferred tax 1 974 542
Current liabilities 20 724 21 372
Total equity and liabilities 1 686 965 1 130 018
11. OUTLOOK
Macro-economic uncertainty, the decline in infrastructure and
unreliability of essential services remain key concerns for 2017, however,
the board is confident that Lodestone will deliver growth in distributions
of between 16% and 17% for the year ending 31 March 2017.
The growth is 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 Lodestone’s auditors.
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
Mar 2016 Mar 2015
ASSETS R'000 R’000
Non-current assets 1 694 678 1 122 164
Investment property 1 234 252 986 906
Straight-lining of rental revenue adjustment 32 635 24 574
Investment property under development 76 667 1 370
Investments 3 201 -
Loans to employees - 8 698
Share purchase scheme loans 78 650 -
Loans to BEE vehicle 269 273 100 616
Current assets 30 283 11 605
Trade and other receivables 16 753 7 582
Loans to employees - 272
Share purchase scheme loans 2 382 -
Cash and cash equivalents 11 148 3 751
Total assets 1 724 961 1 133 769
EQUITY AND LIABILITIES
Total equity attributable to equity holders 1 494 700 772 332
Stated capital 1 377 675 751 077
Reserves 117 025 21 255
Minority interest 31 872 -
Total liabilities 198 389 361 437
Non-current liabilities 177 442 315 092
Interest-bearing borrowings 175 468 314 550
Deferred tax 1 974 542
Current liabilities 20 947 46 345
Trade and other payables 20 947 17 139
Income tax payable - 4 233
Interest-bearing borrowings - 24 973
Total equity and liabilities 1 724 961 1 133 769
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
for the for the nine
year ended months ended
Mar 2016 Mar 2015
R’000 R’000
Net rental and related revenue 104 935 66 293
Recoveries and contractual rental revenue 158 468 107 785
Straight-lining of rental revenue adjustment 8 061 705
Rental revenue 166 529 108 490
Property operating expenses (61 594) (42 197)
Income from investments - 1 736
Fair value gain on investment property
and investments 66 581 70 143
Fair value gain on investment property 75 026 54 752
Adjustment resulting from straight-lining
of rental revenue (8 061) (705)
Fair value (loss)/gain on investments (384) 16 096
Administrative expenses (10 202) (5 647)
Listing costs - (5 459)
Profit before net finance income/(costs) 161 314 127 066
Net finance income/(costs) 3 058 (30 384)
Finance income 26 958 1 516
Interest received 21 684 1 516
Fair value adjustment on interest
rate derivatives 5 274 -
Finance costs (23 900) (31 900)
Interest on borrowings (24 703) (30 837)
Capitalised interest 803 284
Fair value adjustment on interest
rate derivatives - (1 347)
Profit before income tax 164 372 96 682
Income tax (1 432) 80 980
Profit for the period 162 940 177 662
Total comprehensive income for the period 162 940 177 662
Profit for the period attributable to:
Equity holders of the company 162 777 177 662
Minority interest 163 -
162 940 177 662
Total comprehensive income for the
period attributable to:
Equity holders of the company 162 777 177 662
Minority interest 163 -
162 940 177 662
Basic earnings per share (cents) 92,60 161,84
RECONCILIATION OF PROFIT FOR THE PERIOD TO HEADLINE EARNINGS
Audited Audited
for the for the nine
year ended months ended
Mar 2016 Mar 2015
R’000 R’000
Basic earnings – profit for the period
attributable to equity holders 162 777 177 662
Adjusted for: (67 006) (137 652)
- Fair value gain on investment property (66 965) (54 047)
- Income tax effect (41) (83 605)
Headline earnings 95 771 40 010
Headline earnings per share (cents) 54,43 36,45
Basic earnings per share and headline earnings per share are based on the
weighted average of 175 959 096(Mar 2015: 109 778 334) shares in issue
during the period.
Lodestone has no dilutionary instruments in issue.
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
for the for the nine
year ended months ended
Mar 2016 Mar 2015
R’000 R’000
Cash inflow/(outflow) from operating activities 12 272 (10 610)
Cash (outflow)/inflow from investing activities (467 418) 73 309
Cash inflow/(outflow) from financing activities 462 543 (60 854)
Increase in cash and cash equivalents 7 397 1 845
Cash and cash equivalents at beginning of period 3 751 1 906
Cash and cash equivalents at end of period 11 148 3 751
Cash and cash equivalents consist of:
Current accounts 11 148 3 751
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Equity Minor-
Non- attributable ity
Stated distributable to equity inter- Total
capital reserves Reserves holders est equity
Audited R’000 R’000 R’000 R’000 R’000 R’000
Balance
at Jun
2014 200 390 117 - 390 317 - 390 317
Issue of
ordinary
shares 750 877 (528 614) 222 263 222 263
Total
compre-
hensive
income
for the
period 177 662 177 662 177 662
Dividends
paid (17 910) (17 910) (17 910)
Transfer
from non-
distributable
reserves (390 117) 390 117 - -
Balance
at Mar
2015 751 077 - 21 255 772 332 - 772 332
Issue of
ordinary
shares –
59 259 259
on 19 Nov
2015 398 173 398 173 398 173
Issue of
ordinary
shares –
21 428 571
on 26 Nov
2015 149 874 149 874 149 874
Issue of
ordinary
shares –
11 000 000
on 11 Dec
2015 78 551 78 551 78 551
Total
compre-
hensive
income
for the year 162 777 162 777 163 162 940
Dividends paid (67 007) (67 007) (163) (67 170)
Equity contri-
buted by
minorities - 31 872 31 872
Balance
at Mar
2016 1 377 675 - 117 025 1 494 700 31 872 1 526 572
NOTES
1. PREPARATION, ACCOUNTING POLICIES AND AUDIT OPINION
The summarised audited consolidated financial statements have been
prepared in accordance with the requirements of the JSE Listings
Requirements for preliminary reports and the requirements of the Companies
Act of South Africa applicable to summary financial statements. 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. This report
complies with the SA REIT Association Best Practice Recommendations.
The accounting policies applied in the preparation of the consolidated
financial statements, from which the summarised consolidated financial
statements were derived, 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 year.
The group’s investment properties were externally valued by an independent
valuer. In terms of IAS 40 and IFRS 7, investment properties are measured
at fair value and are categorised as level 3 investments. The revaluation
of investment property requires judgement in the determination of future
cash flows from leases and an appropriate capitalisation rate which vary
between 9,00% and 10,25% (2015: 8,75% and 10,00%). Changes in the
capitalisation rate attributable to changes in market conditions can have
a significant impact on property valuations. A 25 basis point increase in
the capitalisation rate will decrease the value of investment property by
R34,8 million (2015: R26,9 million). A 25 basis point decrease in the
capitalisation rate will increase the value of investment property by
R36,7 million(2015: R28,5 million). In terms of IAS 39 and IFRS 7, the
group’s interest rate derivatives are measured at fair value through
profit or loss and are categorised as level 2 investments. In terms of
IAS39, 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 year. The
valuation methods applied are consistent with those applied in preparing
the previous consolidated financial statements.
This report was compiled under the supervision of Inge Pick CA(SA), the
financial director.
The directors are not aware of any matters or circumstances arising
subsequent to March 2016 that require any additional disclosure or
adjustment to the financial statements.
The auditors, Deloitte & Touche, have issued their opinion on the
consolidated financial statements for the year ended 31 March 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 consolidated
financial statements and are consistent, in all material respects, with
the consolidated financial statements. This preliminary report has been
audited by Deloitte & Touche and an unmodified audit opinion has been
issued. Copies of their audit reports and the consolidated financial
statements are available for inspection at Lodestone’s registered address.
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 Lodestone’s registered address.
2. SECTORAL SPLIT
Based on: GLA Book value
Retail 35,3% 56,1%
Industrial 64,7% 39,9%
Residential - 4,0%
100,0% 100,0%
3. LEASE EXPIRY PROFILE
Based on: GLA Rental
revenue
Vacant 2,5%
Mar 2017 26,9% 24,4%
Mar 2018 11,8% 14,8%
Mar 2019 13,4% 14,1%
Mar 2020 16,1% 18,1%
Mar 2021 10,0% 9,2%
> Mar 2021 19,3% 19,4%
100,0% 100,0%
4. SUMMARISED SEGMENTAL ANALYSIS
Audited Audited
for the for the nine
year ended months ended
Mar 2016 Mar 2015
R’000 R’000
Segmental revenue - recoveries
and contractual rental revenue
Industrial 68 602 47 004
Retail 89 866 60 781
Total 158 468 107 785
Property operating expenses
Industrial (26 608) (16 365)
Retail (34 986) (25 832)
Total (61 594) (42 197)
Segmental revenue - rental revenue
Industrial 75 452 48 560
Retail 91 077 59 930
Total 166 529 108 490
Profit for the period
Industrial 79 717 51 633
Retail 92 816 68 707
Residential (633) -
Corporate (8 960) 57 322
Total 162 940 177 662
Total assets
Industrial 541 419 425 017
Retail 758 183 593 432
Residential 53 722 -
Corporate 371 637 115 320
Total 1 724 961 1 133 769
Reconciliation of profit for the period to dividend declared
Mar 2016 Mar 2015
R’000 R’000
Profit for the period 162 940 177 662
Fair value gain on investment property (75 026) (54 752)
Fair value loss/(gain) on investments 384 (16 096)
Fair value adjustment on interest
rate derivatives (5 274) 1 347
Income tax 1 432 (80 980)
Antecedent dividend 25 318 3 907
Minority interest (163) -
Listing costs - 5 459
Amount available for distribution under
best practice 109 611 36 547
Dividend declared – interim (48 371) (17 910)
Dividend declared – final (61 240) (18 637)
- -
The methodology applied in calculating the dividend is consistent with
that of prior periods.
5. PAYMENT OF FINAL DIVIDEND
The board has approved and notice is hereby given of a final dividend of
26,04000 cents per share for the six months ended 31 March 2016.
The dividend is payable to Lodestone shareholders in accordance with the
timetable set out below:
Last date to trade cum dividend Friday, 27 May 2016
Shares trade ex dividend Monday, 30 May 2016
Record date Friday, 3 June 2016
Payment date Monday, 6 June 2016
Share certificates may not be dematerialised or rematerialised between
Monday, 30 May 2016 and Friday, 3 June 2016, both days inclusive.
In respect of dematerialised shareholders, the dividends will be
transferred to the CSDP accounts/broker accounts on Monday, 6 June 2016.
Certificated shareholders’ dividend payments will be posted on or about
Monday, 6 June 2016.
An announcement informing shareholders of the tax treatment of the
dividend will be released separately on SENS.
By order of the board
Jason Cooper Inge Pick
Managing director Financial director
Johannesburg
11 May 2016
Registered office 3rd Floor, Rivonia Village, Rivonia Boulevard, Rivonia,
2191, PO Box 6063, Rivonia, 2128
Transfer secretaries Link Market Services South Africa Proprietary Limited,
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001, PO Box
4844, Johannesburg, 2000
Sponsor Java Capital
Company secretary Leonie Gindan
Directors Annalese Manickum* (chairperson); Jason Cooper (managing
director); Craig Hallowes*; Michael McNamara*; Inge Pick; Ndhlabole
Shongwe*; Gidon Trope; Jacques van Wyk*; Herman Zolty (*Independent non-
executive director)
Date: 11/05/2016 02:23:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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