Wrap Text
Unaudited condensed consolidated interim financial statements for the six months ended 31 August 2016
NEWPARK REIT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2015/436550/06)
JSE share code: NRL ISIN: ZAE000212783
(Approved as a REIT by JSE)
("Newpark" or "the Company" or "the group")
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED
31 AUGUST 2016
COMMENTARY
Nature of Business
Newpark is a property holding and investment company that is currently invested in A-grade commercial properties
situated in the heart of Sandton.
Property portfolio
Newpark's property portfolio consists of two buildings located in the heart of Sandton, Gauteng, namely the JSE which
has 18,162m(2) of gross lettable area ("GLA") and an adjoining building known as 24 Central, which has 15,089m(2) GLA. The
combined independent valuations of these properties as at 29 February 2016 was R1,065 million.
Strategy
Newpark's investment strategy is to seek well positioned prime commercial properties which provide quality cash flows
with the potential of upward rating on lease renewals and/or redevelopment opportunities within the medium to long-
term (5 to 20 years).
Acquisitions and Developments
Newpark made no further acquisitions and no developments took place during the period under review.
Vacancies and Arrears
Vacancies at 31 August 2016 were 6,8% of GLA which had been factored into management's forecasts for the year. No
bad debts were incurred nor is it considered necessary to provide for any potential bad debts.
Funding
Amount Margin
Facility drawn down R'millions over Jibar
Expiry August 2020 270 1.65%
Amount
Interest rate applicable R'millions Rate
Interest rate swap 135 8.52%
Interest rate cap 135 10.17%
Both the swap and cap expire in January 2019
The RMB facility is secured by a first mortgage bond over fixed property with a carrying value of R975 578 291 and
currently attracts a floating rate of three-month JIBAR plus 1.65%. The RMB facility is repayable in August 2020. Newpark
has an interest rate swap and interest rate cap on this facility. The interest rate cap has the effect that 50% of the interest
on the RMB facility is capped at a rate of 10.17%. In addition, the interest rate swap secured with RMB has the effect that
in respect of the remaining 50% of the interest on the RMB facility, the floating portion of the current rate is swapped for
a fixed rate of 8.52%, before the RMB margin of 1.65%. The interest rate swap and cap expire on 18 January 2019 and
interest is payable quarterly.
Percentage of debt hedged
The all-in weighted average cost of funding is 9.57% and the average hedge-term is 2.25 years. It is the board's policy to
hedge at least 70% of the exposure to interest rate risk.
Summary of financial performance
31 August 2016 29 February 2016
Shares in issue 100,000,001 100,000,001
Net asset value per share R8.18 R7.91
Loan-to-value ratio * 20.8% 22.3%
Gross property operating expense ratio 17.6% 34.9%
*The loan-to-value ratio is calculated by dividing interest bearing borrowing net of cash on hand by the total of
investment property.
Outlook
The board is confident that Newpark will deliver on its forecast distribution of 49.47 cents per share for the year ended
28 February 2017 as set out in the Pre-Listing Statement. The forecast is based on the assumption that a stable macro-
economic environment will prevail and operating cost increases will not be above inflation. This forecast has not been
audited or reviewed by the Company's auditors.
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Audited
31 August 29 February
2016 2016
(R'000) (R'000)
Assets
Non-current assets
Investment properties 4 983 329 982 308
Straight-line lease asset 49 226 44 823
Deferred tax 1 150 55
Derivative financial instruments - 699
Lease incentive 21 173 22 496
1 054 878 1 050 381
Current Assets
Trade and other receivables 5 989 6 157
Straight-line lease asset 16 376 12 727
Lease incentive 2 647 2 647
Cash and cash equivalent 47 338 32 217
Total Current Assets 72 350 53 748
Total Assets 1 127 228 1 104 129
Equity and Liabilities
Equity
Share capital 619 918 620 006
Reserves 180 412 180 412
Retained income/(loss) 17 719 (9 759)
818 049 790 659
Liabilities
Non-Current Liabilities
Bank borrowings 270 000 270 000
Deferred tax 16 895 14 640
Derivative financial instruments 2 072 -
288 967 284 640
Current liabilities
Trade and other payables 20 212 28 830
Total Liabilities 309 179 313 470
Total Equity and Liabilities 1 127 228 1 104 129
Net asset value per share R8,18 R7,91
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
6 months ended 6 months ended 12 months ended
31 August 31 August 29 February
2016 2015 2016
(R'000) (R'000) (R'000)
Revenue 54 993 36 350 95 185
Property operating expenses (10 861) (15 061) (33 206)
Other income - - 100
Administrative expenses (1 374) (1 342) (6 000)
Operating profit 42 758 19 947 56 079
Finance income 1 568 179 1 161
Fair value adjustments (2 772) 233 912 242 524
Finance costs (12 916) (11 537) (22 191)
Profit / (loss) before taxation 28 638 242 501 277 573
Taxation (1 160) 87 387 85 537
Profit / (loss) for the period 27 478 329 888 363 110
Other comprehensive income - - -
Total comprehensive income 27 478 329 888 363 110
Earnings per share (cents)
Per share information
Basic earnings per share 5 27.48 366.54 400.17
Diluted earnings per share 5 27.48 366.54 400.17
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share Share Total Capital Retained Total
capital issue costs share reorganisation (loss)/income equity
capital reserve
(R'000) (R'000) (R'000) (R'000) (R'000) (R'000)
Balance at 1 March 2015 1 - 1 - 452 918 452 919
Profit for the period - - - - 363 110 363 110
Other comprehensive income - - - - - -
Total comprehensive income
for the period - - - - 363 110 363 110
Issue of shares 625 000 (4 994) 620 006 - - 620 006
Capital reorganisation (1) - (1) 180 412 (180 474) (63)
Dividends - - - - (645 313) (645 313)
Total contributions by and 624 999 (4 994) 620 005 180 412 (825 787) (25 370)
distributions to owners of
company recognised directly
in equity
Balance at 29 February 2016 625 000 (4 994) 620 005 180 412 (9 759) 790 659
Profit for the period - - - - 27 478 27 478
Other comprehensive income - - - - - -
Total comprehensive income
for the period - - - - 27 478 27 478
Share issue costs - (88) (88) - - (88)
Total contributions by and - (88) (88) - - (88)
distributions to owners of
company recognised directly
in equity
Balance at 31 August 2016 625 000 (5 082) 619 918 180 412 17 719 818 049
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Audited
31 August 29 February
2016 2016
(R'000) (R'000)
Cash flows from operating activities
Cash generated from operations 27 654 48 223
Finance income 1 568 1 161
Finance costs (12 916) (22 191)
Taxation received - 958
Net cash from operating activities 16 306 28 151
Cash flows from investing activities
Purchase of furniture and fixtures (1 185) (1 100)
Acquisition of investment in subsidiary - (62)
Net cash from investing activities (1 185) (1 162)
Cash flows from financing activities
Proceeds from share issue - 62
Repayment of shareholders' loan - (47)
Dividends paid - (83)
Bank borrowings advanced - 270
Bank borrowings repaid - (198)
Net cash from financing activities - 4
Total cash and cash equivalent movement for the period 15 121 30 986
Cash and cash equivalents at beginning of period 32 217 1 231
Total cash and cash equivalents at end of period 47 338 32 217
Additional info on cash flow:
Cash generated from operations before working changes 36 104 29 009
Working capital changes (8 450) 19 214
Cash generated from operations 27 654 48 223
SECTORAL SPLIT GLA Gross Rentals
Based on:
Retail 15.03% 15.76%
Office 84.97% 84.24%
100.00% 100.00%
LEASE EXPIRY PROFILE (unaudited)
Based on: GLA Gross Rentals
Vacant 6.8% 0.0%
Feb 2017 1.8% 2.7%
Feb 2018 13.0% 9.6%
Feb 2019 11.8% 15.2%
Feb 2020 7.6% 5.5%
Feb 2021 1.2% 1.5%
> Feb 2021 57.8% 65.5%
100.0% 100.0%
SIGNIFICANT FINANCIAL STATEMENT NOTES
1. BASIS OF PREPARATION AND ACCOUNTING POLICIES
The unaudited condensed consolidated interim financial statements are prepared in accordance with the requirements of
the JSE Listings Requirements and the requirements of the Companies Act of South Africa applicable to summary financial
statements. The JSE Listings Requirements require reports to be prepared in accordance with the framework concepts
and the measurement and recognition requirements of International Financial Reporting Standards ("IFRS"), the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by
the Financial Reporting Standards Council, and to also, as a minimum, contain the information required by IAS 34, Interim
Financial Reporting. The accounting policies applied in the preparation of these interim financial statements are in terms
of International Financial Reporting Standards and are consistent with those applied in the previous consolidated annual
financial statements.
The unaudited condensed consolidated interim financial statements were compiled under the supervision of Dries Ferreira,
the financial director.
The directors are not aware of any matters or circumstances arising subsequent to the year-end that require any
additional disclosure or adjustment to the financial statements.
The directors take full responsibility for the preparation of this interim condensed report and for ensuring that the
financial information has been correctly extracted from the underlying unaudited annual financial statements. These
unaudited condensed consolidated interim financial statements have not been reviewed by the Company's auditors.
2. CAPITAL RE-ORGANISATION RESERVE ACCOUNTING
The predecessor accounting method, which is based on equivalent US GAAP and UK GAAP guidance for common control
transactions, was applied to the comparative reporting periods. Predecessor accounting does not require the acquirer to
restate assets and liabilities to their fair values. No goodwill arises in applying the predecessor accounting method.
In accordance with the predecessor method, any difference between the consideration given and the aggregate book
value of the assets and liabilities (as of the date of the transaction) is recognised in a separate reserve within equity called
the capital reorganization reserve. The value of this reserve will be analysed on an annual basis.
3. SEGMENTAL ANALYSIS
Segmental information
The appointed Chief Operating Decision Maker within the group is the Group Executive Committee ("EXCO"). This is
because it is EXCO's responsibility to meet on a frequent basis to review budgets and to assess the operating performance
of its operating segments. The information provided to EXCO summarises financial data and information by property. At
31 August 2016, the group is organised into two main operating segments:
- 24 Central
- JSE
31 August 2016 24 Central JSE Total
(R'000) (R'000) (R'000)
Revenue 26 705 28 288 54 993
Property operating expenses (10 861) - (10 861)
Fair value adjustments (1 257) (1 515) (2 772)
14 587 26 773 41 360
29 February 2016
Revenue 58 160 37 025 95 185
Property operating expenses (21 896) (11 320) (33 206)
Fair value adjustments 123 481 119 043 242 524
159 745 144 758 304 503
The amounts provided to EXCO with respect to total assets are measured in a manner consistent with that in the
statement of financial position. These assets are allocated based on the operations of the segment.
31 August 2016 24 Central JSE Total
(R'000) (R'000) (R'000)
Investment property 469 713 513 616 983 329
Straight-line lease asset 3 726 61 876 65 602
Lease incentive - 23 820 23 820
Trade & other receivables 5 605 - 5 605
479 044 599 312 1 078 356
29 February 2016 24 Central JSE Total
(R'000) (R'000) (R'000)
Investment property 471 510 510 798 982 308
Straight-line lease asset 3 490 54 059 57 549
Derivative financial instruments - 699 699
Lease incentive - 25 142 25 142
Trade & other receivables 6 028 30 6 058
481 028 590 729 1 071 757
Reportable segment assets are reconciled to total assets as follows:
31 August 29 February
2016 2016
(R'000) (R'000)
Segment assets for reportable segments 1 078 356 1 071 757
Unallocated:
Deferred tax 1 150 55
Trade and other receivables 384 100
Cash and cash equivalents 47 338 32 217
1 127 228 1 104 129
The amounts provided to EXCO with respect to total liabilities are measured in a manner consistent with that in the
statement of financial position. These liabilities are allocated based on the operations of the segment.
31 August 2016 24 Central JSE Total
(R'000) (R'000) (R'000)
Bank borrowings - 270 000 270 000
Derivative financial instruments - 2 072 2 072
Trade & other payables 4 104 15 557 19 661
4 104 287 629 291 733
29 February 2016 24 Central JSE Total
(R'000) (R'000) (R'000)
Bank borrowings - 270 000 270 000
Trade & other payables 1 521 23 166 24 687
1 521 293 166 294 687
Reportable segment liabilities are reconciled to total liabilities as follows:
31 August 29 February
2016 2016
(R'000) (R'000)
Segment liabilities for reportable segments 291 733 294 687
Unallocated:
Deferred tax 16 895 14 640
Trade and other payables 551 4 143
309 179 313 469
4. Investment properties
The valuation of investment properties was determined principally using discounted cash flow projections, based on
estimates of future cash flows, supported by the terms of any existing lease contracts and by external evidence such as
current market rentals for similar properties in the same location and condition, and using discount rates that reflects
current market assessments, of the uncertainty in the amount and timing of the cash flows. The future rental rates were
estimated depending on the actual location, type and quality of the properties and taking into account market data and
projections at the valuation date, as well as the expiry of existing lease agreement.
For the period under review the property value includes movement made up of the increase in straight lining of the lease
assets (R8 053 219) and the decrease in lease incentives (-R1 323 288) as well as additions and depreciation relating to
furniture and fixtures (R1 184 529 and -R163 562 respectively).
31 August 2016 29 February 2016
(R'000) (R'000)
Cost/ Accumulated Carrying Cost/ Accumulated Carrying
Valuation depreciation value Valuation depreciation value
Investment property 980 747 - 980 747 980 747 - 980 747
Furniture and fittings 3 514 (933) 2 582 2 330 (769) 1 561
Total 984 262 (933) 983 329 983 077 (769) 982 308
Reconciliation of investment properties - 31 August 2016
Opening Additions Fair value Depreciation Closing
balance adjustments balance
Investment property 980 747 - - - 980 747
Furniture and fixtures 1 561 1 185 - (164) 2 582
Total 982 308 1 185 - (164) 983 329
Reconciliation of investment properties - 29 February 2016
Opening Additions Fair value Depreciation Closing
balance adjustments balance
Investment property 738 923 - 241 825 - 980 747
Furniture and fixtures 669 1 100 - (208) 1 561
Total 739 591 1 100 241 825 (208) 982 308
A register containing the information required by Regulation 25(3) of the Companies Regulations, 2011 is available for
inspection at the registered office of the company.
31 August 29 February
2016 2016
(R'000) (R'000)
JSE Building
Portion 25 of Erf 7 Sandown Johannesburg, South Africa
-Purchase price 18 070 18 070
-Fair value adjustment 573 491 573 491
591 561 591 561
24 Central
Portion 20 of Erf 7 Sandton Township, registration division IR, Province of Gauteng
-Purchase price 238 000 238 000
-Fair value adjustment 234 021 234 021
-Net capitalised expenditure 2 439 1 418
474 460 473 439
31 August 29 February
2016 2016
(R'000) (R'000)
Fair value of investment property for accounting purposes
Opening fair value of property assets 1 065 000 800 000
Gross fair value adjustment on investment property - 241 825
Additions and depreciation 1 021 892
Straight-line lease asset and lease incentive movement 6 730 22 283
Property valuation 1 072 751 1 065 000
Less: straight-line lease income adjustment (65 602) (57 549)
Less: lease incentive receivable (23 820) (25 142)
Closing fair value of property assets 983 329 982 308
Securities
Mortgage bonds have been registered over investment property with a fair value of R983 329 190
(February 2016: R982 308 223) as security for interest bearing liabilities at a nominal value amounting
to R270 000 000 (February 2016: R270 000 000).
Details of valuation
The properties were valued on 29 February 2016 using the discounted cash flow of future income streams method. The
valuations of the properties were performed by an independent valuer, Peter Parfitt of Quadrant Properties Proprietary
Limited, who is a registered valuer in terms of section 19 of the Property Valuers Professional Act, No 47 of 2000.
At the 29 February 2016, the key assumptions and unobservable inputs used by the company in determining fair value
were as follows:
These assumptions are based on current market conditions.
24 Central JSE Head Office
Discount rate 14,50% 14,25%
Exit capitalisation rate 9,00% 8,50%
Capitalised rate 8,50% 8,25%
Investment property is required to be fair valued with sufficient regularity that the value is representative of the fair
value.
Measurement of fair value
Valuation techniques:
Discounted cash flows: The valuation model considers the present value of net cash flows to be generated from the
property, taking into account expected rental and expense growth rates, vacant periods, lease incentive costs such as
rent-free periods and other costs not recovered from tenants. The expected net cash flows are discounted using a
discount rate. The discount rate applied is derived using an appropriate capitalisation rate and adding a growth rate
based on market-related rentals, testing this for reasonableness by comparing the resultant Rand rate per m2 against
comparative sales of similar properties in similar locations. Amongst other factors, the capitalisation rate estimation
considers the quality of the building, its location, the tenants' credit quality and their lease terms.
Inter-relationship between key unobservable inputs and fair value measurements:
The estimated fair value would increase/ (decrease) if:
- expected market rental growth was higher/ (lower);
- expected expense growth was lower/ (higher);
- vacant periods were shorter/ (longer);
- the occupancy rate was higher/ (lower);
- rent-free periods were shorter/ (longer);
- discount rate was lower/ (higher); and
- reversionary capitalisation rate was lower/ (higher).
5. Earnings per share
Basic earnings per share
Unaudited Unaudited Audited
6 months ended 6 months ended 12 months ended
31 August 31 August 29 February
2016 2015 2016
Basic (R'000) (R'000) (R'000)
Profit attributable to shareholders 27 478 329 888 363 110
Weighted average number of ordinary shares in issue 100 000 90 000 90 740
Basic earnings per share (cents per share) 27,48 366,54 400,17
Diluted earnings per share
There are no dilutive instruments in issue
Profit attributable to shareholders 27 478 329 888 363 110
Weighted average number of ordinary shares in issue ('000) 100 000 90 000 90 740
Basic diluted earnings per share (cents per share) 27,48 366,54 400,17
Headline earnings per share
Profit attributable to shareholders 27 478 329 888 363 110
Adjusted for:
Change in fair value of investment property and tax - (323 863) (331 603)
thereof
27 478 6 024 31 507
Weighted average number of ordinary shares in issue ('000) 100 000 90 000 90 740
Headline earnings per share (cents per share) 27,48 6,69 34,72
Distributable income
Headline earnings 27 478 6 024 31 507
Adjusted for:
Change in fair value of investment property as a result (5 798) (6 831) (12 176)
of amortisation of straight-line lease asset and tax
thereof
Change in fair value of investment property as a result 1 323 1 323 2 647
of amortisation lease incentive and tax thereof
Deferred tax movement -
Fair value adjustment of financial derivative 1 996 - (503)
instruments and the tax thereof
24 999 517 21 474
Weighted average number of ordinary shares in issue ('000) 100 000 90 000 100 000
Distributable income per share (cents per share) 25,00 0,57 21,47
6. Payment of interim dividend
The board has approved and notice is hereby given of an interim dividend of 24,99884 cents per share for the six months
ended 31 August 2016.
The dividend is payable to Newpark shareholders in accordance with the timetables set out below:
Last day to trade cum dividend Tuesday, 1 November 2016
Share traded ex dividend Wednesday, 2 November 2016
Record date Friday, 4 November 2016
Payment date Monday, 7 November 2016
Share certificates may not be dematerialised or materialised between Wednesday, 2 November 2016 and Friday
4 November 2016, both days included.
In respect of dematerialised shareholders the dividend will be transferred to CSDP accounts/ broker accounts on
Monday, 7 November 2016. Certificated shareholders' dividend payments will be deposited on or about Monday,
7 November 2016.
An announcement informing shareholders of the tax treatment of the dividend will be released separately on SENS.
7. Related parties
Relationships
Subsidiary Newpark Towers Proprietary Limited
Former shareholders of subsidiary B Van Wyk
Ellerine Bros Proprietary Limited
Ellwain Investments Proprietary Limited
FHP Manager Proprietary Limited
Renlia Developments Proprietary Limited
GROUP GROUP
31 August 29 February
2016 2016
(R'000) (R'000)
Interest paid to related parties
Barry Daniel Van Wyk - 35
Ellerine Bros Proprietary Limited - 548
Ellwain Investments Proprietary Limited - 548
Renlia Developments Proprietary Limited - 376
Newpark Towers Proprietary Limited - -
- 1 057
Changes to the board
Effective 31 August 2016, Ron Hill resigned as the financial director of the Company and Dries Ferreira was appointed as
financial director effective 1 September 2016. The board would like to thank Ron for his valuable contribution.
By order of the board.
Simon Fifield Dries Ferreira
Chief Executive Officer Financial Director
Johannesburg
19 October 2016
DIRECTORS
G D Harlow (Chairman) **, S P Fifield (Chief Executive Officer), JAI Ferreira (Financial Director), B D van Wyk *,
D T Ellerine*, K M Ellerine*, H C Turner **, D I Sevel **
* Non-executive director ** Independent non-executive director
REGISTERED OFFICE
51 West Street, Houghton, Gauteng, 2198
P O Box 3178, Houghton, Gauteng, 2041
WEBSITE
www.newpark.co.za
COMPANY SECRETARY
CIS Company Secretaries Proprietary Limited
TRANSFER SECRETARY
Computershare Investor Services Proprietary Limited
DESIGNATED ADVISOR
Java Capital
Date: 19/10/2016 08:00:00 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.
Sharenet Sites 
