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CANCELLATION OF S377740 Unaudited condensed consolidated interim results for the six months ended 31 August 2016
Acsion Limited
Incorporated in the Republic of South Africa
(Registration number 2014/1892931/06)
Share code: ACS
ISIN: ZAE000198289
("Acsion" or the company)
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2016
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Group
Unaudited Unaudited Audited
Six months Six months Year ended
31 August 31 August 29 February
2016 2015 2016
R'000 R'000 R'000
Assets
Non-current assets
Investment property 4 461 505 3 752 585 4 311 974
Plant and equipment 161 576 104 170 92 322
Operating lease asset 121 692 103 665 119 235
Goodwill 625 464 625 464 625 464
Prepayments 362 536 199 835 366 610
Investment in associate 917 1 249 917
Other financial assets 13 134 12 982 13 324
5 746 824 4 799 950 5 529 846
Current assets
Operating lease asset 8 463 14 707 5 315
Loans to group companies 1 401 1 715 1 661
Other financial assets - - 13
Current tax receivables 1 106 427 640
Trade and other receivables 20 731 13 880 14 724
Cash and cash equivalents 47 487 20 136 16 288
79 188 50 865 38 641
Non-current assets held for sale 76 382 82 324 87 931
Total assets 5 902 394 4 933 139 5 656 418
Equity and liabilities
Equity
Share capital 3 974 979 3 979 781 3 975 482
Retained income 718 344 136 815 599 905
Equity attributable to owners of the company 4 693 323 4 116 596 4 575 387
Non-controlling interest 10 438 (48) 10 446
Total equity 4 703 761 4 116 548 4 585 833
Liabilities
Non-current liabilities
Deferred tax 793 256 539 886 792 810
Other financial liabilities 266 523 210 731 190 073
1 059 779 750 617 982 883
Current liabilities
Current tax payable 4 110 66 4 507
Loans from shareholders 506 516 506
Other financial liabilities 65 325 9 013 16 729
Provisions 3 930 2 019 4 254
Trade and other payables 64 983 54 360 61 706
138 854 65 974 87 702
Total liabilities 1 198 633 816 591 1 070 585
Total equity and liabilities 5 902 394 4 933 139 5 656 418
NAV per share (cents) 1 190.0 1 042.3 1160.1
NAV per share excluding deferred taxation (cents) 1 391.1 1 179.0 1 361.1
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Group
Unaudited Unaudited Audited
Six months Six months Year ended
31 August 31 August 29 February
2016 2015 2016
R'000 R'000 R'000
Cash flows from operating activities
Cash generated from operations 157 344 130 661 342 521
Finance income 541 1 076 1 974
Finance costs (9 785) (6 370) (18 530)
Tax paid (23 003) (35 817) (66 116)
Net cash from operating activities 225 097 89 550 259 849
Cash flows from investing activities
Purchase of plant and equipment (83 359) (989) (20 496)
Development costs of investment property (149 531) (108 494) (244 054)
Loans to group companies repaid 260 - 54
Sale of investment property - 1 255 -
Guarantees released - 343 -
Increase in financial assets 203 - (13)
Net cash flow from non-current assets held for sale 13 986 - (272)
Net cash from investing activities (218 441) (107 885) (264 781)
Cash flows from financing activities
Purchase of treasury shares (503) (175) (4 474)
Increase in other financial liabilities 125 046 21 431 8 490
Loans repaid by shareholders - - 259
Loans received from shareholders - 414 145
Net cash from financing activities 124 543 21 670 4 420
Total cash movement for the period 31 199 3 336 (512)
Cash at the beginning of the period 16 288 16 800 16 800
Total cash at end of the period 47 487 20 136 16 288
CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
Group
Unaudited Unaudited Audited
Six months Six months Year ended
31 August 31 August 29 February
2016 2015 2016
R'000 R'000 R'000
Revenue 247 365 215 352 453 343
Other income 2 434 17 618 10 625
Operating expenses (98 292) (109 146) (210 509)
Operating profit 151 416 123 824 253 459
Finance income 541 1 076 1 974
Fair value adjustment - - 633 227
Amortisation (4 074) - -
Income/(loss) from equity accounted investments - 113 (219)
Gain on non-current assets held for sale 2 473 - 4 963
Finance costs (9 785) (6 370) (18 530)
Profit before taxation 140 571 118 642 874 874
Taxation (22 140) (22 668) (305 316)
Profit for the period 118 431 95 974 569 558
Other comprehensive income - - -
Total comprehensive income for the period 118 431 95 974 569 558
Profit (loss) attributable to:
Owners of the company 118 439 96 004 559 094
Non-controlling interest (8) (30) 10 464
118 431 95 974 569 558
Total comprehensive income (loss) attributable to:
Owners of the company 118 439 96 004 559 094
Non-controlling interest (8) (30) 10 464
118 431 95 974 569 558
Reconcilition between earnings and headline earnings
Basic earnings/Diluted earnings 118 439 95 974 559 094
Adjusted for: (1 244) (489) (482 386)
Fair valuation adjustment - - (633 227)
Amortisation (4 074) - -
Fair value relating to non-controlling interest - - 12 995
Gain on non-current assets held for sale - - (4 037)
Profit on sale of plant and equipment 2 473 (489) 40
Tax effect 357 - 141 843
Deferred tax as a result of rate change - - 104 491
Headline earnings 117 195 95 485 181 199
Earnings per share
Per share information
Basic/Diluted earnings per share (cent) 30.0 24.3 141.6
Headline earnings per share (cent) 29.7 24.2 45.9
Weighted number of shares 394 447 019 394 958 459 394 882 303
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Total equity
attributable to
Share Treasury Total Retained owners of the Non-controlling Total
capital shares share capital income company interest equity
R'000 R'000 R'000 R'000 R'000 R'000 R'000
Group
Balance at 1 March 2015 3 979 956 - 3 979 956 40 811 4 020 767 (18) 4 020 749
Profit for the period - - - 96 004 96 004 (30) 95 974
Purchase of treasury shares - (175) (175) - (175) - (175)
Balance at 31 August 2015 3 979 956 (175) 3 979 781 136 815 4 116 596 (48) 4 116 548
Profit for the period - - - 463 090 463 090 10 494 473 584
Purchase of treasury shares - (4 299) (4 299) - (4 299) - (4 299)
Balance at 29 February 2016 3 979 956 (4 474) 3 975 482 599 905 4 575 387 10 446 4 585 833
Profit for the period - - - 118 439 118 439 (8) 118 431
Purchase of treasury shares - (503) (503) - (503) - (503)
Balance at 31 August 2016 3 979 956 (4 977) 3 974 979 718 344 4 693 323 10 438 4 703 761
IFRS 8 - Segment reporting
Due to the current investment property portfolio exposure being heavily weighted to retail, the chief operating decision maker (CODM) considers the operations to be a single operating segment and as such reviews financial
information on this basis.
IFRS 13 and IAS 40 - Fair value measurement
The group's policy is to value investment properties at year-end, with independent valuations performed on a rotational basis to ensure each property is valued at least every three years by an independent external valuer.
The directors value properties by applying the discounted cashflow method. There were no revaluations for the six-month period ended 31 August 2016.
Level 3
Unaudited Unaudited Audited
Six months Six months Year ended
31 August 31 August 29 February
2016 2015 2016
Fair value hierarchy R'bn R'bn R'bn
Investment property R4.830 R3.755 R4.617
IAS 24 - Related parties
During the financial period, K. Anastasi Projects Close Corporation of which K. Anastasiadis is the sole member, undertook construction of Mall@Moutsiya. For the period, the group spent R56m on this construction.
Smaller ad-hoc projects amounted to R2.2m spend. Total spent towards K. Anastasi Projects Close Corporation therefore amounted to R58.5m for the period. Kinsella Consultants, a company owned by the wife of I. Anastasiadis,
were used for ad-hoc repairs and supplies. A total of R110k was spend with Kinsella Consultants during the period under review.
GEOGRAPHIC AND TENANT PROFILES
Sector profile by revenue Sector profile by GLA Tenant profile by revenue Tenant profile by GLA
77% Retail-Metropolitan 68% Retail-Metropolitan 61% National 71% National
22% Retail-Rural 29% Retail-Rural 18% Semi-National 13% Semi-national
1% Light Industrial 3% Light Industrial 21% Line and other franchises 16% Line and other franchises
The tenant profile is separated into national and semi-national tenants, to indicate the exposure Acsion has to direct head office leases and individual franchises. Exposure to national and semi-national tenants as a percentage of
gross lettable area is relatively high at 84% (79% based on revenue). Line shops and other franchises are carefully vetted by Acsion's leasing division to promote maximum dwelling time and footfall in each centre, underpinning
trading densities and the overall sustainability of tenants' lease terms.
Commentary
About Acsion
Acsion ("the group" or "the company") is a property manager, developer and owner which is listed on the Johannesburg Stock Exchange. Acsion is differentiated from Real Estate Investment Trusts ("REITs") in the listed property sector as
it focuses on the delivery of superior net asset value ("NAV") growth. NAV growth drivers include enhancing existing properties, completing the communicated secured development pipeline and obtaining additional future development
opportunities locally and abroad.
The group's development function and "value-engineering" approach to development significantly enhances returns to shareholders. Value engineering focuses on optimising upfront feasibility studies, planning, design and construction in
an innovative and more cost-effective way, resulting in lower construction costs, without compromising on quality. Existing investment properties consist of seven predominantly retail developments strategically located in Gauteng, Mpumalanga
and Limpopo with an aggregate GLA of 219 000 m2 (2015:188 716 m2). The tenant profile by GLA comprises 71% national tenants (2015: 72%), 13% semi-national (2015: 15%) and 16% line and other franchises (2015: 13%).
Operational update
The group performed in line with expectation. Focusing on the development pipeline, the group completed and opened Mall@Moutsiya (Walkraal, Limpopo) in August 2016, partially delivering on its pre-listing promises. Construction of
Mall@Mfula (Piet Retief, Mpumalanga) is well underway and the opening date is set for November this year.
The Acsiopolis development (Benmore, Sandton) is progressing well. Development of Mall@55 (Monavoni, Gauteng) will commence in the last quarter of 2016 and the group aims to open this development by November 2017. Refer to "Development
Pipeline progress update" for more detail.
Financial results
During the first six months of the financial year the group recorded revenue of R247.4m (2015: R215.4m). The 15% increase in revenue is due to a weighted average rental escalation of 7.8% and the opening of Mall@Carnival phase III in
September 2015 which was not reflected in the results for the previous corresponding period. Operating expenses decreased to R98m (2015: R109m) for the same period which demonstrates the group's strong focus on cost control.
Finance costs increased to R9.8m (2015: R6.4m) which was expected considering the funding for developments underway. The gearing of the group remained very low at 5.9%(2015: 5.5%).
Headlines earning per share, which was impacted by the share repurchased by the group, was 29.71 cents per share (2015: 24.18 cents per share). The increase in headline earnings per share and basic earnings per share for the six months
under review was a satisfactory 22.9% and 23.5% respectively.
The investment properties are currently carried at the February 2016 valuations as it is the group's policy to revalue investment properties for year-end purposes only. The seven retail properties from which the group derives income
are valued at R4.162bn. (2015: R3.246bn). Non-current assets held for sale decreased steadily to R76m (2015: R82m) as properties in the Hyde Park development were transferred to their new owners.
Prepayments which are amortised as actual capital spend on Acsiopolis is incurred, decreased by R4m during the six months. Total spend on new developments and renewable energy initiatives for the six months amounted to R233m (2015:R109m).
Treasury share purchase
The group repurchased 65 142 shares during the period and currently holds 558 012 shares as treasury shares. The decision to repurchase shares was made as the share price is trading significantly below the reported NAV of the company.
These shares were purchased at approximately 36% below the reported net asset value per share excluding deferred tax as at 31 August 2016.
Vacancy levels and lease expiry profile
Strategic vacancies are maintained in order to accommodate tenant relocations and support optimisation. The directors are satisfied with the reported vacancy numbers for the portfolio. The weighted vacancy (by GLA) for the portfolio as
at 31 August 2016 was 6.6% (2015: 5.05%). The increase was due to the inclusion of Mall@Moutsiya as some tenants had not taken beneficial occupation by the opening date. Management is of opinion that vacancy levels will return to
previously reported numbers by the financial year end.
The weighted average lease expiry ("WALE") by GLA for the portfolio is currently 3.68 years (2015: 4.87 years). The decrease of the WALE is expected as the once off extension of Mall@Carnival phase II influences this ratio
significantly. Management is not concerned with the reduction in this ratio as lease renewals will spread out over time and be of a lesser impact as the size and number of investment properties in the portfolio increases.
Developed investment property portfolio
The developed investment portfolio and developments under construction as at 31 August 2016 consisted of ten properties. Details are as follows:
Valuation Value/m2 Percentage
(Rm) (excluding of total
February GLA bulk, where portfolio by
Property name 2016 (m2) applicable) value (%)
Mall@Carnival 2 000 87 700 22 810 48.1
Mall@Reds 980 54 300 18 050 23.5
Mall@Emba 486 24 500 19 840 11.7
Mall@Lebo 380 23 500 16 170 9.1
Mall@Moutsiya 130 14 500 8 970 3.1
Moreleta Square 154 8 500 18 120 3.8
Simarlo Rainbow 32 6 000 5 330 0.8
Total developed investment portfolio 4 162 219 000 19 005 100.0
The developed investment property portfolio is trading at an achieved annualised operating profit yield of approximately 8.1% (2015: 7.6%) based on these results.
Properties under development include the following:
Estimated Value/m2
valuation at Anticipated (excluding
completion GLA bulk, where
Developments nearing completion (Rm) (m2) applicable)
Mall@55 275 25 000 11 000
Mall@Mfula 170 18 700 9 090
Current Value/m2
carrying Anticipated (excluding
value GLA bulk, where
Longer duration developments underway (Rm) (m2) applicable)
Acsiopolis 255 67 000 3 810
Development pipeline progress update
Acsiopolis, Benmore, has been designed as a twenty storey mixed use development, situated in the heart of Sandton. The site is positioned on Benmore Drive and consists of an approximate 1 hectare parcel of land. Mixed use development
rights for 70 000 m2 have been obtained and transfer of the land has been completed. A majority of the rights, comprising approximately 61 000 m2, have been earmarked for residential use which supports Acsion's vision of sectoral
diversification. Of the 61 000 m2 approximately 35 000 m2 will be available as executive apartments, 26 000 m2 will be subject to short term rentals, 5 000 m2 will be utilised for retail and 1 000 m2 will be utilised as office space
bringing the total square metres to be developed to 67 000 m2. Acsiopolis will further offer six levels of parking equating to approximately 1 500 underground parking spaces, some of which will be on-grade parking to the retail
section, which is expected to further enhance convenience for shoppers and residents.
In addition to vehicular access, Acsiopolis has been designed to take into consideration the evolving public transport systems in Sandton to accommodate the integration of pedestrian accessibility and bus routes. Construction of the
development has commenced and is estimated to be completed early in 2019. The main contractor has completed the foundations and retaining walls and will commence with the first level of parking in November 2016.
Mall@55 Phase I, consists of a 15 000 m2 convenience shopping centre in Monavoni, Gauteng. It is located on an extremely busy arterial route accessible from the N14 freeway and the R55 provincial route. This development is ideal for a
value/convenience/lifestyle centre, which is underrepresented in the Monavoni area. The main contractor has been identified and bulk earthworks will commence in November 2016.
Trade 55 Phase I, comprises of a 10 000 m2 large ("big box") retail component with special commercial rights already obtained in Monavoni, Gauteng. It is located across from the Mall@55 site on an extremely busy arterial route
accessible from the N14 freeway and the R55 provincial route. Trade 55's value offering will be complementary to Mall@55's offering. Management decided to delay this development for a couple of months to first focus on finalising and
entrenching Mall@55 successfully into the area.
Hyde Park Terrace, located in Hyde Park, Gauteng is a residential development comprising of 12 completed cluster units and 27 residential land parcels. This high-end residential development is in the heart of one of Sandton's most
exclusive areas. The total land size comprises 2.5 hectares and is situated 500 metres from the exclusive Hyde Park shopping centre. The 12 units are approximately 350 m2 to 540 m2 under roof, with the remaining land to be sold as
stands of 450 m2 to 650 m2 with or without building packages. The sales have progressed satisfactorily and transfers of the properties are steadily being finalised. Six properties for which offers were received previously are available
for sale again as the sales could not be successfully concluded.
Mamahlodi Gardens is an affordable housing development in Walkraal, Limpopo with a total land size of 40 hectares. Acsion has formed a partnership with local residents and the local municipality to approach prospective buyers with
access to housing subsidies from the Department of Human Settlements. Proclamation of the land has been completed with all services (water, sewage and electricity) already secured. Plans to build up to 551 residential units for sale
are supported by a shortage of affordable housing in the Walkraal area. The market price will be between R300 000 and R350 000 per unit. Interest for approximately 50 units has already been secured. This development will be demand
driven with pre-approved finance for these units negotiated with the banks before construction commences.
Mall@Mfula will consist of a 17 300 m2 shopping centre with an anticipated 70% national tenancy and will provide a complete formal retail offering for Piet Retief. The development is set to open at the end of November 2016.
Mall@Lebo phase II planning has commenced as the group secured the rights to extend the development. There are no vacancies in phase I of this development and the extension of approximately 8 000 m2 is therefore warranted.
The construction of this extension will commence once the planning stage is completed.
Further development opportunities
Acsion continuously evaluates a consistent stream of new opportunities and is in advanced discussions on certain projects to further enhance capital growth in financial years 2018 and beyond. Details of these projects are not contained
in these results and will be communicated to shareholders in due course and in line with JSE Listings Requirements once an appropriate level of certainty has been reached. At the last practicable date, the following further development
opportunities were under investigation by Acsion, amongst others:
The proposed Mall@Maputo development in northern Maputo will be located adjacent to the main Maputo ring road. A formal agreement has now been finalised with the Mozambican Ministry of Interior to develop a shopping centre of up to
50 000 m2 once fully developed. Acsion will take cognisance of the Mozambican economy and ensure that it does not take on unnecessary risk. Management is confident that it secured a well-positioned site for its proposed development and
intends to develop it when the economic climate is suitable. At this stage most of the South African retailers are not focused on expanding into Maputo and will re-assess their strategy in the near future.
With Offices@Lusaka, Acsion aims to take advantage of Zambia's limited available infrastructure for multinational companies. Negotiations with a local land owner to co-develop up to 20 000 m2 of office space are currently underway. The
site is located in close proximity to Manda Hill Shopping Mall and next to Stanbic's Lusaka offices.
Acsion is currently in advanced discussion with parties for a proposed retail development in south eastern Europe. This potential development could be the first step for Acsion to establish its international footprint. The company is
excited about this opportunity and will provide the market with the necessary information as and when it becomes required to do so.
Prospects
Acsion's board and management remain confident that the group's growth objectives can be achieved despite a challenging economic operating environment. The group remains focused on the completion of its secured development pipeline and
obtaining superior net asset value growth for its shareholders.
Acsion will also continue reinvesting in its existing portfolio and focus on its development expertise, or "value-engineering" approach, to ensure above average NAV growth. In addition, Acsion will explore further development
opportunities in high-growth markets in the rest of Africa and Europe.
Dividends
In line with the group's policy, no dividends have been declared for the period ended 31 August 2016.
By order of the board
Centurion, 26 October 2016
D Green K Anastasiadis
(Chairman) (Chief executive officer)
Basis of preparation and accounting policies
The interim unaudited consolidated financial statements for the six months ended 31 August 2016 were prepared in accordance with International Financial Reporting Standards (IFRS), the information required by IAS 34: Interim Financial
Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, the requirements of the Companies Act of South Africa and the JSE Listings Requirements. The accounting policies are consistent in all
material respects with those of the previous financial period.
The additional disclosure required in terms of IFRS 7 Financial Instruments: Disclosures and IFRS 13 Fair Value Measurements, will be included in detail in the next integrated report for the period ended 28 February 2017.
The directors are not aware of any matters or circumstances arising subsequent to the period ended 31 August 2016 that require additional disclosure or adjustment to the financial statements.
The directors take full responsibility for the preparation of the unaudited condensed consolidated financial results for the six months ended 31 August 2016.
Independent audit by auditors
The interim unaudited consolidated financial statements have not been audited or reviewed by the group's independent auditors.
Directors: D Green (Chairman)*, K Anastasiadis (CEO), P Scholtz (CFO), S Griesel*, PD Sekete*, T Jali* (*Independent non-executive)
Registered office: Mall@Reds, 1st Floor, Corner of Rooihuiskraal and Hendrik Verwoerd Drives,
Rooihuiskraal, Ext 15, Centurion. Postal address: PO Box 569, Wierda Park, 0149. Registration number: 2014/182931/06. Transfer secretaries: Computershare Investor Services Proprietary Limited, 70 Marshall Street, Johannesburg 2001.
Sponsor: Nedbank Limited. JSE share code: ACS. ISIN code: ZAE000198289. Company secretary: MWRK Accountants and Auditors Inc.
Date: 26/10/2016 10:54:59 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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