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Audited summarised consolidated results and cash dividend declaration for the year ended 30 June 2016
FAIRVEST PROPERTY HOLDINGS LIMITED
Incorporated in the Republic of South Africa
(Registration number 1998/005011/06)
("Fairvest" or "the company" or "the group")
Share code: FVT ISIN: ZAE0000203808
Granted REIT status with the JSE
AUDITED SUMMARISED CONSOLIDATED RESULTS AND CASH DIVIDEND DECLARATION
FOR THE YEAR ENDED 30 JUNE 2016
DISTRIBUTION FOR THE YEAR INCREASED BY 10.29% TO
16.660 CENTS PER SHARE, EXCEEDING GUIDANCE
VACANCIES REDUCED
FROM 4.4% TO 3.8% OF THE TOTAL LETTABLE AREA
INCREASED TENANT RETENTION FROM 81.0% TO 85.2%
THE TOTAL PROPERTY PORTFOLIO
INCREASED BY 41.4% TO R1.92 BILLION
11.6% INCREASE ACHIEVED ON RENEWALS
77.6% ANCHOR AND NATIONAL TENANT COMPONENT
NET ASSET VALUE INCREASED
BY 9.3% TO 201.60 CENTS PER SHARE
LIKE-FOR-LIKE ANNUALISED
NET PROPERTY INCOME INCREASED BY 10.5%
DISTRIBUTION GROWTH OF 9% TO 10%
FOR THE YEAR TO 30 JUNE 2017 EXPECTED
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited Audited
30 June 30 June
2016 2015
R'000 R'000
ASSETS
NON-CURRENT ASSETS 1 895 958 1 365 593
Investment property 1 849 158 1 337 428
Loans receivable 11 377 3 761
Investments 2 064 1 979
Office equipment 504 269
Operating lease asset 32 855 22 156
CURRENT ASSETS 31 229 20 856
Current portion of interest bearing loans 1 482 1 399
Trade and other receivables 19 831 16 030
Cash and cash equivalents 9 916 3 427
Non-current asset held for sale 40 000 –
TOTAL ASSETS 1 967 187 1 386 449
EQUITY AND LIABILITIES
SHAREHOLDERS INTEREST 1 327 079 1 105 421
Share capital 105 332 5 994
Retained earnings 1 221 747 1 099 427
Non-controlling interest 1 081 –
TOTAL EQUITY 1 328 160 1 105 421
NON-CURRENT LIABILITIES 593 799 209 239
Interest-bearing borrowings 571 227 203 063
Amounts owing to minorities 13 398 –
Derivative financial instrument 1 945 411
Other non-current liabilities 6 948 5 490
Deferred taxation 281 275
CURRENT LIABILITIES 45 228 71 789
Interest-bearing borrowings 3 530 44 371
Trade and other payables 41 698 27 418
TOTAL EQUITY AND LIABILITIES 1 967 187 1 386 449
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited Audited
12 months 12 months
to 30 June to 30 June
2016 2015
R'000 R'000
GROSS REVENUE 279 735 187 926
Rental income – contractual 268 140 178 698
– straight-line accrual 11 595 9 228
Property expenses (103 416) (65 773)
Net profit from property operations 176 319 122 153
Corporate administrative expenses (16 680) (12 142)
OPERATING PROFIT 159 639 110 011
Fair value adjustment to investment properties 107 571 82 386
Fair value adjustment to derivatives (1 534) (411)
Fair value adjustment to debentures – (8 242)
Fair value adjustment to investments 85 (21)
Finance cost (43 717) (23 702)
Investment revenue 2 050 1 025
PROFIT BEFORE DEBENTURE INTEREST 224 094 161 046
Debenture interest – (38 992)
PROFIT AFTER DEBENTURE INTEREST 224 094 122 054
Capital expenses (870) (4 198)
PROFIT BEFORE TAXATION 223 224 117 856
Taxation (6) 3 348
COMPREHENSIVE INCOME ATTRIBUTABLE TO
SHAREHOLDERS 223 218 121 204
Audited Audited
12 months 12 months
to 30 June to 30 June
2016 2015
R'000 R'000
Profit and total comprehensive income
attributable to:
– Owners of the parent 222 137 121 204
– Non controlling interest 1 081 –
223 218 121 204
Reconciliation between profit attributable
to shareholders, distributable earnings and
headline earnings per share
Comprehensive income attributable to owners of
the parent 222 137 121 204
Fair value adjustment to investment properties
(attributable to owners of the parent) (106 584) (82 386)
Headline and diluted headline earnings attributable
to shareholders 115 553 38 818
Fair value adjustment to debentures – 8 242
Debenture interest – 38 992
Headline and diluted headline profit attributable to
shareholders 115 553 86 052
Distributable earnings calculation
Net profit from property operations 176 319 122 153
Straight-line rental income accrual (11 595) (9 228)
Corporate administrative expenses (16 680) (12 142)
Finance cost (43 162) (20 153)
Investment revenue 2 050 1 025
Share issued cum distribution 2 749 3 519
Non-controlling interest share of distribution (12) –
Distributable earnings 109 669 85 174
Distribution 109 669 85 174
DISTRIBUTION (Dividend and debenture
interest)*
Interim dividend per share/distribution per linked
unit (cents) 8.171 7.427
Final dividend declaration per share (cents) 8.489 7.679
Total distribution per share/linked unit (cents) 16.660 15.106
EARNINGS PER SHARE
Basic and diluted earnings per share (cents) ** 34.65 22.44
Headline and diluted headline earnings per share
(cents) ** 18.03 7.19
Headline and diluted headline earnings per share
(cents) ** 18.03 15.93
Net asset value per share and net tangible asset
value per share (cents)*** 201.60 184.41
Share statistics
Shares in issue 658 261 805 599 438 276
Weighted average number of shares 641 064 762 540 053 358
* Distributions consists of dividends declared and debenture interest paid in the prior
year (prior to the conversion to a share only capital structure). Prior to the conversion
of the capital structure debenture interest was calculated on the capital at a variable
rate equal to 99.9% of the net profit of the company before taxation, but after
adjusting for extraordinary income and expenditure, capital gains and losses, and
capital expenditure.
** Headline earnings have been presented in accordance with IAS 33. In the prior year
in terms of the linked unit structure of the group every shareholder was a debenture
holder. This coupled with the terms of the Debenture Trust Deed, which stated that
99.9% of profits are attributable to debenture holders, resulted in the benefits of
improved trading, which would be ordinarily attributable to shareholders, being
expensed in the statements of comprehensive income as a fair value adjustment to
debentures and debenture interest. This resulted in no profit being attributable to
ordinary shareholders.
*** In the prior year linked unit debentures were included in the net asset value and net
tangible asset value calculation.
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
Audited Audited
12 months 12 months
to 30 June to 30 June
2016 2015
R'000 R'000
Cash inflow from operating activities 19 697 4 239
Cash outflow to investing activities (444 230) (168 953)
Cash inflow from financing activities 431 022 164 475
Net increase/(decrease) in cash and cash
equivalents 6 489 (239)
Cash and cash equivalents at beginning of
period 3 427 3 666
Cash and cash equivalents at end of period 9 916 3 427
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non-
Share Retained Shareholders' controlling Total
capital earnings interest interest Equity
R'000 R'000 R'000 R'000 R'000
Balance at 1 July 2014 5 254 – 5 254 – 5 254
Disposal of treasury linked
units 22 – 22 – 22
Linked units issued 718 – 718 – 718
Conversion of debentures – 978 223 978 223 – 978 223
Total comprehensive
income for the period – 121 204 121 204 – 121 204
Balance at 30 June 2015 5 994 1 099 427 1 105 421 – 1 105 421
Shares issued 100 000 – 100 000 – 100 000
Capital issue expenses (662) – (662) – (662)
Total comprehensive
income for the period – 222 137 222 137 1 081 223 218
Dividends paid and
declared – (99 817) (99 817) – (99 817)
Balance at 30 June 2016 105 332 1 221 747 1 327 079 1 081 1 328 160
OTHER SEGMENTAL INFORMATION
Audited Audited
30 June 30 June
2016 2015
Regional profile based on lettable area
KwaZulu-Natal 23.3% 31.0%
Western Cape 18.9% 22.0%
Gauteng 16.1% 21.6%
Free State 16.1% 3.0%
Northern Cape 9.6% 6.3%
Eastern Cape 7.3% 4.5%
Limpopo 6.2% 8.2%
Mpumalanga 2.5% 3.4%
Vacancy profile based on gross lease area
Gross lease area in metres squared as at end of period * 185 937 139 247
Properties held 39 34
Vacancy area in metres squared * 7 060 6 058
Vacancy area as % of gross lease area 3.8% 4.4%
Regional vacancy profile (m2)
(regions where vacancies are located)
Western Cape 3 409 1 708
Gauteng 1 160 894
Free State 1 093 –
KwaZulu-Natal 771 2 653
Northern Cape 379 207
Limpopo 248 101
Eastern Cape – 495
* Gross lease area and vacancy in the prior and current periods has been updated after the
remeasurement of various properties and excludes unlettable space.
SUMMARISED CONSOLIDATED SEGMENT REPORT
Reconciling
KwaZulu- Western Free Northern Eastern items/
Natal Cape Gauteng State Cape Limpopo Cape Mpumalanga (Eliminations) Total
FOR THE YEAR ENDED 30 JUNE 2016
Revenue - external
customers 64 323 51 469 42 898 39 881 31 205 18 551 10 241 9 572 – 268 140
Operating profit 52 401 33 449 24 239 23 427 16 036 12 747 7 845 6 175 (16 680) 159 639
Total assets 546 571 375 630 269 066 283 825 177 193 118 543 101 917 61 680 32 762 1 967 187
FOR THE YEAR ENDED 30 JUNE 2015
Revenue - external
customers 49 962 46 182 36 978 3 357 14 752 16 570 8 657 2 240 – 178 698
Operating profit 42 519 30 632 18 937 2 714 7 121 11 665 6 716 1 849 (12 142) 110 011
Total assets 491 142 320 117 246 707 26 046 64 607 120 040 40 087 60 304 17 399 1 386 449
Basis of preparation and accounting policies
The preparation of these provisional summarised consolidated financial statements was supervised by the Chief Financial Officer,
BJ Kriel CA (SA).
The accounting policies applied in the preparation of these audited summarised consolidated results for the year ended
30 June 2016, which are based on reasonable judgements and estimates, are in accordance with International Financial Reporting
Standards ("IFRS") and are consistent with those applied in the annual financial statements for the year ended 30 June 2015. Any other
new and amendments to IFRS and IFRIC interpretations did not impact on the financial position or performance of the company but
has resulted in additional disclosures. These audited summarised consolidated results, as set out in this report, have been prepared in
accordance and containing the information required by IAS 34 – Interim Financial Reporting, the SAICA Financial Reporting Guidelines as
issued by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Council, the
Companies Act of South Africa, No 71 of 2008, as amended ("Companies Act") and the Listings Requirements of JSE Limited.
These summarised consolidated results for the year ended 30 June 2016 have been prepared in accordance with the historic cost basis,
except for the measurement of investment properties and certain financial assets and financial liabilities which are stated at fair value.
The financial results are presented in Rands, which is Fairvest's functional and presentation currency and have been prepared on a
going concern basis.
Audit report
The audited summarised consolidated results for the year ended 30 June 2016 set out above, have been extracted from the group's
annual financial statements which have been audited by BDO South Africa Inc. A copy of their unmodified audit opinion is available
for inspection at the company's registered office. Any reference to future financial performance included in this announcement has
not been reviewed or reported on by the company's auditors.
The directors take full responsibility for the preparation of the audited summarised consolidated results presented and that the
financial information has been correctly extracted from the underlying financial statements.
Estimates and critical judgements
Except for the measurement of investment properties, debentures and certain financial assets and financial liabilities the financial
statements do not include any material estimates.
COMMENTARY
INTRODUCTION
Fairvest is a Real Estate Investment Trust ("REIT"), with a unique focus on retail assets weighted toward non-metropolitan and rural
shopping centres, as well as convenience and community shopping centres servicing the lower LSM market, in high-growth nodes,
close to commuter networks. The Fairvest property portfolio consists of 39 properties, with 185 937m2 of lettable area and valued
at R1 925.1 million.
CAPITAL RAISING ACTIVITIES
Shareholders are referred to the company's SENS announcement dated 15 October 2015, regarding the placement of 58 823 529 new
ordinary shares which were issued through a vendor consideration placement at an issue price of R1.70 per share, raising R100 million
of new equity.
REVIEW OF RESULTS
Fairvest board of directors are pleased to announce a 10.55% increase in the final dividend distribution of 8.489 cents per share for
the six months ended 30 June 2016. This brings the total combined dividend for the year to 16.660 cents per share, which is a 10.29%
increase from the previous year, exceeding our updated guidance issued in March 2016 of between 9.25% and 10.25% growth in
distribution for the full year.
Distribution history (cents per share/linked unit) Interim Final Total
Jun-12 5.200 6.300 11.500
Jun-13 4.570 6.000 10.570
Jun-14 6.750 6.970 13.720
Jun-15 7.427 7.679 15.106
Jun-16 8.171 8.489 16.660
Revenue for the year ended 30 June 2016 increased by 48.9% to R279.7 million, as a result of income growth in the historic portfolio
as well as the acquisitions during the year. Net profit from property operations increased by 44.3% to R176.3 million, while corporate
administration expenses increased by 37.4% to R16.7 million, resulting in distributable earnings increasing by 28.8% to R109.7 million.
Gross property expenses as a ratio of revenue increased marginally from 36.8% for the year to 30 June 2015 to 38.6%, as a result
of the increases in rates and taxes and electricity, as well as higher cost to income ratios on assets acquired during the year. The net
property expense ratio (expenses net of utility recoveries) remained well contained and in line with the previous year at 17.3%, which
continues to demonstrate good cost containment and effective recoveries.
Gross rentals across the portfolio trended upwards, with an 8.2% increase in the weighted average rental to R99.40/m2 at
30 June 2016 compared to R91.85/m2 at 30 June 2015. The weighted average contractual escalation for the portfolio improved from
7.4% as at 30 June 2015 to 7.5% at 30 June 2016.
The net asset value increased by 20.1% from R1.11 billion to R1.33 billion at 30 June 2016, which equates to 201.60 cents per share,
a 9.3% increase from the previous year.
Net asset
Market Net asset value
capitalisation value per share
Net asset value and market capitalisation R'million R'million (cents)
Jun-13 503.7 546.5 151.90
Jun-14 733.4 838.9 159.00
Jun-15 1 079.0 1 105.4 184.40
Jun-16 1 020.3 1 327.1 201.60
PROPERTY PORTFOLIO
The total property portfolio increased by 41.4% from R1 361.8 million in June 2015 to R1 925.1 million. The increase is as a result of
the acquisition during the period to the value of R412.3 million and capital expenditure incurred of R31.9 million, as well as the historic
portfolio increasing by 8.8% relative to the previous year. The average value per property increased by 23.2% to R49.4 million, while
the average value per square meter increased by 5.9% to R10 354/m2.
Portfolio valuation history R'million
Jun-12 103.5
Jun-13 774.8
Jun-14 1 109.1
Jun-15 1 361.8
Jun-16 1 925.1
In line with the accounting policy of the group, at least a third of the portfolio was valued by independent external valuers. Of the
39 properties in the portfolio, 14 properties equating to 38.9% by value, was valued by independent valuers, DDP Valuers and the
remainder by the directors. All properties are valued by independent external valuers at least every three years. The properties are
valued using the five year discounted cashflow method. Assumptions are made on the discount rates used to determine the present
value of the cashflows and on the capitalisation rate on an assumed sale after five years. The weighted average discount rate used
was 15.2% compared to 14.9% in 2015 and the weighted average capitalization rate used was 10.3% compared to 10.0% in 2015.
Acquisitions
Shareholders are referred to Fairvest's various SENS announcements, regarding certain acquisitions by the Company. Seven new
properties were acquired during the period, of which five transferred during the current period and two transferred after year-end.
Properties transferred during the year
Purchase
GLA price Anchor Date of
Property Location (m2) R'000 tenant transfer
Sibilo Northern Cape 8 528 95 000 Shoprite 24-Aug-15
Middestad Centre Free State 19 857 Shoprite 26-Aug-15
Mega Park Free State 5 960 Fielli 26-Aug-15
Redefine portfolio 25 817 239 049
Parow Valley Spar * Western Cape 2 455 18 800 Spar 10-May-16
Elliotdale Boxer ** Eastern Cape 7 217 59 400 Boxer 09-May-16
Properties transferred after 30 June 2016
Purchase
GLA price Anchor Date of
Property Location (m2) R'000 tenant transfer
Mqanduli Boxer ** Eastern Cape 6 945 37 600 Boxer 07-Jul-16
Tabankulu Boxer ** Eastern Cape 4 117 32 000 Boxer 15-Jul-16
* The Parow Valley Spar was acquired in a newly incorporated subsidiary, Parow Valley Spar Proprietary Limited, of which Fairvest owns 51%.
** The Mainstream portfolio was acquired in a newly incorporated subsidiary FPP Property Venture 103 Proprietary Limited, of which Fairvest owns 80%.
Property acquired after year-end
Purchase Expected
GLA price Anchor date of
Property Location (m2) R'000 tenant transfer
Macassar Shoprite * Western Cape 5 578 41 500 Shoprite 30-Sep-16
* The Macassar Shoprite will be acquired in a newly incorporated subsidiary, Urban Growth Properties Proprietary Limited, of which Fairvest owns 80%.
Disposals
Fairvest is in the process of concluding an agreement of sale with a black empowered consortium for the disposal of SASSA House.
Fairvest will provide vendor finance for the transaction and the new shareholders will be required to conclude a lease renewal with
Department of Public Works.
Value extraction
St George Square
When the property was acquired in 2012, approximately 1 867m2 of the gross lettable area were unlettable space, and were therefore
included in the purchase consideration at no value. During the current financial year the previously unlettable space was converted
to 1 813m2 of new retail and storage space has been created and certain tenants were strategically relocated into the newly created
premises. In addition to the creation of additional GLA, the centre is being repainted and new signage pylons provided to improve the
overall shopping experience by way of enhanced aesthetics.
Qualbert Centre
The redevelopment of the Qualbert Centre was largely concluded during year. The introduction of a food anchor, through the
conclusion of a 10-year lease with Pick 'n Pay, has positively repositioned the centre and is attracting a broader customer base.
Vacancies have reduced significantly and the overall tenant quality has improved. The project also included a facade upgrade to the
centre, as well as improved lighting.
PORTFOLIO COMPOSITION, LETTING AND VACANCIES
Tenant grade as a percentage of GLA
Jun-16 Jun-15
A-grade tenants 77.6% 78.5%
B-grade tenants 7.0% 6.6%
C-grade tenants 15.4% 14.9%
A – Anchor and national tenants
B – Franchise, professional and large tenants
C – Other
The high national tenant component of 77.6% of the portfolio provides shareholders with a relatively low risk investment profile.
Vacancies reduced from 4.4% to 3.8% or 7 060m2 during the year under review, mainly as a result of some positive letting at Qualbert
Centre, Richmond Shopping Centre and SASSA House. This was partially offset by vacancies in some of the newly acquired properties,
as well as additional GLA created in St Georges Square which was vacant at year-end.
Based on Based on
Lease expiry profile rentable area gross rental
Vacant 3.8% –
Monthly/expired 8.0% 7.5%
30 Jun 17 17.6% 20.1%
30 Jun 18 21.0% 23.4%
30 Jun 19 12.3% 13.0%
30 Jun 20 15.2% 14.5%
After 30 Jun 21 22.1% 21.5%
During the year under review 62 new leases were concluded which equates to a GLA of 8 695m2. Renewal activity was also positive
with an 11.6% escalation achieved on the 19 424m2 of leases that were renewed during the year. Tenant retention for the year was
85.2%, an improvement from the 81% for the previous year. The weighted average lease term is 36 months
BORROWINGS
The loan to value ("LTV") ratio was 29.7% (LTV is calculated as total interest bearing debt divided by total property assets), which
increased from 19.0% in June 2015 as a result of the acquisitions during the year. As at 30 June 2016, 57.7% of the debt was fixed
either through swaps or fixed rate loans, with a weighted average expiry for the fixed debt of 27 months, a significant improvement
from the 36.2% fixed debt component as at 31 December 2015.
The weighted average all-in cost of funding increased from 9.02% at June 2015 to 9.42% at 30 June 2016, mainly as a result of the
increases to the repo rate. The weighted average maturity of debt decreased from 31 months to 27 months.
After year-end an additional interest rate swap to the value of R100 million was entered into, which will, after the conclusion of the
Macassar Shoprite acquisition, increase LTV to 33.4% and further improve the fixed component of debt to 62.7%.
PROSPECTS
Pressure will remain on tenants in a low economic growth, and rising interest rate environment and we expect trading conditions to
remain challenging. Despite the weak economic outlook the portfolio is well positioned, with a low-risk tenant base and improved
portfolio quality to continue to achieve strong growth in distributions. Management is confident that Fairvest should be able to
achieve distribution growth of between 9% and 10% for the 2017 financial year. We will continue to remain conservatively geared
and sufficiently hedged to minimize the impact of potential interest rate increases.
This view assumes no material deterioration in the macro-economic environment relative to current levels, that no major corporate
failures will occur and that tenants will be able to absorb increases in municipal and utility costs. Forecast rental income is based on
contractual lease terms and anticipated market related renewals. This forecast is the responsibility of the board of Fairvest and has not
been reviewed or reported on by the auditors.
DIVIDEND WITH ELECTION TO REINVEST
The board has approved and declared a final gross distribution of 8.489 cents per share for the six-month period ended 30 June 2016,
payable to shareholders registered as such at the close of business on Friday, 14 October 2016.
Shareholders will be entitled, in respect of all or part of their shareholdings, to elect to reinvest the cash dividend of 8.489 cents per
share, in return for new Fairvest ordinary shares ("Reinvestment Alternative"), failing which they will receive the cash dividend.
Further details regarding the dividend and Reinvestment Alternative, including the tax treatment and a detailed timetable, will be
included in a separate SENS announcement, to be released today, 8 September 2016.
SUBSEQUENT EVENTS
The directors of Fairvest are not aware of any further material matters or circumstances arising between 30 June 2016 and this report
which may materially affect the financial position of the group or the results of its operation.
APPRECIATION
We extend our appreciation to our directors, management and staff for their valued efforts as well as our advisers and shareholders
for their continuing belief in and support of Fairvest.
For and on behalf of the board
Fairvest Property Holdings Limited
8 September 2016
Cape Town
Executive Non-executive
DM Wilder (Chief executive officer) J F du Toit (Chairman)
BJ Kriel (Chief financial officer) LW Andrag (Lead independent director)#
AJ Marcus (Chief operating officer)* KR Moloko#
* alternate to DM Wilder N Mkhize#
JD Wiese#
# independent
Company Secretary
SecCorp Secretarial Services Proprietary Limited
Registered office
8th Floor, The Terraces, 34 Bree Street, Cape Town, 8001
Postnet Suite 30, Private Bag X3, Roggebaai, 8012
Transfer secretaries
Computershare Investor Services Proprietary Limited
Ground Floor, 70 Marshall Street, Johannesburg, 2001
PO Box 61051, Marshalltown, 2107
Auditor
BDO South Africa Incorporated
Registered Auditors
Sponsor
PSG Capital Proprietary Limited
www.fairvest.co.za
Date: 08/09/2016 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
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