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Provisional summarised audited consolidated financial statements for the 12 months ended 29 February 2016
NEWPARK REIT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2015/436550/06)
JSE share code: NRL ISIN: ZAE000212783
(Approved as a REIT by JSE)
(“Newpark” or “the Company” or “the group”)
PROVISIONAL SUMMARISED AUDITED CONSOLIDATED FINANCIAL STATEMENTS FOR THE 12 MONTH PERIOD ENDED 29 FEBRUARY 2016
DIRECTORS REPORT
Nature of Business
Newpark is a property holding and investment company that is currently invested in A-grade commercial properties
situated in the heart of Sandton.
Newpark listed on the Alternative Exchange of the JSE on 3 February 2016. Following the successful private placing of
10 000 000 ordinary shares at R6.25 per share, the number of shares in issue after the R62.5 million capital raising
increased to 100 000 001.
Newpark’s property portfolio consists of two buildings located in the heart of Sandton, Gauteng, namely the JSE which
2 2
has 18,162m of gross lettable area (“GLA”) and an adjoining building known as 24 Central, which has 15,089m GLA. The
combined independent valuations of these properties as at 29 February 2016 was R1,065 million.
Change in Auditors
The group changed auditors from Grant Thornton to PricewaterhouseCoopers Inc. effective 3 March 2016.
PricewaterhouseCoopers Inc. will continue in office as auditors in accordance with section 90 of the Companies Act 71 of
2008, subject to approval of the shareholders at the upcoming annual general meeting.
Results
In accordance with the Pre-Listing Statement (“PLS”), the board of directors of Newpark (“the Board”) has not declared a
dividend for the 1 month period ended 29 February 2016.
Strategy
Newpark’s investment strategy is to seek well positioned prime commercial properties which provide quality cash flows
with the potential of upward rating on lease renewals and/or redevelopment opportunities within the medium to long-
term (5 to 20 years).
Acquisitions and Developments
Apart from the acquisition of the entire issued share capital of Newpark Towers Proprietary Limited (“Newpark Towers”),
Newpark made no further acquisitions and no developments took place during the period under review.
Vacancies and Arrears
There were no vacancies in the property portfolio as at 29 February 2016. No bad debts were incurred nor is it considered
necessary to provide for any potential bad debts.
Funding
During the period Newpark Towers accepted a facility from Rand Merchant Bank of R271 million of which R270 million
has been drawn down, and repaid both the Standard Bank loan of R198 million and shareholders loans of R47 million.
Amount Margin
Facility drawn down R’millions over Jibar
Expiry August 2020 270 1.65%
Amount
Interest rate applicable R’millions Rate
Interest rate swap 135 8.52%
Interest rate cap 135 10.17%
Both the swap and cap expire in January 2019
The RMB facility is secured by a first mortgage bond over fixed property with a carrying value of R982 308 223 and
currently attracts a floating rate of three-month JIBAR plus 1.65%. The RMB facility is repayable in August 2020. Newpark
secured an interest rate swap and interest rate cap on this facility on 18 January 2016. The interest rate cap has the effect
that 50% of the interest on the RMB facility is capped at a rate of 10.17%. In addition, the interest rate swap secured with
RMB has the effect that in respect of the remaining 50% of the interest on the RMB facility, the floating portion of the
current rate is swapped for a fixed rate of 8.52%, before the RMB margin of 1.65%. The interest rate swap and cap expire
on 18 January 2019 and interest is payable quarterly.
Percentage of debt hedged
The all-in weighted average cost of funding is 9.42% and the average hedge-term is 2.9 years. It is the board’s policy to
hedge at least 70% of the exposure to interest rate risk.
Summary of financial performance
29 February 2016
Shares in issue 100,000,001
Net asset value per share R7.91
Loan-to-value ratio * 22.3%
Gross property operating expense ratio 34.9%
*The loan-to-value ratio is calculated by dividing interest bearing borrowing net of cash on hand by the total of
investment property.
CAPITAL REORGANISATION – NEWPARK TOWERS ACQUISITION
On 3 February 2016 Newpark acquired 100% of the share capital of Newpark Towers. This did not result in a substantive
economic change and merely resulted in a change in the structure of the group.
Newpark Towers’ assets and liabilities are ultimately controlled by the same parties both before and after the transaction.
IFRS 3 specifically states that a combination of entities or businesses under common control is excluded from the scope of
IFRS 3. There is currently no guidance in IFRS on the accounting treatment for combinations among entities under
common control. In developing a policy for capital reorganisation transactions, Newpark considered the guidance issued
by other standard setting bodies which use a similar conceptual framework to develop accounting standards.
Newpark has elected to use the predecessor accounting method, which is based on equivalent US GAAP and UK GAAP
guidance for common control transactions. Predecessor accounting does not require the acquirer to restate assets and
liabilities to their fair values. The acquirer, i.e. Newpark incorporated the predecessor carrying values. No goodwill arises
in applying the predecessor accounting method.
In accordance with the predecessor method, any difference between the consideration given and the aggregate book
value of the assets and liabilities (as of the date of the transaction) is recognised in a separate reserve within equity called
the capital reorganisation reserve.
Outlook
The Board is confident that Newpark will deliver on its PLS forecasts of a distribution of 49.47 cents per share for the year
ended 28 February 2017. The forecast is based on the assumption that a stable macro-economic environment will prevail
and operating cost increases will not be above inflation. This forecast has not been audited or reviewed by the Company’s
auditors.
By order of the board.
Simon Fifield Ron Hill
Managing Director Financial Director
Johannesburg
31 May 2016
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
29 February 28 February
2016 2015
Restated
(R’000) (R’000)
Assets
Non-current assets
Investment properties 982 308 739 591
Straight-line lease asset 44 823 23 726
Deferred tax 55 -
Derivative financial instruments 699 -
Lease incentive 22 496 17 124
1 050 381 780 441
Current Assets
Trade and other receivables 6 157 6 718
Straight-line lease asset 12 727 16 912
Current tax receivable - 865
Lease incentive 2 647 2 647
Cash and cash equivalent 32 217 1 231
Total Current Assets 53 748 28 373
Total Assets 1 104 129 808 814
Equity and Liabilities
Equity
Share capital 620 006 1
Reserves 180 412 -
Retained (loss)/income (9 759) 452 918
790 659 452 919
Liabilities
Non-Current Liabilities
Bank borrowings 270 000 198 290
Deferred tax 14 640 100 029
284 640 298 319
Current liabilities
Loans from shareholders - 47 400
Trade and other payables 28 830 10 175
28 830 57 575
Total Liabilities 313 470 355 894
Total Equity and Liabilities 1 104 129 808 813
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
12 months ended 14 months ended
29 February 28 February
2016 2015
Restated
(R’000) (R’000)
Revenue 95 185 91 001
Property operating expenses (33 206) (29 822)
Other income 100 -
Administrative expenses (6 000) (93)
Operating profit 56 079 61 086
Finance income 1 161 300
Fair value adjustments 242 524 (42 854)
Finance costs (22 191) (22 950)
Profit / (loss) before taxation 277 573 (4 418)
Taxation 85 537 (2 667)
Profit / (loss) for the period 363 110 (7 085)
Other comprehensive income - -
Total comprehensive income / (loss) for the period 363 110 (7 085)
Earnings per share (cents)
Per share information
Basic earnings per share* 400.17 (7.87)
Diluted earnings per share* 400.17 (7.87)
* Subsequent to the publication of the trading statement on 25 May 2016, the Board, in consultation with the Company’s
auditors, have revised the calculation of the weighted average number of shares in issue to more appropriately reflect the
substance of the Newpark Towers acquisition, resulting in the consolidation of Newpark Towers for the full financial
period ended 29 February 2016. The trading statement utilised the weighted average number of shares in issue
calculated as the total number of shares in issue as at 29 February 2016, weighted for a period of one month (being the
date of listing to 29 February 2016), resulting in 7 397 260 shares being used in the EPS calculation. Whereas, the revised
weighted average number of shares contained herein has been calculated as 90 000 001 shares (being the underlying
shares attributable to the pre-existing Newpark Towers shareholders) weighted for the full financial year, plus the
additional 10 000 000 shares issued on listing, weighted to 29 February 2016, resulting in 90 739 727 shares being used in
the EPS calculation (2015: 90 000 001 shares).
RECONCILIATION OF PROFIT FOR THE PERIOD TO HEADLINE EARNINGS
12 months ended 14 Months ended
29 February 28 February
2016 2015
Restated
(R’000) (R’000)
Earnings 363,110 (7,085)
Less: Change in fair value of property net of tax (331,603) 34,862
Headline Earnings 31,507 27,777
Less: Current year lease straight lining net of tax (12,177) (20,804)
Derivative financial instrument fair value adjustment (503) -
net of tax
Add: Lease incentive charge 2,647 2,715
Distributable Income (cents) 21,474 9,689
Headline earnings per ordinary share* 34.72 30.86
Distributable income per share 21.47 10.77
Newpark has no dilutionary instruments in issue.
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
12 months ended 14 months ended
29 February 28 February
2016 2015
Restated
(R’000) (R’000)
Net cash from operating activities 28 151 (7 180)
Net cash from investing activities (1 162) (334)
Cash flows from financing activities
Proceeds on share issue 62 500 -
Repayment of shareholder loans (47 400) -
Dividends paid (82 813) -
Bank borrowings advanced 270 000 5 887
Bank borrowings repaid (198 290) -
Net cash from financing activities 3 997 5 887
Total cash and cash equivalent movement for the year 30 986 (1 627)
Cash and cash equivalent at the beginning of the year 1 231 2 858
Total cash and cash equivalent at the end of the year 32 217 1 231
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Total Capital Retained Total
capital issue costs share reorganisation (loss)/income equity
capital reserve
(R’000) (R’000) (R’000) (R’000) (R’000) (R’000)
Balance at 1 March 2015
restated 1 - 1 - 452 918 452 919
Profit for the period - - - - 363 110 363 110
Other comprehensive income - - - - - -
Total comprehensive income
for the period - - - - 363 110 363 110
Issue of shares 625 000 (4 994) 620 006 - - 620 006
Capital reorganisation (1) - (1) 180 412 (180 474) (63)
Dividends - - - - (645 313) (645 313)
Total contributions by and
distributions to owners of
company recognised directly
in equity 624 999 (4 994) 620 005 180 412 (825 787) (25 370)
Balance at 29 February 2016 625 000 (4 994) 620 005 180 412 (9 759) 790 659
SECTORAL SPLIT GLA Gross Rentals
Based on:
Retail 15.03% 15.76%
Office 84.97% 84.24%
LEASE EXPIRY PROFILE (unaudited)
Based on: GLA Gross Rentals
Vacant
Feb 2016 0.00% 0.07%
Feb 2017 8.44% 3.45%
Feb 2018 13.98% 10.69%
Feb 2019 13.00% 10.02%
Feb 2020 6.99% 6.14%
> Feb 2020 57.59% 69.63%
100% 100%
SEGMENTAL ANALYSIS
Segmental information
The appointed Chief Operating Decision Maker within the group is the Group Executive Committee (“EXCO”). This is
because it is EXCO's responsibility to meet on a frequent basis to review budgets and to assess the operating performance
of its operating segments. The information provided to EXCO summarises financial data and information by property. At
29 February 2016, the group is organised into two main operating segments:
- 24 Central
- JSE
24 Central JSE Total
(R’000) (R’000) (R’000)
2016
Revenue 58 160 37 025 95 185
Property operating expenses (21 896) (11 320) (33 206)
Fair value adjustments 123 481 119 043 242 524
159 745 144 758 302 503
2015
Revenue 66 769 24 232 91 001
Property operating expenses (29 822) - (29 822)
Fair value adjustments (3 724) (39 130) (42 854)
33 223 (14 898) 18 325
NOTES
PREPARATION, ACCOUNTING POLICIES AND AUDIT OPINION
The provisional summarised audited consolidated financial statements have been prepared in accordance with the
requirements of the JSE Listings Requirements and the requirements of the Companies Act of South Africa applicable to
summary financial statements. The JSE Listings Requirements require 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. The accounting policies applied in the preparation of the
audited consolidated financial statements, from which the provisional summarised audited consolidated financial
statements were derived, are in terms of IFRS.
The provisional summarised consolidated financial statements were compiled under the supervision of Ron Hill, the
financial director.
The directors are not aware of any matters or circumstances arising subsequent to the year-end that require any
additional disclosure or adjustment to the financial statements.
This provisional summarised report is extracted from audited information, but is not itself audited. The annual financial
statements were audited by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The audited
annual financial statements and the auditor’s report thereon are available for inspection at the company’s registered
office.
The directors take full responsibility for the preparation of this provisional summarised report and for ensuring that the
financial information has been correctly extracted from the underlying audited annual financial statements.
SIGNIFICANT FINANCIAL STATEMENT NOTES
Investment properties
The valuation of investment properties was determined principally using discounted cash flow projections, based on
estimates of future cash flows, supported by the terms of any existing lease contracts and by external evidence such as
current market rentals for similar properties in the same location and condition, and using discount rates that reflects
current market assessments, of the uncertainty in the amount and timing of the cash flows. The future rental rates were
estimated depending on the actual location, type and quality of the properties and taking into account market data and
projections at the valuation date, as well as the expiry of existing lease agreement.
Related parties
Relationships
Subsidiary Newpark Towers Proprietary Limited
Former shareholders of subsidiary B Van Wyk
Ellerine Bros Proprietary Limited
Ellwain Investments Proprietary Limited
FHP Manager Proprietary Limited
Renlia Developments Proprietary Limited
GROUP GROUP COMPANY
29 February 28 February 29 February
2016 2015 2016
(R’000) (R’000) (R’000)
Related party balances
Loan accounts owing to related parties
Barry Daniel Van Wyk - 1 100 -
Ellerine Bros Proprietary Limited - 17 237 -
Ellwain Investments Proprietary Limited - 17 237 -
Renlia Developments Proprietary Limited - 11 826 -
- 47 400 -
Interest paid to related parties
Barry Daniel Van Wyk 35 - -
Ellerine Bros Proprietary Limited 548 - -
Ellwain Investments Proprietary Limited 548 - -
Renlia Developments Proprietary Limited 376 - -
Newpark Towers Proprietary Limited - - 41
1 057 - 41
PRIOR PERIOD ERRORS
The up-front payment of the lease incentive was expensed in full upon payment in order to extinguish the related liability
at the due date being August 2015. No adjustment was processed in order to straight-line the up-front payment of the
lease incentive over the remaining term of the lease. The correction of the errors results in adjustments as follows:
28 February 1 January
2015 2014
(R’000) (R’000)
Statement of financial position
Current assets
Increase in lease 19 771 5 812
Equity
Increase in opening retained income (5 812)
Increase in retained income (5 812)
Non-current liabilities
Increase in deferred tax (3 804)
Statement of profit or loss and other comprehensive
income
Increase in revenue (13 959)
Increase in taxation 3 804
The straight-line lease asset and the lease incentive receivable were not taken into account in determining the fair value
of investment property. The correction of the errors results in adjustments as follows:
28 February 1 January
2015 2014
(R’000) (R’000)
Statement of financial position
Current assets
Decrease in investment properties (61 077) (18 224)
Equity
Decrease in opening retained income 14 825
Decrease in retained income 14 825
Non-current liabilities
Decrease in deferred tax 11 390 3 398
Statement of profit or loss and other comprehensive
income
Decrease in fair value adjustment 42 854
Decrease in taxation (7 991)
DIRECTORS
G D Harlow (Chairman) **, S P Fifield (Chief Executive Officer), R R Hill (Financial Director), B D van Wyk *, D T Ellerine*, K
M Ellerine*, H C Turner **, D I Sevel **
* Non-executive director
** Independent non-executive director
REGISTERED OFFICE
51 West Street, Houghton, Gauteng, 2198
P O Box 3178, Houghton, Gauteng, 2041
WEBSITE
www.newpark.co.za
COMPANY SECRETARY
CIS Company Secretaries Proprietary Limited
TRANSFER SECRETARY
Computershare Investor Services Proprietary Limited
SPONSOR
Java Capital
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