Wrap Text
Reviewed condensed consolidated financial statements for the year ended 30 June 2016
Texton Property Fund Limited
(“the Fund” or “the Company”)
(Incorporated in the Republic of South Africa)
(Registration number:
2005/019302/06)
A Real Estate Investment Trust, listed on the JSE Limited
JSE share code: TEX ISIN: ZAE000190542
(formerly ISIN: ZAE000185872)
Reviewed condensed consolidated financial statements
for the year ended 30 June 2016
Financial highlights
Distribution per share up 9,4%
103,68 cents (2015: 94,77)
Net tangible asset value down 4,1%
1 006,81 cents per share (2015: 1 049,87 cents per share)
Up 2,8% from 31 December 2015
(979,56 cents per share)
Investment property income up 39,9% R561,4 million
(2015: R401,2 million)
Net property income up 41,3%
R400,7 million (2015: R283,5 million)
Loan to value ratio down 37,2% (2015: R38,8%)
Non-financial highlights
Gross lettable area up 22,6%
427 831m2 (2015: 349 051m2)
National/listed/blue-chip tenants (by GLA) up 15,2%
57,5% (2015: 49,9%)
Government tenants (by GLA) down 33,9%
12,5% (2015: 18,9%)
Portfolio value (including Broad Street Mall) up 39,3% R5,774 billion
(2015: R4,146 billion)
Condensed consolidated statement of financial position
at 30 June 2016
Reviewed Audited
30 June 30 June
2016 2015
R'000 R'000
Assets
Non-current assets 5 498 451 4 338 969
Investment property 4 990 914 4 146 385
Property, plant and equipment 10 930 8 322
Goodwill – 77 018
Investment in joint venture 262 938 –
Other financial assets 132 108 –
Other non-current assets 8 027 8 923
Restricted cash 93 534 98 321
Current assets 323 974 361 287
Trade and other receivables 38 064 85 182
Investment property reclassified as
held-for-sale 133 000 24 000
Income tax receivable 3 781 3 631
Restricted cash 25 134 28 089
Cash and cash equivalents 123 995 220 385
Total assets 5 822 425 4 700 256
Equity and liabilities
Stated capital 2 906 923 2 037 921
Retained earnings 788 906 832 781
Share-based payment reserve 1 074 1 074
Foreign exchange translation reserve (102 579) 9 223
Shareholders’ interest 3 594 324 2 880 999
Non-current liabilities 1 832 586 1 719 760
Other financial liabilities 1 828 971 1 716 145
Deferred tax 3 615 3 615
Current liabilities 395 515 99 497
Current portion of other financial
liabilities 315 429 30 613
Trade and other payables 80 086 68 884
Total liabilities 2 228 101 1 819 257
Total equity and liabilities 5 822 425 4 700 256
Shares in issue (’000) 357 362 267 424
Net asset value per share (cents) 1 005,79 1 077,32
Net tangible asset value less deferred tax
per share (cents) 1 006,81 1 049,87
Condensed consolidated statement of comprehensive income
for the year ended 30 June 2016
Reviewed Audited
30 June 30 June
2016 2015
R'000 R'000
Investment property income 561 362 401 181
Straight-line rental adjustment 10 871 9 590
Revenue 572 233 410 771
Property expenses (171 521) (127 269)
Net property income 400 712 283 502
Profit from joint venture 5 053 –
Other income 2 033 22 804
Other operating expenses (11 253) (9 167)
Foreign exchange losses (10 695) (9 463)
Asset management fees (27 908) (14 834)
Operating profit 357 942 272 842
Finance income 84 877 585
Finance costs (130 820) (77 588)
Fair value adjustments 11 945 164 242
Capital items (52) (114)
Profit before income tax 323 892 359 967
Income tax - (8 063)
Profit for the year 323 892 351 904
Other comprehensive income
Items that may be reclassified to profit
or loss – –
Exchange differences on translation of
foreign operations (111 802) 9 223
Total comprehensive income for the year 212 090 361 127
Reconciliation of attributable income to
earnings, headline earnings
Earnings attributable to shareholders 323 892 351 904
Gain on bargain purchase – (14 071)
Gross revaluation of investment property (55 375) (165 748)
Impairment of goodwill 77 018 –
Profit on sale of property – (5 791)
Headline earnings attributable to
shareholders 345 535 166 294
Weighted average number of shares (’000)
(basic and diluted) 335 208 200 337
Basic and diluted earnings per share (cents) 96,62 175,66
Headline and diluted earnings per share (cents) 103,08 83,01
Dividend per share (cents) 103,68 94,77
Interim dividend 51,52 44,68
Final dividend* 52,16 50,09
*Declared subsequent to reporting period.
Condensed consolidated statement of cash flows
for the year ended 30 June 2016
Reviewed Audited
30 June 30 June
2016 2015
R'000 R'000
Net cash inflow from operating activities 9 058 15 669
Net cash outflow from investing activities (1 361 299) (518 689)
Net cash inflow from financing activities 1 248 607 658 271
Net (decrease)/increase in cash and cash
equivalents (103 634) 155 251
Effect of the conversion of foreign
operations on cash and cash equivalents (4 479) 685
Release of restricted cash 11 723 –
Cash and cash equivalents at the beginning
of the year 220 385 64 449
Cash and cash equivalents at the end of
the year 123 995 220 385
Distributable earnings
for the year ended 30 June 2016
Reviewed Audited
30 June 30 June
2016 2015
R'000 R'000
Revenue 561 362 401 181
Property expenses (171 521) (127 269)
Profit from joint venture 5 053 -
Other income 4 097 8 733
Bargain purchase price – 14 071
Other operating expenses (11 253) (9 167)
Asset management fees (27 908) (14 834)
Net finance cost (43 496) (76 616)
Finance income 84 877 585
Finance cost (130 820) (77 588)
Finance cost amortisation 2 447 387
Taxation – (692)
Accrued distribution included in share price 27 720 19 583
Distribution of foreign exchange gain 26 674 –
Dividends on treasury shares 19 166 8 381
Realisation of property revaluation – 8 059
Total distribution 389 894 231 430
Operating segments
The Group has two reportable segments based on the geographic splits in
South Africa and the United Kingdom which are the Group’s strategic
business segments. The geographic segments are then split between office,
retail and industrial.
For each strategic business segment, the group’s CEO (who is considered the
Chief Operating Decision Maker) reviews internal management reports on at
least a monthly basis. Segments are located in South Africa and the
United Kingdom. There are no single major customers.
Reconciliation from segment result to profit
for the year for the year ended 30 June 2016
Reviewed Audited
30 June 30 June
2016 2015
R'000 R'000
Segment results 389 841 273 912
Straight-line rental adjustment 10 871 9 590
Other income 2 033 22 804
Share of profit from joint venture 5 053 -
Other operating expenses (11 253) (9 167)
Foreign exchange losses (10 695) (9 463)
Asset management fees (27 908) (14 834)
Finance income 84 877 585
Finance cost (130 820) (77 588)
Fair value adjustment 11 945 164 242
Capital items (52) (114)
Income tax - (8 063)
Profit for the year 323 892 351 904
Condensed consolidated statement of changes in equity
for the year ended 30 June 2016
Share- Foreign
based currency
Stated payment translation
capital reserve reserve
R'000 R'000 R'000
Group
Balance at 30 June 2014
(Audited) 945 436 – –
Transactions with owners of the
Company recognised directly
in equity
Issue of shares 1 092 485 – –
Dividend paid – – –
Share-based payment transactions – 1 074 –
Total comprehensive income
for the year – – 9 223
Profit for the period – – –
Exchange differences on translation
of foreign operations – – 9 223
Balance at 30 June 2015
(Audited) 2 037 921 1 074 9 223
Transactions with owners of the
Company recognised directly
in equity
Issue of shares (net of
share issue expenses) 960 568 – –
Dividend paid - – –
Treasury shares acquired (91 566) – –
Total comprehensive income
for the year – – (111 802)
Profit for the year – – –
Exchange differences on translation
of foreign operations – – (111 802)
Balance at 30 June 2016
(Reviewed) 2 906 923 1 074 (102 579)
Retained
earnings Total
R’000 R’000
Balance at 30 June 2014 (Audited) 646 880 1 592 316
Transactions with owners of the Company
recognised directly in equity
Issue of shares – 1 092 485
Dividend paid (166 003) (166 003)
Share-based payment transactions – 1 074
Total comprehensive income for the year 351 904 361 127
Profit for the period 351 904 351 904
Exchange differences on translation of
foreign operations – 9 223
Balance at 30 June 2015 (Audited) 832 781 2 880 999
Transactions with owners of the Company
recognised directly in equity
Issue of shares (net of share issue expenses) – 960 568
Dividend paid (367 767) (367 767)
Treasury shares acquired – (91 566)
Total comprehensive income for the year 323 892 212 090
Profit for the year 323 892 323 892
Exchange differences on translation of
foreign operations – (111 802)
Balance at 30 June 2016 (Reviewed) 788 906 3 594 324
Segmental analysis at 30 June 2016
South Africa
Office Retail Industrial Total
R'000 R'000 R'000 R'000
2016
Extracts from the
statement of
comprehensive income 369 239 46 563 46 610 462 412
Property expenses (128 961) (19 862) (20 116) (168 939)
Segmental result 240 278 26 701 26 494 293 473
Extracts from the
statement of
financial position
Investment property 2 606 180 467 744 316 017 3 389 941
Property, plant and
equipment 10 902 5 23 10 930
Investment property
held-for-sale 133 000 – – 133 000
Property at valuation 2 750 082 467 749 316 040 3 533 871
2015
Extracts from the
statement of
comprehensive income
Investment property
income 334 942 3 058 24 750 392 750
Property expenses (103 550) (12 145) (10 742) (126 437)
Segmental result 231 392 20 913 14 008 266 313
Extracts from the
statement of
financial position
Investment property 2 762 023 305 289 289 243 3 356 555
Property, plant and
equipment 8 301 3 18 8 322
Investment property
held-for-sale 24 000 – – 24 000
Property at valuation 2 794 324 305 292 289 261 3 388 877
United Kingdom and Wales
Office Retail Industrial Total
R'000 R'000 R'000 R'000
2016
Extracts from the
statement of
comprehensive income
Investment property
income 56 096 22 326 20 528 98 950
Property expenses (1 538) (756) (288) (2 582)
Segmental result 54 558 21 570 20 240 96 368
Extracts from the
statement of
financial position
Investment property 654 652 414 786 531 535 1 600 973
Property, plant and
equipment - - - -
Investment property
held-for-sale - - - -
Property at valuation 654 652 414 786 531 535 1 600 973
2015
Extracts from the
statement of
comprehensive income
Investment property
income 6 928 808 695 8 431
Property expenses (640) (125) (67) (832)
Segmental result 6 288 683 628 7 599
Extracts from the
statement of
financial position
Investment property 573 805 186 865 29 160 789 830
Property, plant and
equipment – – – –
Investment property
held-for-sale – – – –
Property at valuation 573 805 186 865 29 160 789 830
Total
Office Retail Industrial Total
R'000 R'000 R'000 R'000
2016
Extracts from the
statement of
comprehensive income
Investment property
income 425 335 68 889 67 138 561 362
Property expenses (130 499) (20 618) (20 404) (171 521)
Segmental result 294 836 48 271 46 734 389 841
Extracts from the
statement of
financial position
Investment property 3 260 832 882 530 847 552 4 990 914
Property, plant and
equipment 10 902 5 23 10 930
Investment property
held-for-sale 133 000 – – 133 000
Property at valuation 3 404 734 882 535 847 575 5 134 844
2015
Extracts from the
statement of
comprehensive income
Investment property
income 341 870 33 866 25 445 401 181
Property expenses (104 190) (12 270) (10 809) (127 269)
Segmental result 237 680 21 596 14 636 273 912
Extracts from the
statement of
financial position
Investment property 3 335 828 492 154 318 403 4 146 385
Property, plant and
equipment 8 301 3 18 8 322
Investment property
held-for-sale 24 000 – – 24 000
Property at valuation 3 368 129 492 157 318 421 4 178 707
Commentary
Angelique de Rauville, acting CEO said:
The political landscapes in both the United Kingdom and South Africa
have changed significantly during the course of the past few months.
A vote for Brexit at the 23 June 2016 UK Referendum was unexpected and
sent global markets into turmoil and the subsequent political fallout
was unprecedented. The swift political response has resulted in some
stability being returned. The recent 25 basis points cut in interest
rates in the UK, has provided the market with some direction. Some
uncertainty is expected to continue until Article 50 has been invoked
and until the renegotiated trading terms with the rest of the
European Union have been agreed.
Whilst most of Texton’s UK debt is fixed, we have an element of
sterling floating debt which will benefit from the decrease in UK
interest rates. The Blend renegotiated UK deal has benefited from the
stronger ZAR/weaker GBP and the lower cost of GBP debt funding.
Post-Brexit we renegotiated the transaction which resulted in Texton
acquiring two of the three preferred UK assets. We are not aware of
any direct negative impact that Brexit will have on the Texton tenant
base. Our leases are long, and our covenants are strong.
The political changes in South Africa are expected to have a positive
impact on at least investor perception and possibly the economic
future of South Africa in the long term. South Africa continues to face
economic headwinds and Texton’s SA legacy portfolio is challenging.
Management is actively managing and trading the portfolio. The
properties previously occupied by Vodacom and SITA created a material
drag on earnings in the prior year. Both these have been sold post
the reporting period. We are in the process of disposing a non-core
portfolio of properties in a responsible manner, and over the course
of the next year.
Key performance indicators
As communicated in last year’s annual results announcement, Texton’s
strategy is focused around diversification of the portfolio both by
sector and geographically, and management has continued to implement
the strategy through various acquisitions in South Africa and the
United Kingdom. Texton’s international expansion is continuing and a
number of deals have been concluded to acquire attractive assets with
good-qualitytenants and long-term leases. Acquisitions have been funded
through debt, equity and proceeds generated from disposal of non-core
assets. The equity raised during 2016 has resulted in the introduction
of a number of new shareholders as well as increasing the percentage
holding of some of our larger shareholders.
The introduction of a new executive team has enabled Texton to
continue to execute on its solid pipeline whilst still actively
managing the existing portfolio. The new executive team brings a wealth
of experience and diversified skills to Texton, which will complement
the business and position Texton well for the future.
Diversification across the sector and internationally is a strategy
that Texton strongly supports and believes that in the long term,
exposure to fewer, larger assets, with long-term leases in both South
Africa and abroad will significantly improve the risk profile of the
Company and deliver superior returns for its shareholders.
Texton’s current portfolio split by value is 61,2% South Africa and
38,8% United Kingdom. Retail assets now comprise 13,9% by GLA and
industrial 30,1% with office exposure down to 56,0%.
The vacancy rate (2016: 9,0% vs 2015: 7,9%) has increased mostly due
to a large office vacancy. The Fund started the year with two
material vacancies at Investment Place and Vodacom Park. Furthermore,
the SITA lease at Perseus Park expired at 30 April 2016, increasing
the total vacancy by 13 837m2. Management proactively marketed these
vacant spaces but, due to minimal interest, decided to dispose of
certain buildings. Post-year-end, Vodacom Park (5 101m2), Linga Longa
(597m2) and Perseus Park (13 837m2) have been sold and once
transferred, will reduce the overall Fund vacancy to 4,9%. The
take-up of space at Investment Place is notable and the current
vacancy stands at 15% (2015: 53,5%).
The weighted average lease expiry is 5,0 years (2015: 4,75 years).
In addition, we have improved our risk profile by reducing the
concentration of our tenants. Our exposure to government has reduced
to 12,5% of GLA (2015: 18,9%), and national and listed/large entities
are currently 57,5% of GLA (2015: 49,9%).
Acquisitions
During the year the Group acquired six properties comprising two
South African properties and four properties in the United Kingdom.
The South African properties acquire during the year were the
following:
– On 18 January 2016 the Fund acquired a commercial building known as
The Grid, situated at 45 De La Rey Road, Rivonia, Sandton. The gross
lettable area measures 4 528m2 all of which is occupied by a single
tenant on a 10 year triple-net lease. The purchase price was settled
in cash.
– On 22 February 2016 the Fund acquired a retail building known as
Golddurb, situated at 381 to 389 Dr Pixley Kaseme Street, Durban. The
gross lettable area measures 13 640m2 which is let to various tenants
on medium-term leases. The purchase price was settled in cash.
The United Kingdom properties acquired during the year were the
following:
– On 1 July 2015 the fund acquired a 50% stake in a retail and
commercial building known as Broad Street Mall, situated in the heart
of Reading, England. The gross lettable area measures 37 832m2 of
retail (30 961m2) and office (6 871m2) all of which is occupied by a
multitude of tenants on medium to long-term leases.
– On 23 December 2015 the Fund acquired an industrial building known
as Bawtry 270, situated in Doncaster, England. The gross lettable
area measures 25 087m2 all of which is occupied by a single tenant on
a long-term, triple-net lease. The purchase price was settled in
cash.
– On 8 January 2016 the Fund acquired a retail building known as
Camborne Retail Park, situated in Camborne, England. The gross
lettable area measures 4 477m2 all of which is occupied by a single
tenant on a long-term lease. The purchase price was settled in cash.
– On 4 February 2016 the Fund acquired two industrial buildings known
as Caterpillar, situated in Peterlee, England. The total gross
lettable area measures 10 030m2 all of which is occupied by a single
tenant on a long-term, triple-net lease. The purchase price was
settled in cash.
Broad-based black economic empowerment (BBBEE)
The management and board of the fund is committed to the
transformation and empowerment objectives of South Africa, and have
expended considerable effort in addressing our objective of having
meaningful, sustainable and commercially driven BBBEE shareholding at
the listed level.
The fund additionally recognises that integrating transformation into
business practice is crucial for the sustainability of the Company
and industry. As such, it was proud to sponsor several BBBEE
workshops over the year, with the aim of achieving greater
empowerment knowledge and commitment in the industry.
The 2016 financial year saw our two BBBEE partners remain invested in
the Fund where they continue to contribute meaningfully to our
business. The Texton Broad Based Proprietary Limited stake has been
retained at 13,8%. PD Naidoo has a shareholding in the Company of
4,0% at year-end. These two parties control 17,8% of the issued
share capital.
Our BBBEE partners comprise a combination of broad-based
beneficiaries, black women and other well networked and respected
business people, and Texton has and will continue to maintain a
meaningful, sustainable and commercially driven black economic
empowerment shareholding at the listed level. The Fund has achieved a
Level 3 rating in 2016, and will continue to aim to remain one of the
most empowered property funds listed on the exchange operated by the
JSE Limited.
Greening
Greening is an important element of our business and the portfolio is
constantly reviewed as part of Texton’s ongoing greening strategy.
During the year, a smart metering initiative was approved, which is
being rolled out across 33 properties within the portfolio, with
completion expected by end August 2016.
Equity raised and shares repurchased
In the year under review 100 000 000 new shares were issued as part
of a rights offer on 7 October 2015. The offer was made in a ratio of
36,22312 for every 100 Texton shares held. The shares were placed at
an issue price of R9,86 per rights offer share.
The equity raised was used to acquire assets in both South Africa
and the United Kingdom and was fully deployed during the 2016
financial year.
Post the rights issue, the total issued share capital increased from
276 066 766 to 376 066 766 at year-end. This includes 10 428 348 held
in the share incentive trust, and whose shares are treated as
treasury shares. In the current year the share trust followed its
rights and subscribed for 1 345 463 shares as part of the rights
offer at R9,86 per share and purchased an additional 439 843 shares
at R8,50 per share.
In addition, 8 276 143 shares were repurchased in December 2015 at a
price of R9,00 per share. These repurchased shares are also held as
treasury shares.
Basis of preparation
These condensed consolidated financial statements are prepared in
accordance with the requirements of the JSE Limited Listings
Requirements for reports and the requirements of the Companies Act of
South Africa. The 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) and 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 condensed consolidated financial statements are in terms of IFRS
and are consistent with those applied in the previous consolidated
annual financial statements.
The Group’s investment properties were partially externally valued
by independent valuers and partially internally valued. 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 8,5% and 10,69%. Changes in the capitalisation rate
attributable to changes in market conditions can have a significant
impact on property valuations. A 50 basis points increase in the
capitalisation rate will decrease the value of investment property by
R183,0 million. A 50 basis points decrease in the capitalisation rate
will increase the value of investment property by R204,2 million. In
terms of IAS 39: Financial Instruments: Recognition and Measurement
and IFRS 7, the Group’s currency and interest rate derivatives are
measured at fair value through profit or loss and are categorised as
Level 2. The fair value of the currency asset derivative was R132 million
and the fair value of the interest rate liability derivative was
R2,5 million. These fair values were determined using valuation
techniques that present value the net cash flows. These cash flows
are based on observable market data. 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 carrying value of all other financial assets and liabilities
approximate their fair value.
The new standards and interpretations that become effective during
the year have had no material effect on the results for the year, nor
has it required the restatement of any prior year figures. The
condensed consolidated financial statements information has been
presented on the historical cost basis, except for financial
instruments and investment properties carried at fair value, and is
presented in South African Rand which is the Company’s functional
currency, rounded to the nearest thousand. Ms Brigitte De Bruyn,
Texton’s Chief Financial Officer and Financial Director, was
responsible for the preparation of these condensed consolidated
financial statements.
Review of financial statements
The Group’s auditors KPMG Inc. have reviewed the condensed
consolidated preliminary financial statements for the year ended
30 June 2016. The review was conducted in accordance with ISRE 2410:
Review of interim financial information performed by the independent
auditor of the entity. A copy of their unmodified review report dated
29 August 2016 is available for inspection at the Company’s
registered office.
The auditor’s report does not necessarily report on all of the
information contained in these financial results. 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 the
auditor’s report together with the accompanying financial information
from the issuer’s registered office.
Business combinations
During the year the Group acquired six properties comprising two
South African properties and 4 properties in the United Kingdom.
These were as follows:
Acqui- Rental
sition esca-
price GLA Yield lation
Details Location Transfer date R'000 m2 % %
Bawtry Doncaster, 23 December 392 938 25 087 6,45 2,00
270 UK 2015
Camborne Camborne, 8 January 235 700 4 477 6,40 2,50
Retail UK 2016
Park
The Grid Sandton, 18 January 105 601 4 528 8,64 8,00
SA 2016
Cater- Peterlee, 4 February 178 617 10 030 7,54 1,75
pillar UK 2016
Golddurb Durban, 22 February 190 446 13 640 9,05 7,20
SA 2016
United
South Kingdom
Africa and Wales Total
R’000 R’000 R’000
Purchase price 296 047 807 255 1 103 302
Net assets acquired
Investment property 296 047 807 255 1 103 302
Net assets acquired 296 047 807 255 1 103 302
Cash acquired – – –
Net cash outflow 296 047 807 255 1 103 302
Revenue since acquisition 11 906 24 127 36 033
Revenue for the full year 28 967 50 152 79 119
Profit since acqusition 11 681 1 970 13 651
Full year profit 30 218 3 183 33 401
Stated capital
There are 376 066 766 ordinary shares of no par value in issue
(2015: 276 066 766). The Group accounts for 10 428 348 shares which
were issued to the staff incentive scheme trust and 8 276 143 shares
held as treasury shares. The Company’s share structure is in line with
international best practice for REITs.
Impairment of Goodwill
Goodwill of R77 million was paid on the acquisition of a portfolio of
properties in the prior year as a result of the opportunity to acquire
the portfolio in an off-market share transaction. The properties in
question have been revalued during the current year and the directors
aresatisfied that the premium paid is now reflected in the fair value
of the properties in question. The goodwill paid on the acquisition of
the properties in the prior year has consequently been impaired.
Borrowings
At 30 June 2016 the Fund had a loan-to-value ratio of 37,2%
(2015: 38,8%). The calculation of loan to value was based on
interest-bearing borrowings included in other financial liabilities
(excluding the fair value of the interest rate swaps) of
R1 912 million (2015: R1 617 million) and the value of investment
property, excluding Broad Street Mall, of R5 135 million (2015:
R4 170 million). The Fund remains capitalised to take advantage
of yield-enhancing acquisitions. The Fund has an average cost of
debt of 9,41% on its South African debt at 3,58% on its
United Kingdom debt.
Debt maturities profile
Drawn down
Total
drawn
Facility Fixed Floating down
R'000 R'000 R'000 R'000
South Africa
FY 2017 300 000 – 299 309 299 309
FY 2018 285 326 – 285 326 285 326
FY 2020 715 000 – 377 361 377 361
1 300 326 – 961 996 961 996
UK
FY 2018 534 011 – 532 046 532 046
FY 2020 418 088 – 418 088 418 088
952 099 – 950 134 950 134
Total 2 252 425 – 1 912 130 1 912 130
Interest rate swap maturity profile
Nominal rate
Expiry R’000 %
14 December 2016 150 000 7,26
22 March 2017 103 000 7,12
22 March 2017 102 000 7,12
17 July 2017 200 000 7,12
11 February 2019 170 000 8,05
11 February 2019 100 000 8,29
Total 825 000
Currency swap
We receive We pay
Expiry R’000 Gpb’000 % %
08/12/2020 350 560 16 000 11,0 3,818
21/12/2020 102 269 4 525 11,0 3,638
04/01/2021 239 065 10 421 11,0 3,688
18/01/2021 180 628 7 564 11,0 3,448
Total 872 522 38 510
Property and asset management
Texton has an external asset management company namely, Texton
Property Investments Proprietary Limited (TPI), that manages the Fund
in terms of the asset management agreement concluded between the
parties. Day-to-day management and operational functions are
performed by the executive management team of Texton, who are
employees of TPI. The executive management team of Texton interact
regularly with the TPI shareholders through regular meetings, and
service-level agreements. The roles of TPI shareholders, executive
management and Texton directors are clearly defined and specific
responsibilities and committees including key deliverables and
performance criteria are well documented and covered in the
service-level agreements.
The shareholders of the outsourced asset management company bring
considerable knowledge, skill, expertise, networks and pipeline to
Texton and we believe that Texton, at this stage of its lifecycle,
continues to derive significant benefit from the outsourced
arrangement it has with the management company.
Management of Texton has recently received queries from shareholders
and other stakeholders regarding the potential internalisation of the
asset management function of Texton (Manco Internalisation). Pursuant
to the above, of the Manco Internalisation is something that each of
the board of directors of Texton and TPI consider on a regular basis.
With effect 1 January 2016 Kuper Legh Property Management (KLPM)
assumed full property management responsibility over the South
African property portfolio. Argo Real Estate Limited and Moorgarth
Holdings Limited manage Texton’s portfolio of assets in the United
Kingdom. Texton’s property managers are responsible for daily
property operations such as leasing, invoicing of tenants, debt
collection, maintenance, tenant interaction, financial administration,
and the management of relationships with third- party service
providers and local government. Texton’s property managers have a
proven track record with a long and successful history in managing
Texton’s portfolio of properties and funds in the listed
property space.
Events after the reporting date
Acquisition of the portfolio referred to as the Blend Portfolio
Shareholders are referred to the announcement released on SENS on
27 May 2016 (the Initial Announcement) relating to the acquisition of
two property portfolios in South Africa and in the United Kingdom
(collectively, the Blend portfolio) and the subsequent announcement
released on SENS on 17 August 2016.
Texton renegotiated with the vendors of the Blend Portfolio, due to
prevailing market conditions and agreed terms to acquire four of the
original nine properties contained in the Initial Announcement.
The revised United Kingdom transaction consists of Heapham Road,
located in Gainsborough, UK and Mowbray House, located in Nottingham
Road, UK and was valued at £16,157 million (R290,13 million). The
revised South African transaction consists of 16 Skeen Boulevard,
located in Bedfordview, South Africa and 18 Skeen Boulevard, located in
Bedfordview, South Africa and was valued at R98,69 million. The
portfolios represent a yield of 7,29% in UK (previously 6,95%) and
9,3% in SA (previously 9,6%).
The total purchase consideration of the revised portfolio of
R378,04 million (Purchase Consideration), is R88,34 million lower than
the initial purchase consideration of the properties contained in the
Revised Portfolio due to favourable currency movements since the
Initial Announcement date.
The Purchase Consideration is payable in cash and will be funded
through a combination of new debt facilities and cash proceeds generated
from the sale of non-core properties. Texton did not raise equity to
fund any of the Purchase Consideration.
The United Kingdom properties transferred on 17 August 2016 and the
SouthAfrican properties are expected to transfer within the next three
months.
The acquisition of the Revised Portfolio constitutes a category 2
transaction in terms of the JSE Listings Requirements and,
accordingly, does not require approval by shareholders.
Executive Management and Director changes
Angelique de Rauville has agreed to extend her contract as acting
Chief Executive Officer until 31 December 2016. Nic Morris will
assume the role of Managing Director from 1 September 2016 and will
fulfil the permanent role of Chief Executive Officer from 1 January
2017. Angelique will remain involved in the business post 1 January 2017
focusing on the United Kingdom business where she is based. Angelique
remains the Chief Executive Officer of Texton’s management company being
Texton Property Investments Proprietary Limited.
In compliance with paragraph 3,59 of the Listings Requirements of JSE
Limited, the board of directors of Texton (the Board) hereby notifies
its shareholders of the following changes:
Ms Portia Tau-Sekati (lead independent) and Mr Thando Sishuba
(independent non-executive Director) have resigned from the board of
Texton with effect 25 August 2016. As a consequence Ms Tau-Sekati is
no longer chair of the remuneration and nomination committee nor
member of the Social and Ethics committee, Mr Sishuba is no longer a
member of the Audit and Risk Committee nor the Investment Committee.
In addition Mr John Macey has resigned as a member of the Investment
Committee but remains as a Director and Chair of the Audit and Risk
Committee. The Board would like to thank Ms Tau-Sekati and Mr Sishuba
for their meaningful contribution to Texton during their tenure, and
Mr Macey for his contribution to the Investment Committee. The company
will address the appointment of a new lead independent director in
due course to ensure compliance with King III and the JSE Limited’s
Listings Requirements.
Prospects
2016 has been a significant year of achievement for Texton. We have
recruited a top-calibre team of professionals into the business,
substantially improved operational processes and efficiencies, and
made significant progress in business restructuring. We have
continued to deliver on our strategy and we have progressed on a plan
to dispose of non-core properties and acquire those that improve the
overall quality of our fund and which are mostly accretive. We remain
committed to this strategy. With almost 40% of our portfolio by value
being based in the United Kingdom our earnings may be subject to the
volatility of the Rand however hedging instruments are being
considered to mitigate risk associated with income. We continue to
hedge a significant component of our capital.
Assuming some stability in markets, management remains of the view
that we shall continue to deliver top-quartile distribution growth on
a like-for-like basis and from a vastly improved portfolio of
properties - including a reduced government exposure, reduced
secondary South African office exposure, the disposal of
non-performing assets providing no income and a balanced portfolio of
assets across the two geographic jurisdictions where management has a
proven track record, experience and footprint.
Cash dividend
Notice is hereby given of the declaration of the final dividend
number 11 of 52,16 cents per share for the final six-month period to
30 June 2016, bringing the total dividend for the year ended 30 June
2016 to 103,68 cents per share (2015: 94,77). The dividend has been
declared from income reserves.
Texton’s income tax reference number: 9353785158.
Issued shares as at 29 August 2016: 376 066 766.
Salient dates
Dividend declaration date 29 August 2016
Last date to trade 27 September 2016
Shares trade ex-dividend 28 September 2016
Rekord date 30 September 2016
Payment date 3 October 2016
Share certificates may not be dematerialised or rematerialised
between 28 September 2016 and 30 September 2016, both dates
inclusive.
An announcement informing shareholders of the tax treatment of the
dividends will be released on SENS on 29 August 2016.
On behalf of the board
PD Naidoo AN de Rauville
Chairman Acting Chief Executive Officer
29 August 2016
Board of directors
PD Naidoo (Chairman), AN Du Hecquet de Rauville (Acting Chief
Executive Officer), B de Bruyn (Financial Director – appointed
1 November 2015), NV Balfour, KR Collins (alternate – appointed
3 November 2015), JA Legh, JR Macey, N Morris (Chief Operating Officer
– appointed 1 January 2016), P Ntshalintshali (appointed 1 March 2016),
PM Tau-Sekati (Lead independent) (resigned 25 August 2016),
TS Sishuba (resigned 25 August 2016), KN Vundla, MJ van Heerden,
JD Wiese (appointed 3 November 2015).
Corporate information
Company registration number: 2005/019302/06
Company Secretary: CIS Company Secretaries Proprietary Limited
Sponsor: Investec Bank Limited
Transfer secretary: Computershare Investor Services Proprietary
Limited, 70 Marshall Street, Johannesburg, 2001
Physical and registered address: Block C, Investment Place,
10th Road, Hyde Park, 2196
Postal address: PO Box 41394, Craighall Park, 2024
www.texton.co.za
Date: 29/08/2016 01:50:00 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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