Wrap Text
Reviewed Provisional Report for the Group for the year ended 30 JUNE 2016
ORION REAL ESTATE LIMITED
Approved as a REIT by the JSE
(Incorporated in the Republic of South Africa)
Registration number: 1997/021085/06)
Share Code: ORE ISIN: ZAE000201695
("Orion Real Estate" or “the Company”)
REVIEWED PROVISIONAL REPORT FOR THE GROUP FOR THE YEAR ENDED 30 JUNE 2016
Condensed Consolidated Statement of Financial Position
Reviewed Audited
Figures in Rand 30 June 30 June
2016 2015
ASSETS
Investment property 802 883 351 772 015 611
Fair value of property portfolio 797 701 052 762 593 997
Straight-line rental income adjustment 5 182 299 9 421 614
Property, plant and equipment 5 394 586 1 337 724
Total non-current assets 808 277 937 773 353 335
Loans to related parties 22 419 374 19 923 506
Stock on hand 102 035 4 321
Trade and other receivables 60 271 664 43 139 146
Cash and cash equivalents 10 684 674 3 606 291
Total current assets 93 477 747 66 673 264
Investment properties held for sale 4 500 000 -
Total assets 906 255 684 840 026 599
EQUITY AND LIABILITIES
Capital and reserves
Share capital and share premium 114 336 674 114 336 674
Retained earnings 506 466 861 504 392 314
Total equity attributable to owners of the parent 620 803 535 618 728 988
Non-controlling interest -287 431 -286 933
Total equity 620 516 104 618 442 055
Borrowings 151 148 521 127 353 881
Deferred tax liabilities 1 006 350 1 856 393
Total non-current liabilities 152 154 871 129 210 274
Current income tax liabilities 8 269 251 8 610 355
Loans from directors 403 529 18 248
Loans from related parties 21 264 21 012
Tenant deposits 6 994 110 6 961 064
Trade and other payables 100 101 583 47 452 023
Borrowings 14 764 174 25 758 076
Bank overdraft 3 030 798 3 553 492
Current liabilities 133 584 709 92 374 270
Total liabilities 285 739 580 221 584 544
Total equity and liabilities 906 255 684 840 026 599
Condensed Consolidated Statement of Comprehensive Income
Reviewed Audited
Year ended Year ended
Figures in Rand
30 June 30 June
2016 2015
Revenue 81 995 484 99 547 277
Property revenue 86 234 799 101 171 545
Straight-line rental income accrual -4 239 315 -1 624 268
Other income 2 472 052 13 080 160
Other direct property operating costs -83 438 989 -74 886 055
Repairs and maintenance -2 996 586 -5 877 678
Fair value adjustment 22 944 906 13 372 211
Gross change in fair value of investment property 18 705 591 11 747 943
Straight-line lease adjustment 4 239 315 1 624 268
Fair value adjustment to debtors - 446 238
Operating profit before interest 20 976 867 45 682 153
Finance income 5 973 367 4 492 671
Finance costs -25 192 635 -17 284 790
Profit before taxation 1 757 599 32 890 034
Taxation 316 450 76 924 274
Profit for the year 2 074 049 109 814 308
Other comprehensive income - -
Total comprehensive income for the year 2 074 049 109 814 308
Profit/(Loss) and total comprehensive income/(loss) for
the year attributable to:
Owners of the parent 2 074 547 109 831 114
Non-controlling interest -498 -16 806
2 074 049 109 814 308
Earnings per share
Basic earnings per share (cents) 0.33 17.52
Diluted earnings per share (cents) 0.33 17.52
Condensed Consolidated Statement of Cash Flows
Reviewed Audited
Year ended Year ended
Figures in Rand
30 June 30 June
2016 2015
Cash inflow from operating activities 17 356 379 7 700 193
Cash generated from operations 38 334 464 22 839 234
Interest received 5 973 367 4 492 671
Interest paid -25 192 635 -17 284 790
Taxation paid -1 758 817 -2 346 922
Cash (outflows) / Inflows from investing activities -22 941 573 28 473 147
Loans advanced to related parties -2 495 868 -5 415 331
Additions to investment property -22 870 911 -
Proceeds on sale of investment property 3 500 000 34 250 000
Purchases of property, plant and equipment -1 074 794 -361 522
Cash inflows/(outflows) from financing activities 13 186 271 -32 316 249
Movement in related party loans 252 -414 348
Loans raised from directors 385 281 159 811
Movement in interest-bearing borrowings 12 800 738 -32 061 712
Net increase in cash, cash equivalents and bank
overdrafts 7 601 077 3 857 090
Cash, cash equivalents and bank overdrafts at the
beginning of the year 52 799 -3 804 291
Cash, cash equivalents and bank overdrafts at the end
of the year 7 653 876 52 799
Condensed Consolidated Statements of Changes in Equity
Total share
capital Non-
Figures in Rand Share Share and Debenture Retained controlling Total
capital premium premium reserve earnings Total Interest equity
Balance at 30 June 2014 6 270 098 67 965 428 74 235 526 10 675 886 369 012 064 453 923 476 -270 127 453 653 349
Total comprehensive
income for the year 109 831 115 109 831 115 -16 806 109 814 309
REIT conversion of
debenture reserve -10 675 886 10 675 886 - -
REIT conversion of
debenture valuation
premium 14 873 249 14 873 249 14 873 249
REIT conversion of share
premium 67 965 428 -67 965 428 - -
REIT conversion of
debenture capital and
premium 40 101 148 40 101 148 40 101 148 40 101 148
Balance at 30 June 2015 114 336 674 - 114 336 674 - 504 392 314 618 728 988 -286 933 618 442 055
Total comprehensive
income for the year 2 074 547 2 074 547 -498 2 074 049
Balance at 30 June 2016 114 336 674 - 114 336 674 - 506 466 861 620 803 535 -287 431 620 516 104
Segment Report for the year ended 30 June 2016
Reviewed Audited
Year ended Year ended
30 June 30 June
2016 2015
R % R %
Revenue (excluding recoveries)
Commercial 27 572 704 43 37 315 186 46
Industrial 8 642 694 14 8 173 053 10
Retail 24 323 583 38 24 535 908 31
Hospitality 2 651 430 4 9 344 550 12
Residential 657 225 1 668 198 1
63 847 636 100 80 036 895 100
Profit before taxation
Commercial 722 676 41 16 431 477 50
Industrial 209 679 12 9 096 397 28
Retail 524 608 30 17 518 975 53
Hospitality 280 229 16 -1 736 825 (5)
Residential 20 407 1 -8 419 989 (26)
1 757 599 100 32 890 035 100
Property values (including properties held
for sale, before adjustment for straight-
lining of leases)
Commercial 411 854 098 51 339 235 830 44
Industrial 82 229 907 10 87 896 177 11
Retail 162 247 997 20 161 663 471 21
Hospitality 90 876 169 11 80 874 438 10
Residential 10 275 180 1 48 945 695 6
Land 53 400 000 7 53 400 000 7
810 883 351 100 772 015 611 100
Borrowings (excluding instalment sales and
loans)
Commercial 122 760 804 82 72 530 231 53
Industrial 21 499 139 14 22 800 003 17
Retail 3 660 387 2 23 069 847 17
Hospitality 2 878 314 2 9 505 847 7
Residential - - 7 613 790 6
150 798 644 100 135 519 718 100
Rating of tenants (rental income)
Commercial A 6 287 511 12 A 4 231 515 6
B 460 289 1 B 13 661 821 20
C 14 784 890 28 C 18 474 674 28
Industrial A - - A - -
B 4 075 103 8 B 5 945 293 9
C 3 882 776 7 C 1 547 200 2
Retail A 7 124 771 14 A 2 974 139 5
B 985 550 2 B 8 920 070 13
C 11 788 702 23 C 8 365 052 12
Hospitality B 2 321 709 4 B 2 712 974 4
Residential C 655 836 1 C 668 199 1
52 367 137 100 67 500 937 100
A: Represents major listed companies.
B: Represents smaller listed companies and
big unlisted companies.
C: Represents smaller unlisted companies
and private businesses.
1. Basis of preparation
The condensed consolidated financial statements are prepared in accordance with the requirements of
the JSE Limited Listings Requirements for provisional reports and the requirements of the Companies Act of
South Africa. The Listings Requirements require provisional 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 Financial Reporting Standards Council and as a
minimum, contains 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 results have been prepared by John Connaway, BAcc, CA(SA).
The directors take full responsibility for the preparation of the condensed consolidated financial statements.
BDO South Africa Incorporated has expressed an unqualified review conclusion. In accordance with their
responsibilities in terms of section 44(2) and section 44(3) of the Auditing Profession Act, they reported that
they had identified certain unlawful acts or omissions committed by persons responsible for management of
Orion Real Estate Limited which constitute reportable irregularities in terms of the Auditing Profession Act,
and have reported such matters to the Independent Regulatory Board of Auditors. The matters pertaining
to the reportable irregularities have been described in note 8 of the accompanying financial information.
The auditors review report does not necessarily report on all information contained in this announcement.
Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor’s
engagement they should obtain the auditors review report together with the accompanying financial
information from the issuers registered office.
Nature of business
Orion Real Estate is a JSE main board listed Real Estate Investment Trust (REIT) listed under the diversified
REIT’s sector. Its primary focus is on long-term investment in quality, rental generating properties situated in
strategic nodes.
Financial and operational overview
The prevailing economic and socio-political conditions have placed huge strain on some of the properties
in our portfolio which was particularly hard hit by high vacancies and rent defaults. The gross property
revenue decreased from R99,6 million in 2015 to R82,0 million in 2016. This represents a decrease of 17,6%.
Other direct property operating costs and repairs and maintenance costs increased from R80,8 million in
2015 to R86,4 million in 2016. This represents an increase of 7,0%.
The average vacancy factor of the portfolio has increased from 19.8% in June 2015 to 21.7% in June 2016.
The total comprehensive income for the year attributable to equity holders of the Group has decreased
from a profit of R109,8 million in 2015 to a profit of R2,1 million in 2016.
Headline losses have increased for the same period from a loss of R3,6 million to a loss of R17,4 million.
Headline losses per share have increased from (0,57) cents in 2015 to (2,78) cents in 2016. Basic earnings per
share have decreased from 17,52 cents per share to 0,33 cents per share. The NAV has improved from 98,68
cents to 99,01 cents.
The value of the property portfolio has increased from R772,0 million in 2015 to R802,9 million in 2016.
Bank borrowings increased from R156,7 million in 2015 to R168,9 million in 2016. This is an increase of R12,2
million or 7,8%.
The 2015 figures reflected the effects of the change in the company's capital structure from a variable loan
stock company to a Real Estate Investment Trust (REIT). The main effect of the conversion was the decrease
in the company's deferred tax liability as a result of the new structure's exemption from paying Capital Gains
Tax.
In the previously stated strategy of development and re-development the group undertook and completed
two projects of significant importance.
- The conversion and expansion of an existing cinema at the Promenade shopping centre into a Boxer
Supermarket; and
- The rehabilitation, expansion and redevelopment of the 1st floor of Orion House into a 1800 sq.m Virgin
Red Gym.
The headline earnings reconciliation and per share information is set out below:
2016 2015
Earnings per share
Basic earnings per share (cents) 0.33 17.52
Diluted earnings per share (cents) 0.33 17.52
Headline loss per share (cents) (2.78) (0.57)
Diluted headline loss per share (cents) (2.78) (0.57)
Net asset value per share unit (cents) 99.01 98.68
Weighted average number of shares in issue 627 009 822 627 009 822
Reconciliation of basic earnings and headline earnings
Profit attributable to equity holders 2 074 547 109 831 115
Fair value adjustment to investment properties (18 705 591) (11 747 942)
Deferred tax (reversed)/raised on fair value adjustment - (90 356 633)
Profit on disposal of investment property (791 238) (11 293 982)
Headline loss (17 422 282) (3 567 442)
The Group has continued with the initiative to redevelop a number of buildings to keep in line with market
developments and changing needs.
In line with the group's strategy of increasing its shareholder spread, the company has actively pursued the
purchase of investment properties the settlement of which would be by combination of cash and the issue
of shares in the company.
2. Acquisitions and disposals
During the year under review we have disposed of the property situated at 2, 15th Street, Marlboro,
Sandton. A gain of R0.8 million was made on this transaction.
3. Investment property held for sale
The group intends to dispose of a property situated at Cnr Silversands and Westbank, Main Street, Cape
Town in the next 12 months.
No impairment loss was recognised on reclassification of the property as held for sale as the directors of the
group expect that the fair value (based on recent market prices of similar properties in a similar location)
less cost to sell is higher than the carrying amount.
4. Dividends
Year ended 30 June 2016
It is intended that a distribution of R5 583 870 will be made by the holding company to all its shareholders
before 31 December 2016. A separate announcement providing details and salient dates relating to the
dividend distribution will be made once the company has finalised the audit for the year ended 30 June
2016.
Year ended 30 June 2015
As announced on SENS on 14 October 2016, a distribution of 2.35 cents per share in respect of the year
ended 30 June 2015, will be paid to shareholders on 7 November 2016.
5. Change to Board of Directors
Mr DPW Andre resigned as director on 22 September 2015. Mr AB Old was appointed on 1 October 2015
and passed away on 6 June 2016. Mr TFJ Oosthuizen was appointed a director on 14 December 2015.
Mr JFC Connaway was appointed a director on 14 September 2016.
6. Prospects
Despite challenging economic and socio-political conditions and tight cashflows, the group continues
pursuing its dynamic strategy of redeveloping its portfolio and seeking investment and development
opportunities.
7. Events after the reporting period
Provisional liquidation of Erf 195 Elma Park Limited
On 22 September 2016, a provisional liquidation order was granted by The High Court of South Africa in
favour of the Elma Park Body Corporate (Sectional Title Scheme Number 128/2008) against Erf 195 Elma Park
Limited, a 100% owned subsidiary of Orion Real Estate Limited. The provisional liquidation order was the result
of a long standing dispute concerning levies, special levies and punitive interest charges levied by the
applicant Body Corporate.
Purchase of Safari Lodge from related party
On 4 October 2016, at a General Meeting of shareholders of the company, the purchase of Portion 161 of
the Farm Town and Townlands of Rustenburg 272, Registration division J.Q. in the North West Province with
all land and buildings and other improvements (known as Safari Lodge) together with all contracts in the
form of lease agreements, from Gmeiner Investment Holding Proprietary Limited, for the sum of R100 million
was approved. The purchase consideration is to be settled by way of cash of R30 million, the settlement of
existing related party loan accounts as at 31 December 2015 and any remaining amount by way of a new
loan account owing to Gmeiner Investment Holding Proprietary Limited.
8. Reportable Irregularity
Orion Real Estate Limited’s non-compliance with the JSE Listing Requirements as set out in section 13.47(a)
and 13.49(d).
In terms of 13.47(a) the dividend distribution was not made within 6 months of the 30 June 2015 year end. In
terms of 13.49(d) the directors of the REIT did not submit a compliance declaration to the JSE within 6
months of the financial year end.
This oversight was rectified by the declaration of the said dividend on 14 October 2016 for the year ended
30 June 2015.
9. General meeting
Shareholders will be advised of the details of the annual general meeting once the Annual Report has been
finalised.
Johannesburg
31 October 2016
Directors
RS Wilkinson*, MDK Mthembu*, AC Gmeiner+, F Gmeiner (MD)~, TFJ Oosthuizen*, JFC Connaway (Financial
Director)~
*Independent non-executive
+Non-executive
~Executive
Company secretary and registered office Transfer office
Corporate Governance Facilitators CC Computershare Investor Services Proprietary Limited
Registered office Sponsor
Registered office and business address Arbor Capital Sponsors Proprietary Limited
16th Floor, Orion House
49 Jorissen Street
Braamfontein
Johannesburg, 2017
Date: 31/10/2016 04:19:00 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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