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Preliminary summarised audited consolidated financial statements for the year ended 30 June 2016
FORTRESS INCOME FUND LIMITED
INCORPORATED IN THE REPUBLIC OF SOUTH AFRICA
REG NO 2009/016487/06
JSE SHARE CODES “FFA” ISIN ZAE000192787 AND “FFB” ISIN ZAE000192795
(APPROVED AS A REAL ESTATE INVESTMENT TRUST (“REIT”) BY THE JSE)
(“FORTRESS” OR “THE GROUP”)
PRELIMINARY SUMMARISED AUDITED CONSOLIDATED FINANCIAL STATEMENTS for the year ended
30 June 2016
DIRECTORS’ COMMENTARY
1 CAPITAL STRUCTURE
Fortress is an internally asset managed REIT listed on the Johannesburg Stock
Exchange with separately traded A and B shares.
The Fortress A shares have a preferential right to income distribution and to
capital participation in the event of winding-up. The growth on the A share dividend
is the lower of 5% or CPI. The Fortress B shares are entitled to the residual
distributable income and capital participation on winding-up.
Fortress successfully acquired all the issued shares of Capital Property Fund
Limited by scheme of arrangement at a swap ratio of 0,35 A and 0,35 B shares for
each Capital share. Following the implementation of the acquisition, Fortress
repurchased 105 482 144 Fortress B shares held by Capital, which shares were
cancelled. An accelerated bookbuild successfully undertaken on 18 February 2016
increased the Fortress shares in issue by 27 960 606 A and B shares to
1 119 708 334 A shares and 1 014 226 190 B shares.
In terms of the authority granted by shareholders, Fortress repurchased 7 100 000
A shares. These shares were acquired at an average price of R14,76 per share and are
held in treasury.
2 NATURE OF BUSINESS
Fortress is a hybrid REIT investing in both physical property and listed property
securities.
Fortress owns and develops well located logistics warehouses let to corporate
tenants on long leases. The group also invests in retail properties focused on
transport nodes. The equity portfolio consists of both local listed REITs and
international listed property securities.
3 DISTRIBUTABLE EARNINGS AND COMMENTARY ON RESULTS
The dividend growth for the final period attributable to the A share was calculated
using data published by Statistics SA. The growth was 5%, being the lower of CPI or
5%, and consequently the dividend for the A share for the six months ended 30 June
2016 is 64,45 cents. The final dividend for the B share increased by 90,54% from
39,20 cents to 74,69 cents over the previous comparable period.
For the financial year ended 30 June 2016, the A share dividend amounts to 129,17
cents per share (4,91% increase). The dividend for the B share for the year
increased by 95,28% to 137,50 cents per share.
The substantial growth in the dividend of the B share was largely attributable to
the Capital acquisition which was funded with equity issued at a lower yield than
the yield of the Capital portfolio.
The logistics, industrial and office properties performed in line with budget while
the retail properties were ahead. Turnover rentals collected for the year were R3,5
million ahead of budget.
Equity investments generally performed in line with budget, while Resilient
outperformed. The group hedged the projected June 2016 dividend income from its
investments in Hammerson, Nepi and Rockcastle at R20,80, R14,84 and R13,34 against
the British Pound, the Euro and the US Dollar respectively.
4 OFFER TO ACQUIRE LODESTONE REIT LIMITED
A non-binding expression of interest to acquire all the issued shares of Lodestone
in exchange for A and B shares has been made and shareholders are referred to the
SENS announcement dated 21 July 2016 in this regard. Further announcements will be
made in due course.
5 DIRECT PROPERTY INVESTMENTS
LOGISTICS
The following developments were completed during the year:
Description % owned 100% GLA Yield Completion
Montague Business Park 25% 31 376m2 7,9% Oct 2015
Montague Business Park 25% 5 294m2 7,6% Dec 2015
Linbro Logistics Park 100% 31 692m2 9,0% Jan 2016
Pomona Logistics 100% 20 660m2 9,3% Nov 2015
CiplaMED Rivergate 100% 18 214m2 8,3% Oct 2015
N1 Business Park 20% 12 817m2 12,5% Jun 2016
N1 Business Park 20% 8 260m2 9,0% Aug 2015
Tlokwe Street Louwlardia 100% 8 469m2 9,0% Mar 2016
In line with the board’s strategy of increasing the group’s exposure to new
logistics warehouses, Fortress has made several acquisitions of prime zoned land for
development. These include:
Description % owned 100% GLA
R21 Logistics Park ^ 50% 500 000m2
Cornubia Logistics Park ^ 50% 120 000m2
Louwlardia Logistics Park * 100% 93 000m2
Westlake Logistics * 100% 45 000m2
3rd Avenue Linbro * 50% 23 000m2
^ Transfer subject to regulatory approval.
* Transferred.
The following developments have commenced:
Estimated Estimated
Description % owned 100% GLA yield completion
Louwlardia Logistics Park 100% 23 711m2 9,5% Feb 2017
Westlake Logistics 100% 19 878m2 9,0% Feb 2017
Montague Business Park* 25% 9 000m2 8,0% Oct 2016
* 10-year lease agreement concluded.
Fortress has received approval for its Environmental Impact Assessment and zoning of
the proposed Clairwood Logistics Park in Durban. Once approval for the Environmental
Management Plan is received, construction will commence. Demand from logistics users
is strong for this strategically located development site.
The group has concluded a new 15-year lease at Tradeport City Deep with C. Steinweg
Bridge Group for the joint development of a new 30 000m2 logistics facility. A new
16-year lease was concluded with C. Steinweg Bridge Group on the existing 19 084m2
warehouse which will be incorporated into the joint development.
Fortress furthermore owns 25% of 61 000m2 GLA in Montague Business Park and
30 000m2 GLA (100%) in Rivergate, Cape Town for future development.
INDUSTRIAL
The vacancies in the industrial portfolio are low, however, tenant mix and rental
growth remain a challenge.
RETAIL
The retail portfolio, which consists of 58 shopping centres, has been further
enhanced with the completion of extensions to Nelspruit Plaza and Botlokwa Plaza and
the re-development of Biyela Square and Central Park Bloemfontein.
Ongoing development at The Galleria (25% owned) to accommodate H&M and Pick n Pay
and the construction at Lephalale Crossing are expected to be completed in November
2016. The new extension at Lebowakgomo Centre to accommodate Mr Price and an
enlarged Boxer supermarket is scheduled to open in November 2016. Refurbishment
projects were also undertaken at Venda Plaza and Rustenburg Plaza which are expected
to be completed in November 2016. Development at Jeffreys Bay to accommodate Food
Lover’s Market is expected to be completed in November 2016.
The retail portfolio achieved year-on-year trading density growth of 10% which is
considerably higher than the national figures.
OFFICES
The prevailing difficult conditions in the office market continue. Five office
buildings were sold during the year and, in line with the board’s mandate, exposure
to this segment will continue to be reduced. Fortress will, however, continue to
market and upgrade its existing offices to attract new tenants and retain its
current users.
Management is currently exploring several options with its partners regarding the
vacant Sandton land held for the development of either offices, hotels or
residential.
6 PROPERTY DISPOSALS
The following non-core properties were disposed of during the year:
Book Net
Value proceeds Exit Transfer
Property name Sector R’000 R’000 yield date
Caxton House East London $ Offices 84 300 80 000 7,1% May 2016
35 Intersite Avenue Umgeni $ Logistics 77 500 79 862 7,4% Apr 2016
Anvil Road Robertville $ Industrial 56 000 73 800 10,2% Feb 2016
Appleton’s $ Retail 58 800 65 000 7,9% Sep 2015
17 Kramer Road Kramerville $ Industrial 48 800 64 000 8,3% #
Queenstown Mall Retail 48 500 54 750 10,0% Feb 2016
Westmead Road Pinetown $ Logistics 41 000 54 000 8,0% Mar 2016
Westway Office Park $ Offices 46 500 52 000 9,0% #
Diesel Road Isando Industrial 46 300 43 500 9,8% Jun 2016
20 Ebonyfield Ave
Springfield Park $ Logistics 27 950 34 500 7,9% Apr 2016
Shoprite Dundee Retail 30 000 30 545 8,9% #
5 Bertie Avenue Epping 2 $ Industrial 27 600 30 500 9,2% #
70 Lechwe Street
Corporate Park $ Logistics 24 000 29 500 7,7% Feb 2016
35 Impala Road
Chislehurston $ Offices 21 000 28 000 5,5% Jun 2016
Greenbushes Units $ Logistics 19 550 24 000 5,1% Nov 2015
Lees Street Wynberg $ Logistics 23 700 23 700 10,2% Dec 2015
386 Main Road Bryanston $ Offices 21 400 22 000 7,0% #
20 Alexander Road Westmead $ Logistics 19 600 22 000 9,3% Feb 2016
79 Willowfield Crescent $ Logistics 18 950 20 500 8,3% Mar 2016
8 Ivanseth Road Industrial 18 900 18 000 11,0% #
19 Ebonyfield Ave
Springfield Park $ Logistics 13 200 15 840 7,9% Mar 2016
Bryanston Ridge Office Park Offices 4 100 6 900 8,6% ##
Greenbushes Erf 116 $ Land 1 637 2 451 n/a Dec 2015
Greenbushes Erf 121 $ Land 1 599 2 274 n/a Dec 2015
Greenbushes Erf 126 $ Land 1 656 1 984 n/a Dec 2015
TOTAL 782 542 879 606
# Held for sale at 30 June 2016. Transfer pending.
## Held for sale at 30 June 2016, transferred 6 July 2016.
$ Details of these properties, previously owned by Capital, were included in the
Revised Listings Particulars.
7 VACANCIES AND ARREARS
At 30 June 2016 the total vacancy decreased to 5,7% from 6,2% as at 31 December
2015. Following the merger, the combined lettable area has increased from 784 294m2
(100% GLA) at 30 June 2015 to 3 168 916m2 (100% GLA) as at 30 June 2016. Included in
the retail vacancy is 10 619m2 of retail space which is currently under
construction.
Subsequent to 30 June 2016, a new lease agreement was concluded over the 11 000m2
logistics facility at 50 Electron Avenue, Isando. This reduces the total vacancy at
30 June 2016 by 0,4% to 5,3%.
There was no material change in arrears and potential bad debts are well provided
for.
% of property portfolio
Sectoral vacancy by GLA Jun 2016 by book value
Logistics 6,3% 36,6%
Retail 3,6% 34,5%
Offices 13,5% 15,4%
Industrial 2,9% 11,8%
Other 7,0% 1,7%
8 LISTED PORTFOLIO
Jun 2016 Jun 2015
Number of Fair value Number of Fair value
Counter shares R’000 shares R’000
Greenbay (GRP) 420 000 000 579 600 - -
Capital (CPF) - - 80 633 816 1 153 064
Nepi (NEP) 52 530 000 8 825 040 24 902 939 3 426 644
Resilient (RES) 39 370 000 5 188 966 18 347 639 1 769 630
14 593 606 6 349 338
Hammerson (HMSO UK)# 13 300 405 1 403 489 15 700 000 1 867 829
Rockcastle (ROC)* 343 830 000 11 865 573 172 026 261 4 639 548
27 862 668 12 856 715
# The Hammerson position is held through local equity derivatives.
* Rockcastle was treated as an associate (equity accounted) and was thus not fair
valued in the financial statements. The carrying value of Rockcastle was R9 313
million and R3 213 million at 30 June 2016 and 30 June 2015 respectively.
Fortress reduced its exposure to the Hammerson IDX position by 2 440 000 shares at
an average price of GBP5,74 per share since December 2015. The group acquired 420
000 000 Greenbay shares at an average price of R1,20 per share. The increases in the
Nepi and Rockcastle holdings were the result of electing scrip dividends. Fortress
took up shares in the Resilient bookbuild to retain its percentage holding.
The board’s policy is to hedge its foreign currency exposure to equity investments
(Greenbay, Hammerson, Nepi and Rockcastle) to achieve a neutral effect on the first
year’s distribution.
The following hedges were in place at 30 June 2016:
Foreign
Exchange Foreign
ZAR fair value fair value of exchange
of investment investment hedged Exchange
’000 ’000 ’000 rate
Greenbay R579 600 GBP29 551 GBP40 115 GBP - R20,52
Hammerson R1 403 489 GBP71 556
Nepi R8 825 040 EUR540 194 EUR91 904 EUR - R16,90
Rockcastle R11 865 573 USD805 724 USD269 272 USD - R15,48
R22 673 702
In total, 27,6% of Fortress’ offshore equity exposure is hedged with the main
purpose being the alignment of the funding risk profile to both the currency and
income streams of the group’s offshore holdings. This results in 27,6% of these
investments being funded at interest rates applicable to the currencies of these
investments.
9 FACILITIES AND INTEREST RATE DERIVATIVES
Moody’s Investors Service has recalibrated South Africa’s national rating scale
mapping table and repositioned the national scale ratings of non-financial
corporates. Following this, Moody’s has repositioned Fortress’ national scale
ratings to Aa3.za/P-1.za from A3.za/P-2.za. Moody’s furthermore assigned global
scale local currency ratings of Baa3/P-3 to Fortress with a stable outlook.
In April 2016, GCR reviewed Fortress’ rating and assigned an A(za) long term and an
A1(za) short term national scale rating to Fortress with a positive outlook.
Fortress extended R1 billion of its funding facilities from Standard Bank which
matured in February 2016 for a further four to five years and accepted a new R250
million unsecured three-year facility from Standard Bank. In addition, Fortress
accepted new secured facilities totalling R750 million from Standard Bank with
maturities in four to five years.
RMB facilities totalling R5,1 billion were restructured and an additional R500
million secured facility was accepted. The facilities expire in three to six years.
The group accepted three new secured facilities from Libfin with tenures of five
years (R200 million), six years (R200 million) and seven years (R200 million).
Average
Amount margin
Facility expiry R’million over Jibar
June 2017 2 372 1,32%
June 2018 743 1,54%
June 2019 5 237 1,65%
June 2020 3 325 1,69%
June 2021 2 225 1,80%
June 2022 1 350 1,90%
June 2023 200 1,65%
15 452 1,65%
Amount Average
Interest rate swap expiry R’million swap rate
June 2017 110 7,58%
June 2018 1 200 7,34%
June 2019 700 6,46%
June 2020 1 100 6,95%
June 2021 700 8,16%
June 2022 600 7,99%
June 2023 300 7,79%
June 2024 200 7,47%
June 2025 100 7,78%
5 010 7,37%
Amount Average
Interest rate cap expiry R’million cap rate
June 2019 300 7,40%
June 2020 200 7,52%
June 2021 400 7,80%
June 2022 400 7,76%
June 2023 300 7,71%
June 2024 400 7,98%
2 000 7,73%
Amount
Variable rate instruments R’000
Loans to BEE vehicle (1 803 180)
Loans to co-owners (215 575)
Cash and cash equivalents (12 414)
Hammerson equity derivative margin (182 670)
Interest-bearing borrowings
(including gross-up of Hammerson equity derivative) 14 029 079
Currency derivatives
(gearing in foreign currency) (6 544 668)
Capital commitments contracted for 1 064 319
6 334 891
Total interest rate derivatives 7 010 000
Percentage hedged 110,7%
Capital expenditure approved by the board 174 745
Percentage hedged inclusive of approved capital expenditure 107,7%
The all-in weighted average cost of funding of Fortress was 8,81% at 30 June 2016
and the average hedge term was 4,1 years.
The information contained in note 5, 7, 9 and the “Fair value information” section
of note 10 has been compiled using proportionate consolidation. This results in
Fortress accounting for its share of the assets and liabilities of property
investments that are not held in undivided shares (Arbour Crossing, The Galleria and
Mthatha Residential). It further recognises the Rockcastle investment at fair value
and the Hammerson equity derivative position on a gross basis.
10 SUMMARY OF FINANCIAL PERFORMANCE
Jun 2016 Dec 2015 Jun 2015 Dec 2014
Dividend per
A share (cents) 64,45 64,72 61,38 61,75
Dividend per
B share (cents) 74,69 62,81 39,20 31,21
Shares in issue at period end
-A 1 119 708 334 1 091 747 728 466 251 105 466 251 105
-B 1 014 226 190 986 265 584 466 251 105 466 251 105
Shares used for dividend per
share calculation
-A 1 112 608 334 1 112 608 334 466 251 105 466 251 105
-B 1 014 226 190 1 014 226 190 466 251 105 466 251 105
A shares held in treasury 7 100 000 7 100 000 - -
Fair value information
Net asset value per A share* R15,62 R16,61 R15,72 R16,19#
Net asset value per B share R25,73 R24,14 R16,21 R12,04#
Loan-to-value ratio** 23,8% 25,3% 27,3% 19,3%
Net property expense ratio 16,8% 15,2% 15,8% 14,2%
Gross property expense ratio 33,6% 35,3% 35,6% 34,6%
Net total expense ratio 15,6% 13,3% 10,9% 12,2%
Gross total expense ratio 28,1% 27,4% 23,1% 26,6%
IFRS accounting
Net asset value per A share* R15,62 R16,61 R15,72 R16,19#
Net asset value per B share R23,22 R20,77 R13,15 R8,63#
#Net asset value includes total equity attributable to equity holders and linked
debentures.
* 60-day volume weighted average traded price at reporting date limited to combined
net asset value.
**The loan-to-value ratio is calculated by dividing total interest-bearing
borrowings adjusted for cash on hand by the total of investments in property, listed
securities and loans advanced.
Fair value information
Jun 2016 Jun 2015
SUMMARISED STATEMENT OF FINANCIAL POSITION R’000 R’000
ASSETS
Investment property 25 484 151 7 335 459
Investment property under development 1 709 878 98 689
Investments 27 862 668 12 856 715
Fortress Share Purchase Trust loans 1 046 512 514 652
Loans to BEE vehicle 1 803 180 283 700
Loans to co-owners 215 575 194 858
Current assets 808 669 168 843
Total assets 58 930 633 21 452 916
EQUITY AND LIABILITIES
Total equity attributable
to equity holders 43 476 856 14 887 104
Interest-bearing borrowings
net of cash on hand 13 833 995 5 801 915
Deferred tax 1 065 603 559 433
Current liabilities 554 179 204 464
Total equity and liabilities 58 930 633 21 452 916
SUMMARISED STATEMENT OF COMPREHENSIVE INCOME
Recoveries and contractual rental revenue 2 226 472 880 503
Property operating expenses (747 171) (313 278)
Distributable income from investments 706 031 367 164
Fair value gain on investment property,
investments and currency derivatives 2 739 307 3 437 260
Administrative expenses (104 710) (36 997)
Impairment of goodwill on Capital merger (8 846 837) -
(Loss)/profit before net finance costs (4 026 908) 4 334 652
Net finance costs (122 761) (523 424)
(Loss)/profit before income tax (4 149 669) 3 811 228
Income tax (96 014) (244 083)
(Loss)/profit for the year
attributable to equity holders (4 245 683) 3 567 145
11 BROAD-BASED BLACK ECONOMIC EMPOWERMENT
Fortress issued 23 300 000 A shares and 23 300 000 B shares to The Siyakha Education
Trust on 2 December 2015 under the authority approved by shareholders. Siyakha
promotes the education of previously disadvantaged individuals. The Fortress board
is evaluating several initiatives to support black-owned businesses.
12 PROSPECTS
Fortress has positioned itself as a preferred logistics developer with access to the
best land and a reputation for delivering a technically superior product. This will
enable the group to provide sustainable attractive growth in a difficult economic
environment. Although exposed to fluctuations in the value of the Rand, the offshore
companies in which Fortress is invested are well positioned to show strong growth in
distributions in hard currencies.
On the assumption that the A share dividend will grow at 5%, the board anticipates
that the B share dividend will increase by approximately 22% for the 2017 financial
year.
The projected dividend income from the group’s offshore holdings is hedged at the
following exchange rates:
Greenbay Hammerson Nepi Rockcastle
GBP GBP EUR USD
Forward rate against ZAR:
Dec 2016 R22,28 R23,72 R18,55 R16,54
Forward rate against ZAR:
Jun 2017 R22,73 R22,23 R18,67 R16,73
The growth is further 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 Fortress’ auditors.
By order of the board
Mark Stevens Rual Bornman
Managing director Financial director
Johannesburg
11 August 2016
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Reclassified
Jun 2016 Jun 2015
R’000 R’000
ASSETS
Non-current assets 53 771 468 17 799 299
Investment property 24 286 405 6 452 089
Straight-lining of rental
revenue adjustment 282 850 155 949
Investment property under development 1 709 878 98 689
Investment in and loans
to associates and joint venture 10 053 527 3 935 521
Investments 14 593 606 6 349 338
Fortress Share Purchase Trust loans 1 019 634 502 269
Loans to BEE vehicle 1 803 180 283 700
Loans to co-owners 22 388 21 744
Current assets 1 395 532 597 301
Investment property held for sale 222 377 57 936
Straight-lining of rental
revenue adjustment 1 568 642
Fortress Share Purchase Trust loans 26 878 12 383
Loans to co-owners 146 641 126 589
Trade and other receivables 805 497 167 836
Hammerson equity derivative 182 670 227 229
Cash and cash equivalents 9 901 4 686
Total assets 55 167 000 18 396 600
EQUITY AND LIABILITIES
Total equity attributable
to equity holders 40 924 489 13 460 811
Stated capital 42 241 795 7 441 388
Treasury shares (104 827) -
Currency translation reserve (34 075) -
Reserves (1 178 404) 6 019 423
Total liabilities 14 242 511 4 935 789
Non-current liabilities 12 052 828 3 034 806
Interest-bearing borrowings 10 987 225 2 468 464
Deferred tax 1 065 603 566 342
Current liabilities 2 189 683 1 900 983
Trade and other payables 551 318 201 937
Interest-bearing borrowings 1 638 365 1 699 046
Total equity and liabilities 55 167 000 18 396 600
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Reclassified
for the year for the year
ended ended
Jun 2016 Jun 2015
R’000 R’000
Net rental and related revenue 1 557 337 554 900
Recoveries and contractual
rental revenue 2 148 517 805 398
Straight-lining of rental
revenue adjustment 127 827 37 095
Rental revenue 2 276 344 842 493
Property operating expenses (719 007) (287 593)
Income from investments 348 296 229 228
Fair value gain on investment property,
investments and currency derivatives 1 331 559 1 841 196
Fair value gain on investment property 524 586 304 329
Adjustment resulting from
straight-lining of rental revenue (127 827) (37 095)
Fair value gain on investments 1 915 616 1 893 464
Fair value loss on currency derivatives (980 816) (319 502)
Administrative expenses (104 502) (36 852)
Impairment of goodwill
on Capital merger (8 846 837) -
Profit on sale of interest
in associate Rockcastle 54 004 20 885
Income from associates and joint venture 511 793 733 154
- distributable 411 950 191 524
- non-distributable 99 843 541 630
(Loss)/profit before
net finance costs (5 148 350) 3 342 511
Net finance costs (127 393) (527 737)
Finance income 650 426 251 629
Interest from loans 650 426 251 629
Finance costs (777 819) (779 366)
Interest on borrowings (849 951) (357 232)
Capitalised interest 93 029 14 824
Fair value adjustment on
interest rate derivatives (20 897) (3 531)
Interest to linked debenture holders
- A linked units - (287 910)
- B linked units - (145 517)
(Loss)/profit before income tax (5 275 743) 2 814 774
Income tax (96 014) (250 992)
(Loss)/profit for the year
attributable to equity holders (5 371 757) 2 563 782
Total comprehensive
(loss)/income for the year (5 371 757) 2 563 782
Basic (loss)/earnings
per A share (cents) (332,71) 285,89
Basic (loss)/earnings
per B share (cents) (332,71) 285,89
Fortress has no dilutionary instruments in issue.
RECONCILIATION OF (LOSS)/PROFIT FOR THE YEAR TO HEADLINE EARNINGS
Audited Reclassified
for the year for the year
ended ended
Jun 2016 Jun 2015
R’000 R’000
Basic earnings - (loss)/profit for
the year attributable to
equity holders (5 371 757) 2 563 782
Adjusted for: 8 300 269 (326 374)
- fair value gain on
investment property (396 759) (267 234)
- profit on sale of interest in
associate Rockcastle (54 004) (20 885)
- fair value loss/(gain)
on investment property of joint
venture and associate 23 725 (94)
- impairment of goodwill
on Capital merger 8 846 837 -
- income tax effect (119 530) (38 161)
Headline earnings 2 928 512 2 237 408
Headline earnings per A share (cents) 181,38 249,50
Headline earnings per B share (cents) 181,38 249,50
Basic (loss)/earnings per share and headline earnings per share are based on the
following weighted average shares in issue during the year:
- A share 835 699 554 448 380 144
- B share 778 829 752 448 380 144
Given Fortress' capital conversion, detailed in the circular issued to shareholders
on 3 February 2015, linked debentures no longer exist within Fortress' capital
structure.
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Reclassified
for the year for the year
ended ended
Jun 2016 Jun 2015
R’000 R’000
Cash outflow from operating
activities (678 385) (32 251)
Cash outflow from investing
activities (2 959 919) (2 377 096)
Cash inflow from financing
activities 3 643 519 2 410 337
Increase in cash and cash equivalents 5 215 990
Cash and cash equivalents
at beginning of year 4 686 3 696
Cash and cash equivalents
at end of year 9 901 4 686
Cash and cash equivalents consist of:
Current accounts 9 901 4 686
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Stated
capital/ Currency
share Treasury Share translation
capital shares premium reserve
R’000 R’000 R’000 R’000
Balance at Jun 2014 8 486 2 330 270
Issue of linked units (equal number of A
and B units) 840 905 532
Total comprehensive income for the year
Capitalisation of linked debentures 4 196 260
Transfer to stated capital 3 235 802 (3 235 802)
Transfer from non-distributable reserves
Balance at Jun 2015 7 441 388 -
Issue of shares (equal number of
A and B shares) 39 057 666
- Issue of 592 196 623 shares
on 1 Dec 2015 35 885 628
- Issue of 23 300 000
shares on 2 Dec 2015 1 281 079
- Issue of 10 000 000
shares on 8 Dec 2015 512 258
- Issue of 27 960 606
shares on 26 Feb 2016 1 378 701
Total comprehensive loss for the year
Repurchase of A shares (104 827)
Repurchase and cancellation of B shares
- 105 482 144 on 3 Dec 2015 (4 257 259)
Exchange differences on translation of
Rockcastle associate (34 075)
Dividends paid
Balance at Jun 2016 42 241 795 (104 827) - (34 075)
Non- Equity
distribu- attributable
table to equity
reserves Reserves holders
R’000 R’000 R’000
Balance at Jun 2014 3 455 641 - 5 794 397
Issue of linked units (equal number of
A and B units 906 372
Total comprehensive income for the year 2 563 782 2 563 782
Capitalisation of linked debentures 4 196 260
Transfer to stated capital -
Transfer from non-distributable reserves (3 455 641) 3 455 641 -
Balance at Jun 2015 - 6 019 423 13 460 811
Issue of shares (equal number of
A and B shares) 39 057 666
- Issue of 592 196 623 shares on 1 Dec 2015 35 885 628
- Issue of 23 300 000 shares on 2 Dec 2015 1 281 079
- Issue of 10 000 000 shares on 8 Dec 2015 512 258
- Issue of 27 960 606 shares on 26 Feb 2016 1 378 701
Total comprehensive loss for the year (5 371 757) (5 371 757)
Repurchase of A shares (104 827)
Repurchase and cancellation of B shares
- 105 482 144 on 3 Dec 2015 (4 257 259)
Exchange differences on translation of
Rockcastle associate (34 075)
Dividends paid (1 826 070) (1 826 070)
Balance at Jun 2016 - (1 178 404) 40 924 489
NOTES
1 PREPARATION, ACCOUNTING POLICIES AND AUDIT OPINION
The preliminary 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. This report was compiled under the
supervision of Rual Bornman CA(SA), the financial director.
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: Investment Property and IFRS 7: Financial Instruments:
Disclosure, 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 varies between 8,00% and 14,50% (Jun 2015: 7,5% and 14,00%). Changes in
the capitalisation rate attributable to changes in market conditions can have a
significant impact on property valuations. A 25 basis points increase in the
capitalisation rate will decrease the value of investment property by R659,9 million
(Jun 2015: R201,1 million). A 25 basis points decrease in the capitalisation rate
will increase the value of investment property by R697,1 million (Jun 2015: R212,8
million). In terms of IAS 39 and IFRS 7, the group’s currency and interest rate
derivatives as well as the Hammerson equity derivative are measured at fair value
through profit or loss and are categorised as level 2 investments. In terms of IAS
39, 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.
The board has resolved to impair the R8,8 billion of goodwill that arose on the
Capital merger due to all the cash flows from Capital's assets being carried at fair
value.
The directors are not aware of any matters or circumstances arising subsequent to 30
June 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 30 June 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 Fortress’ 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 Fortress’
registered address.
2 LEASE EXPIRY PROFILE
Based on
Based on contractual
Lease expiry rentable area rental revenue
Vacant 5,7%
Jun 2017 25,5% 22,3%
Jun 2018 20,5% 21,8%
Jun 2019 18,8% 19,7%
Jun 2020 8,2% 10,5%
Jun 2021 7,7% 10,2%
> Jun 2021 13,6% 15,5%
100,0% 100,0%
3 SEGMENTAL ANALYSIS
Audited Audited
for the year for the year
ended ended
Jun 2016 Jun 2015
R’000 R’000
Segmental revenue - rental revenue
Logistics 850 957 -
Industrial 95 439 97 453
Offices 321 547 3 891
Retail 995 978 741 149
Other 12 423 -
2 276 344 842 493
(Loss)/profit after tax
Logistics 639 548 -
Industrial 115 150 100 073
Offices 62 397 4 270
Retail 1 108 332 752 527
Other 28 669 18 946
Corporate - South Africa (7 808 628) 161 301
Corporate - Europe 482 775 1 526 665
(5 371 757) 2 563 782
Total assets
Logistics 10 034 954 -
Industrial 3 252 085 640 715
Offices 4 232 922 19 675
Retail 9 419 134 6 671 058
Other 500 638 195 725
Corporate - South Africa 8 826 751 4 002 298
Corporate - Europe 18 900 516 6 867 129
TOTAL 55 167 000 18 396 600
Reconciliation of (loss)/profit for the year to dividend declared
(Loss)/profit for the year (5 371 757) 2 563 782
Fair value gain on investment property (524 586) (304 329)
Fair value gain on investments (1 915 616) (1 893 464)
Fair value loss on
currency derivatives 980 816 319 502
Impairment of goodwill on
Capital merger 8 846 837 -
Profit on sale of interest
in associate Rockcastle (54 004) (20 885)
Non-distributable income from
associates and joint venture (99 843) (541 630)
Fair value adjustment on
interest rate derivatives 20 897 3 531
Interest to linked debenture holders - 433 427
Income tax 96 014 250 992
Antecedent dividend* 758 405 33 583
Dividends accrued 94 554 57 873
Amount available for distribution
under best practice 2 831 717 902 382
Interim dividend declared
- A shares (net of treasury shares) (720 080) (287 910)
- B shares (637 035) (145 517)
Final dividend declared
- A shares (net of treasury shares) (717 076) (286 185)
- B shares (757 526) (182 770)
- -
* The antecedent dividend includes five months' performance of Capital prior to
1 December 2015.
4 PAYMENT OF FINAL DIVIDENDS
The board has approved and notice is hereby given of final dividends of 64,45 cents
per A share and 74,69 cents per B share for the six months ended 30 June 2016. The
dividends are payable to Fortress shareholders in accordance with the timetable set
out below:
Last date to trade cum dividend Tuesday, 6 September 2016
Shares trade ex dividend Wednesday, 7 September2016
Record date Friday, 9 September 2016
Payment date Monday, 12 September 2016
Share certificates may not be dematerialised or rematerialised between Wednesday, 7
September 2016 and Friday, 9 September 2016, both days inclusive.
In respect of dematerialised shareholders, the dividend will be transferred to the
CSDP accounts/broker accounts on Monday, 12 September 2016. Certificated
shareholders’ dividend payments will be deposited on or about Monday, 12 September
2016. An announcement informing shareholders of the tax treatment of the dividend
will be released separately on SENS.
SHAREHOLDER SPREAD AT 30 JUNE 2016 AS DEFINED IN TERMS OF THE JSE LISTINGS
REQUIREMENTS
FORTRESS - A SHARES
Number of Percentage of Number of Percentage of
shareholders shareholders shares held issued shares
Public 10 158 98,9,% 972 005 358 86,8%
Non-public 1 - 111 970 832 10,0%
Directors and employees 116 1,1% 35 732 144 3,2%
10 275 100,0% 1 119 708 334 100,0%
Number of Percentage of Number of Percentage of
shareholders shareholders shares held issued shares
SIZE OF HOLDING
1 to 2 500 shares 4 691 45,6% 4 607 466 0,4%
2 501 to 10 000 shares 3 184 31,0% 16 638 240 1,5%
10 001 to 100 000 shares 1 796 17,5% 51 225 293 4,6%
100 001 to 1 000 000 shares 453 4,4% 148 302 535 13,2%
1 000 001 to 3 500 000 shares 102 1,0% 178 254 699 15,9%
More than 3 500 000 shares 49 0,5% 720 680 101 64,4%
10 275 100,0% 1 119 708 334 100,0%
Number of Percentage of
shares held issued share
REGISTERED SHAREHOLDERS OWNING 5% OR MORE OF
ISSUED SHARES
Coronation Balanced Plus Fund 111 970 832 10,00%
The Siyakha Education Trust 87 298 016 7,8%
Government Employees Pension Fund 87 035 012 7,8%
286 303 860 25,6%
Number of Percentage of
shares controlled issued share
CONTROL OF MORE THAN 5% OF ISSUED SHARES
Coronation Fund Managers 320 126 610 28,6%
Government Employees Pension Fund 101 507 690 9,1%
The Siyakha Education Trust 87 298 016 7,8%
Stanlib 68 352 030 6,1%
577 284 346 51,6%
FORTRESS - B SHARES
Number of Percentage of Number of Percentage of
shareholders shareholders shares held issued shares
Public 10 669 98,4% 707 444 954 69,8%
Non-public 1 - 165 400 000 16,3%
Directors and employees 178 1,6% 141 381 236 13,9%
10 848 100,0% 1 014 226 190 100,0%
Number of Percentage of Number of Percentage of
shareholders shareholders shares held issued shares
SIZE OF HOLDING
1 to 2 500 shares 5 361 49,5% 5 037 643 0,5%
2 501 to 10 000 shares 3 173 29,3% 16 417 378 1,6%
10 001 to 100 000 shares 1 705 15,7% 47 796 715 4,7%
100 001 to 1 000 000 shares 460 4,2% 153 527 599 15,1%
1 000 001 to 3 500 000 shares 102 0,9% 185 982 392 18,3%
More than 3 500 000 shares 47 0,4% 605 464 463 59,8%
10 848 100,0% 1 014 226 190 100,0%
Number of Percentage of
shares held issued shares
REGISTERED SHAREHOLDERS OWNING 5% OR MORE OF
ISSUED SHARES
Resilient REIT Limited 165 400 000 16,3%
The Siyakha Education Trust 92 298 016 9,1%
Government Employees Pension Fund 84 861 485 8,4%
342 559 501 33,8%
Number of Percentage of
shares controlled issued shares
CONTROL OF MORE THAN 5% OF ISSUED SHARES
Resilient REIT Limited 165 400 000 16,3%
Government Employees Pension Fund 97 061 446 9,6%
The Siyakha Education Trust 92 298 016 9,1%
354 759 462 35,0%
Directors Iraj Abedian (chairman); Jeff Zidel (deputy chairman); Mark Stevens*; Rual
Bornman*; Kura Chihota; Nontando Mahlati; Jan Potgieter; Wiko Serfontein*; Andrew
Teixeira* (Alternate: Steven Brown*); Fareed Wania*; Banus van der Walt; Djurk
Venter; Tshiamo Matlapeng-Vilakazi (*executive director)
Changes to the board of directors Steven Brown and Fareed Wania were appointed on
13 April 2016 and 14 June 2016 respectively.
Company secretary Tamlyn Stevens
Registered address 3rd Floor Rivonia Village, Rivonia Boulevard, Rivonia, 2191
(PO Box 138, 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
Date: 11/08/2016 02:52:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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