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Condensed unaudited consolidated interim financial statements for the six months ended 31 December 2016
FORTRESS INCOME FUND LIMITED
Incorporated in the Republic of South Africa Reg no 2009/016487/06
JSE share codes "FFA" ISIN ZAE000192787 and "FFB" ISIN ZAE000192795
(Approved as a REIT by the JSE) ("Fortress" or "the group")
CONDENSED UNAUDITED CONSOLIDATED INTERIM FINANCIAL
STATEMENTS for the six months ended 31 December 2016
DIRECTORS' COMMENTARY
1 CAPITAL STRUCTURE
Fortress is an internally asset managed Real Estate Investment Trust ("REIT")
listed on the Johannesburg Stock Exchange ("JSE") with separately traded A
and B shares. Fortress had a combined market capitalisation of R53,9 billion
at 31 December 2016 and is included in the JSE Top 40 Index.
The Fortress A shares have a preferential right to income distribution and
to capital participation in the event of winding-up. The growth on the A
share dividend is the lower of 5% or CPI. The Fortress B shares are entitled
to the residual distributable income and capital participation on winding-up.
Fortress acquired all the issued shares of Lodestone REIT Limited at a swap
ratio of 0,15 A and 0,15 B shares for each Lodestone share, effective from
1 December 2016.
2 NATURE OF BUSINESS AND STRATEGY
Fortress is a hybrid REIT investing in both physical property and listed
property securities.
Fortress owns 336 investment properties valued at R28,7 billion at
31 December 2016. At this date, the equity portfolio comprising both local
listed REITs and international listed property securities was valued at
R28,8 billion.
The group's property portfolio consists predominantly of logistics warehouses
let to corporate tenants on long leases. Fortress will continue to focus on
the development of logistics warehouses built to the highest international
specifications on the prime land it owns. The retail properties are focused
on commuter orientated nodes.
3 DISTRIBUTABLE EARNINGS
The dividend growth for the period attributable to the A share was calculated
using data published by Statistics SA. The growth was 5%, being the lower of
CPI or 5%, and consequently the dividend for the A shares increased from 64,72
cents to 67,96 cents per share. The B shares' dividend increased by 25,12%
from 62,81 cents to 78,59 cents per share compared to the previous period.
The direct property portfolio performed in line with budget across all sectors.
The listed equity investments continued to perform strongly. Attractive
currency rates previously locked-in on the foreign dividend income from
the group's offshore equity investments further enhanced the dividend from
these listed investments.
4 DIRECT PROPERTY PORTFOLIO
LOGISTICS
In line with the board's strategy of increasing exposure to new logistics
warehouses, the group commenced with the following developments:
Estimated
Description % owned 100% GLA yield Completion
C. Steinweg Bridge* 51% 30 000m2 9,00% Oct 2017
Louwlardia Logistics Park 100% 23 711m2 9,50% Feb 2017
Westlake One 100% 20 000m2 9,25% Mar 2017
Union Park 100% 13 300m2 9,30% Sep 2017
Montague Business Park# 25% 4 894m2 8,60% Sep 2017
* 15-year lease to C. Steinweg Bridge Group and sale of a 49% share in the
development to the tenant.
# 5-year lease to Geberit Southern Africa.
A 10-year agreement was concluded with a national logistics provider for
the 20 000m2 logistics warehouse at Westlake One. The agreement provides
for a one-year option to acquire 50% of the property. The initial yield on
the development is estimated at 9,25%. Earthworks have commenced on Westlake
Two and construction of a 20 000m2 logistics facility is anticipated to
commence prior to June 2017.
An agreement was concluded with a national franchise for the construction
of a 35 000m2 logistics warehouse at Louwlardia Logistics Park. This
10-year lease commences in June 2018 at an initial yield of 9,5% and the
tenant has a one-year option to acquire 50% of the property.
Fortress acquired the following portions of prime zoned land:
Description % owned 100% GLA
R21 Logistics Park^ 65,0% 500 000m2
Cornubia Logistics Park* 50,1% 120 000m2
Linbro Park East Logistics^ 100,0% 100 000m2
^ Transfer subject to regulatory approval.
* Transferred.
The earthworks and infrastructure development at Clairwood Logistics Park
and Cornubia Logistics Park in Durban have commenced. Construction of
logistics warehouses on these sites is anticipated to commence in April
2017 and July 2017 respectively.
INDUSTRIAL
Despite a slowdown in manufacturing and a marginal increase in arrears
and vacancies, Fortress' industrial portfolio performed satisfactorily.
RETAIL
The retail trade at Fortress' centres showed a pleasing 12-month
rolling December density growth of approximately 8,6%. The strong trade
of both November's Black Friday and December's Christmas trade contributed
to this growth.
The successful opening in November of both H&M and Pick n Pay at
The Galleria (25% owned) further entrenched the dominance of this regional
mall in its catchment area. Construction at Lephalale Crossing to
accommodate a number of new fashion retailers, including Mr Price,
Jet Stores and Truworths, as well as to expand Boxer and Shoprite, was
completed in November.
The new extension at Lebowakgomo Centre to accommodate Mr Price and
an upgraded Boxer opened in November. Projects were also completed at
Venda Plaza and Rustenburg Plaza. Food Lover's Market was introduced at
the Jeffreys Bay centre in time for December trade. Fortress purchased
the remaining 18% of Sterkspruit Plaza for R27,5 million at a yield of
9% effective 1 December 2016.
OFFICES
In a difficult market characterised by continued new supply and slowing
demand, the office portfolio performed in line with budget. Partly due to
the sale of two let office blocks, the vacancies in the office portfolio
increased from 13,5% to 15,7%. It is anticipated that new lettings and
renewals will remain a challenge going forward.
5 PROPERTY DISPOSALS
The following non-core properties were disposed of during the interim period:
Net
Book value proceeds Transfer
Property name Sector R'000 R'000 Exit yield date
Makhaza Shopping
Centre Retail 110 400 115 681 8,8% Dec 16
40 Brakfontein
Century Park Logistics 88 300 90 000 * #
Van Riebeeck Mall Retail 77 497 74 000 9,3% ##
11 Naivasha Road Office 68 000 70 938 9,5% Nov 16
7 Wilcox Road
Prospecton Logistics 52 400 53 500 9,2% Nov 16
Homeworld Centre Retail 47 000 50 500 9,1% Nov 16
7 Old Pretoria Road
Nelspruit Industrial 54 900 50 000 11,7% Dec 16
Citrus Street Logistics 30 900 30 600 9,2% Nov 16
Cranberry
Street Logistics 28 700 28 800 9,2% Nov 16
Albert Amon Road
Meadowdale Industrial 26 000 27 500 8,8% #
Bofors Circle
Park Epping Logistics 18 600 21 500 8,3% ##
93 Goodwood Road
Pinetown Logistics 20 600 20 800 9,1% Dec 16
Absa Towers
Vanderbijlpark Office 15 000 13 000 14,0% ##
18 Suni Avenue
Corporate Park Logistics 5 640 7 575 * Nov 16
3 Arbeid
Street Industrial 6 400 6 500 * ##
9 Linbro Village
Linbro Park Industrial 4 300 4 400 9,0% Dec 16
654 637 665 294
* Vacant.
# Held for sale at 31 December 2016 and transferred after reporting period.
## Held for sale at 31 December 2016. Transfer pending.
6 VACANCIES AND ARREARS
The total vacancy increased to 6,0% from 5,7% at 30 June 2016. Fortress'
property portfolio has a total GLA of 3 292 643m2 (based on 100%).
% of property portfolio
Sectoral vacancy by GLA Dec 2016 by book value
Logistics 5,0% 35,7%
Retail 3,7% 34,1%
Offices 15,7% 15,9%
Industrial 6,2% 12,7%
Other 10,7% 1,6%
7 LISTED PORTFOLIO
Dec 2016 Jun 2016
Number of Fair value Number of Fair value
Counter shares R'000 shares R'000
Greenbay (GRP)* * 420 000 000 579 600
Nepi (NEP) 57 876 000 9 202 284 52 530 000 8 825 040
Resilient (RES) 39 455 000 4 514 047 39 370 000 5 188 966
13 716 331 14 593 606
Greenbay (GRP)* 1 069 101 000 1 699 871 *
Hammerson (HMN)# 13 300 405 1 277 770 13 300 405 1 403 489
Rockcastle (ROC)^ 350 490 000 12 091 905 343 830 000 11 865 573
Total 28 785 877 27 862 668
* Fortress increased its interest in Greenbay to 21,5% and treated it as an
associate (equity accounted) at Dec 2016. At Jun 2016 the investment was
fair valued.
^ Rockcastle was treated as an associate (equity accounted) and was thus not
fair valued in the financial statements.
# The Hammerson position is held through equity derivatives.
The board's policy is to hedge its foreign currency exposure to equity
investments (Greenbay, Hammerson, Nepi and Rockcastle) to achieve a neutral
effect on the first year's distribution. The following hedges were in place
at the date of this report:
Foreign
exchange Foreign
ZAR fair value fair value of exchange
of investment investment hedged Exchange
'000 '000 '000 rate
Greenbay R1 699 871 GBP100 323 GBP43 661 GBP - R17,98
Hammerson R1 277 770 GBP75 411 GBP22 353 GBP - R18,73
Nepi R9 202 284 EUR636 770 EUR155 464 EUR - R15,85
Rockcastle R12 091 905 USD880 045 USD287 872 USD - R14,35
R24 271 830
In total, 30,2% of Fortress' offshore equity exposure is hedged. This aligns
the funding risk profile to both the currency and income streams of the group's
offshore holdings. This results in 30,2% of these investments being funded at
interest rates applicable to the currencies of these investments.
8 FACILITIES AND INTEREST RATE DERIVATIVES
Fortress raised R688 million (3-year notes: R438 million; 6-month notes:
R250 million) under the Domestic Medium Term Note ("DMTN") programme and repaid
R572 million during the interim period. Fortress has accepted R500 million in
facilities from Sanlam with tenures of 7 years (R250 million) and 10 years
(R250 million).
Fortress raised R541 million (3-year notes: R300 million; 3,5-year notes:
R241 million) under the DMTN programme during February 2017 and new bank
finance of R2 billion has been approved. The new funding has been raised
to refinance the R2,7 billion expiring in the next 12 months. Fortress
intends to roll its expiring bank facilities.
Average
Amount margin
Facility expiry R'million over Jibar
Jun 2017 1 900 1,28%
Jun 2018 1 257 1,64%
Jun 2019 5 137 1,65%
Jun 2020 4 008 1,71%
Jun 2021 2 475 1,79%
Jun 2022 1 350 1,91%
Jun 2023 200 1,70%
Jun 2024 250 1,75%
Jun 2025 - -
Jun 2026 - -
Jun 2027 250 1,99%
16 827 1,67%
Amount Average
Interest rate swap expiry R'million swap rate
Jun 2018 150 6,48%
Jun 2019 700 6,46%
Jun 2020 1 200 6,99%
Jun 2021 700 8,16%
Jun 2022 600 7,99%
Jun 2023 300 7,79%
Jun 2024 200 7,47%
Jun 2025 100 7,78%
3 950 7,34%
Amount Average
Interest rate cap expiry R'million cap rate
Jun 2019 300 7,40%
Jun 2020 200 7,52%
Jun 2021 400 7,80%
Jun 2022 400 7,76%
Jun 2023 300 7,71%
Jun 2024 400 7,98%
2 000 7,73%
Amount
Variable rate instruments R'000
Loans to BEE vehicles (2 715 124)
Loans to co-owners (303 501)
Cash and cash equivalents (18 554)
Hammerson equity derivative (253 894)
Interest-bearing borrowings (including gross-up of
Hammerson equity derivatives) 15 760 906
Currency derivatives (gearing in foreign currency) (7 798 764)
Capital commitments contracted for 851 759
5 522 828
Total interest rate derivatives 5 950 000
Percentage hedged 107,7%
Capital expenditure approved by the board 840 223
Percentage hedged inclusive of approved capital expenditure 93,5%
The all-in weighted average cost of funding of Fortress was 8,92% at
31 December 2016 and the average hedge term was 4,1 years.
The information contained in notes 2, 6, 7 and the "Fair value information"
section of note 9 has been compiled using proportionate consolidation. This
results in Fortress accounting for its share of the assets and liabilities
of property investments that are not held in undivided shares (Arbour
Crossing, The Galleria, Mthatha Residential, Cornubia and Tradeport).
It further recognises the investments in Greenbay and Rockcastle at fair
value and the Hammerson equity derivative position on a gross basis.
9 SUMMARY OF FINANCIAL PERFORMANCE
Dec 2016 Jun 2016 Dec 2015 Jun 2015
Dividend per A
share (cents) 67,96 64,45 64,72 61,38
Dividend per B
share (cents) 78,59 74,69 62,81 39,20
Shares in issue
at period end
- A 1 172 508 991 1 119 708 334 1 091 747 728 466 251 105
- B 1 067 026 847 1 014 226 190 986 265 584 466 251 105
Shares used for dividend per
share calculation
- A 1 165 408 991 1 112 608 334 1 112 608 334 466 251 105
- B 1 067 026 847 1 014 226 190 1 014 226 190 466 251 105
A shares held
in treasury 7 100 000 7 100 000 7 100 000 -
Fair value information
Net asset value per
A share* R16,32 R15,62 R16,61 R15,72
Net asset value per
B share R24,73 R25,73 R24,14 R16,21
Loan-to-value ratio** 25,2% 23,8% 25,3% 27,3%
Net property
expense ratio 19,5% 16,8% 15,2% 15,8%
Gross property
expense ratio 36,2% 33,6% 35,3% 35,6%
Net total expense ratio 15,8% 15,6% 13,3% 10,9%
Gross total
expense ratio 28,0% 28,1% 27,4% 23,1%
IFRS accounting
Net asset value
per A share* R16,32 R15,62 R16,61 R15,72
Net asset value
per B share R22,83 R23,22 R20,77 R13,15
* 60-day volume weighted average traded price at reporting date limited to
combined net asset value.
** The loan-to-value ratio is calculated by dividing total interest-bearing
borrowings adjusted for cash on hand by the total of investments in property,
listed securities and loans advanced.
Fair value information
Summarised statement of Dec 2016 Jun 2016 Dec 2015
financial position R'000 R'000 R'000
ASSETS
Investment property 26 325 935 25 484 151 25 113 762
Investment property
under development 2 326 564 1 709 878 1 578 090
Investments 28 785 877 27 862 668 27 628 824
Fortress Share Purchase
Trust loans 1 071 140 1 046 512 1 196 038
Loans to BEE vehicles 2 715 124 1 803 180 2 597 110
Loans to co-owners 303 501 215 575 213 199
Current assets 1 170 610 808 669 647 076
Total assets 62 698 751 58 930 633 58 974 099
EQUITY AND LIABILITIES
Total equity attributable to
equity holders 45 403 832 43 476 856 41 827 632
Interest-bearing borrowings
net of cash on hand 15 488 458 13 833 995 14 756 441
Deferred tax 1 280 111 1 065 603 907 316
Current liabilities 526 350 554 179 1 482 710
Total equity and liabilities 62 698 751 58 930 633 58 974 099
Summarised statement of
comprehensive income (6 months) (12 months) (6 months)
Recoveries and contractual
rental revenue 1 617 069 2 226 472 653 414
Property operating expenses (585 019) (747 171) (230 799)
Distributable income
from investments 542 210 706 031 252 988
Fair value gain on investment
property, investments and
currency derivatives 2 445 667 4 165 600 3 492 787
Administrative expenses (60 078) (104 710) (30 567)
Impairment of goodwill on
Capital merger - (8 846 837) (8 846 837)
Impairment of goodwill on
Lodestone merger (1 707) - -
Profit/(loss) before net
finance costs/income 3 958 142 (2 600 615) (4 709 014)
Net finance (costs)/income (179 437) (122 761) 174 080
Profit/(loss) before income tax 3 778 705 (2 723 376) (4 534 934)
Income tax (197 410) (96 014) 48 296
Profit/(loss) for the period attributable
to equity holders 3 581 295 (2 819 390) (4 486 638)
Reconciliation of fair value
information to IFRS disclosure
Profit/(loss) for the period
attributable to equity holders of
the company -
fair value information 3 581 295 (2 819 390) (4 486 638)
Carrying value of associates
- Greenbay 1 710 434 - -
- Rockcastle 10 058 337 9 313 206 8 519 464
Fair value of investments
- Greenbay (1 699 871) - -
- Rockcastle (12 091 905) (11 865 573) (11 846 805)
Profit/(loss) for the period
attributable to equity holders
of the company - IFRS disclosure 1 558 290 (5 371 757) (7 813 979)
10 BROAD-BASED BLACK ECONOMIC EMPOWERMENT
Fortress issued 10 638 297 A shares and 10 638 297 B shares at R16,00 per
A share and R31,00 per B share to The Siyakha 2 Education Trust on
15 December 2016. Fortress provided financial assistance to this
charitable trust, established for the promotion of black education, to
enable it to acquire shares.
11 PROSPECTS
Fortress continues to strengthen its position as the preferred developer of
prime logistics warehouses, delivering a technically superior product and
the group's strategically located land will ensure a sustainable
development pipeline. The offshore companies in which Fortress is invested
are well positioned to show strong growth in distributions in hard
currencies.
Dividend income from foreign listed holdings is hedged in line with the
following policy:
- hedge 100% of the dividends to be received in the following 12 months;
- hedge 67% of the dividends to be received in months 13 to 24; and
- hedge 33% of the dividends to be received in months 25 to 36.
In line with this policy the following hedges are currently in place:
Greenbay Hammerson Nepi Rockcastle
GBP GBP EUR USD
Forward rate
against ZAR: Jun 2017 R20,89 R22,23 R18,51 R16,70
Forward rate
against ZAR: Dec 2017 R19,71 R19,35 R17,49 R15,50
Forward rate
against ZAR: Jun 2018 R20,45 R19,99 R18,28 R16,11
Forward rate
against ZAR: Dec 2018 R21,22 R20,85 R19,03 R16,55
Forward rate
against ZAR: Jun 2019 R22,01 R21,53 R19,89 R17,18
On the assumption that the A share dividend will grow at 5%, the board
anticipates that the B share dividend will increase by approximately 25%
for the 2017 financial year.
The growth is further based on the assumptions that a stable macro-economic
environment will prevail,no major corporate failures will occur and that
tenants will be able to absorb the recovery of rising utility costs and
municipal rates. Budgeted rental income was based on contractual escalations
and market-related renewals. This forecast has not been audited or reviewed
by Fortress' auditors.
By order of the board
Mark Stevens Rual Bornman
Managing director Financial director
Johannesburg
9 February 2017
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Audited Unaudited
Dec 2016 Jun 2016 Dec 2015
R'000 R'000 R'000
ASSETS
Non-current assets 58 007 204 53 771 468 52 558 843
Investment property 25 084 162 24 286 405 23 993 467
Straight-lining of rental
revenue adjustment 333 220 282 850 181 494
Investment property
under development 2 565 181 1 709 878 1 578 090
Investment in and loans to
associates and joint venture 12 540 793 10 053 527 9 258 263
Investments 13 716 331 14 593 606 13 611 108
Fortress Share Purchase
Trust loans 1 052 393 1 019 634 1 172 485
Loans to BEE vehicles 2 715 124 1 803 180 2 597 110
Loans to co-owners - 22 388 166 826
Current assets 1 718 930 1 395 532 1 286 084
Investment property held
for sale 232 262 222 377 253 456
Straight-lining of rental
revenue adjustment 238 1 568 1 094
Fortress Share Purchase
Trust loans 18 747 26 878 23 553
Loans to co-owners - 146 641 -
Trade and other receivables 1 193 673 805 497 644 512
Hammerson equity derivative 253 894 182 670 350 948
Cash and cash equivalents 20 116 9 901 12 521
Total assets 59 726 134 55 167 000 53 844 927
EQUITY AND LIABILITIES
Total equity attributable to
equity holders 43 380 827 40 924 489 38 500 291
Stated capital 44 677 185 42 241 795 40 863 094
Treasury shares (104 827) (104 827) (104 827)
Currency translation reserve (96 815) (34 075) 5 535
Reserves (1 094 716) (1 178 404) (2 263 511)
Non-controlling interests 30 053 - -
Total equity 43 410 880 40 924 489 38 500 291
Total liabilities 16 315 254 14 242 511 15 344 636
Non-current liabilities 13 111 706 12 052 828 11 421 088
Interest-bearing borrowings 11 831 595 10 987 225 10 506 863
Deferred tax 1 280 111 1 065 603 914 225
Current liabilities 3 203 548 2 189 683 3 923 548
Trade and other payables 535 848 551 318 1 474 440
Income tax payable - - 5 101
Interest-bearing borrowings 2 667 700 1 638 365 2 444 007
Total equity and liabilities 59 726 134 55 167 000 53 844 927
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited
for the six Audited for the six
months for the year months
ended ended ended
Dec 2016 Jun 2016 Dec 2015
R'000 R'000 R'000
Net rental and related revenue 1 057 078 1 557 337 424 352
Recoveries and contractual
rental revenue 1 577 915 2 148 517 615 223
Straight-lining of rental
revenue adjustment 49 040 127 827 25 997
Rental revenue 1 626 955 2 276 344 641 220
Property operating expenses (569 877) (719 007) (216 868)
Income from investments 281 419 348 296 148 443
Fair value (loss)/gain on
investment property, investments
and currency derivatives (193 867) 1 331 559 647 435
Fair value gain on
investment property 34 272 524 586 8 000
Adjustment resulting from
straight-lining of rental revenue(49 040) (127 827) (25 997)
Fair value (loss)/gain
on investments (994 963) 1 915 616 2 175 372
Fair value gain/(loss) on
currency derivatives 815 864 (980 816) (1 509 940)
Administrative expenses (60 024) (104 502) (30 504)
Impairment of goodwill on
Capital merger - (8 846 837) (8 846 837)
Impairment of goodwill on
Lodestone merger (1 707) - -
Profit on sale of interest
in associates - 54 004 23 781
Income/(loss) from associates and
joint venture 855 833 511 793 (400 793)
- distributable 288 344 411 950 130 974
- non-distributable 567 489 99 843 (531 767)
Profit/(loss) before net finance
costs/income 1 938 732 (5 148 350) (8 034 123)
Net finance (costs)/income (184 851) (127 393) 171 848
Finance income 446 058 650 426 461 793
Interest received 446 058 650 426 209 873
Fair value adjustment on interest
rate derivatives - - 251 920
Finance costs (630 909) (777 819) (289 945)
Interest on borrowings (672 301) (849 951) (307 329)
Capitalised interest 91 496 93 029 17 384
Fair value adjustment on
interest rate derivatives (50 104) (20 897) -
Profit/(loss) before
income tax 1 753 881 (5 275 743) (7 862 275)
Income tax (197 410) (96 014) 48 296
Profit/(loss) for the period 1 556 471 (5 371 757) (7 813 979)
Other comprehensive (loss)/income
net of tax
Items that may subsequently be
reclasssified to profit or loss
Exchange differences on
translation of associates (62 740) (34 075) 5 535
Total comprehensive income/(loss)
for the period 1 493 731 (5 405 832) (7 808 444)
Profit/(loss) of the period
attributable to:
Equity holders of the company 1 558 290 (5 371 757) (7 813 979)
Non-controlling interests (1 819) - -
1 556 471 (5 371 757) (7 813 979)
Total comprehensive income/(loss)
for the period attributable to:
Equity holders of the company 1 495 550 (5 405 832) (7 808 444)
Non-controlling interests (1 819) - -
1 493 731 (5 405 832) (7 808 444)
Basic earnings/(loss)
per A share (cents) 72,74 (332,71) (694,69)
Basic earnings/(loss)
per B share (cents) 72,74 (332,71) (694,69)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Currency
Stated Treasury translation
capital shares reserve Reserves
R'000 R'000 R'000 R'000
Balance at Jun 2015 7 441 388 6 019 423
Issue of shares
(equal number
of A and B
shares) 37 678 965
Loss for the period (7 813 979)
Repurchase of
A shares (104 827)
Repurchase and
cancellation of
B shares (4 257 259)
Exchange
differences on
translation of
associates 5 535
Dividends paid (468 955)
Balance at
Dec 2015 40 863 094 (104 827) 5 535 (2 263 511)
Issue of shares
(equal number
of A and B
shares) 1 378 701
Profit for the
period 2 442 222
Exchange
differences on
translation of
associates (39 610)
Dividends paid (1 357 115)
Balance at
Jun 2016 42 241 795 (104 827) (34 075) (1 178 404)
Issue of shares
(equal number
of A and B
shares) 2 435 390
- Issue of
35 272 360
shares on
1 Dec 2016 1 600 566
- Issue of
6 890 000
shares on
12 Dec 2016 335 032
- Issue of
10 638 297
shares on
15 Dec 2016 499 792
Non-controlling
interests acquired:
Lodestone
merger
Profit/(loss) for
the period 1 558 290
Exchange
differences on
translation of
associates (62 740)
Dividends paid (1 474 602)
Balance at
Dec 2016 44 677 185 (104 827) (96 815) (1 094 716)
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
Equity
attributable Non-
to equity controlling
holders interests Total equity
R'000 R'000 R'000
Balance at Jun 2015 13 460 811 - 13 460 811
Issue of shares
(equal number
of A and B
shares) 37 678 965 37 678 965
Loss for the period (7 813 979) (7 813 979)
Repurchase of
A shares (104 827) (104 827)
Repurchase and
cancellation of
B shares (4 257 259) (4 257 259)
Exchange
differences on
translation of
associates 5 535 5 535
Dividends paid (468 955) (468 955)
Balance at
Dec 2015 38 500 291 - 38 500 291
Issue of shares
(equal number
of A and B
shares) 1 378 701 1 378 701
Profit for the
period 2 442 222 2 442 222
Exchange
differences on
translation of
associates (39 610) (39 610)
Dividends paid (1 357 115) (1 357 115)
Balance at
Jun 2016 40 924 489 - 40 924 489
Issue of shares
(equal number
of A and B
shares) 2 435 390 2 435 390
- Issue of
35 272 360
shares on
1 Dec 2016 1 600 566 1 600 566
- Issue of
6 890 000
shares on
12 Dec 2016 335 032 335 032
- Issue of
10 638 297
shares on
15 Dec 2016 499 792 499 792
Non-controlling
interests acquired:
Lodestone
merger 31 872 31 872
Profit/(loss) for
the period 1 558 290 (1 819) 1 556 471
Exchange
differences on
translation of
associates (62 740) (62 740)
Dividends paid (1 474 602) (1 474 602)
Balance at
Dec 2016 43 380 827 30 053 43 410 880
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited
for the six Audited for the six
months for the year months
ended ended ended
Dec 2016 Jun 2016 Dec 2015
R'000 R'000 R'000
Cash outflow from
operating activities (358 056) (678 385) (226 084)
Cash outflow from
investing activities (1 920 761) (2 959 919) (2 356 179)
Cash inflow from
financing activities 2 289 032 3 643 519 2 590 098
Increase in cash and
cash equivalents 10 215 5 215 7 835
Cash and cash equivalents at
beginning of period 9 901 4 686 4 686
Cash and cash equivalents
at end of period 20 116 9 901 12 521
Cash and cash equivalents consist of:
Current accounts 20 116 9 901 12 521
The net cash outflow from operating activities results mainly from the group
distributing scrip dividends received, the antecedent dividend adjustment and
dividends accrued for but not yet received.
NOTES
1 PREPARATION AND ACCOUNTING POLICIES
The condensed unaudited consolidated interim financial statements have been
prepared in accordance with International Financial Reporting Standards
("IFRS"), IAS 34: Interim Financial Reporting, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and
Financial Reporting Pronouncements as issued by the Financial Reporting
Standards Council, the JSE Limited Listings Requirements and the requirements
of the Companies Act of South Africa. This report complies with the
SA REIT Association Best Practice Recommendations. This report was compiled
under the supervision of Rual Bornman CA(SA), the financial director.
The accounting policies applied in the preparation of the condensed unaudited
consolidated interim financial statements are in terms of IFRS and are
consistent with the accounting policies applied in the preparation of the
previous consolidated financial statements, with the exception of the
adoption of new and revised standards which became effective during the
period.
The group's investment properties are valued internally by the directors
at interim reporting periods and externally by an independent valuer for
year-end reporting. In terms of IAS 40: Investment Property and
IFRS 7: Financial Instruments: Disclosure, the group's investment properties
are measured at fair value and are categorised as level 3 investments.
In terms of IAS 39: Financial Instruments: Recognition and measurement and
IFRS 7, the group's currency and interest rate derivatives as well as the
Hammerson equity derivative are measured at fair value through profit or
loss and are categorised as level 2 investments. In terms of IAS 39,
investments are measured at fair value being the quoted closing price at
the reporting date and are categorised as level 1 investments. There
were no transfers between levels 1, 2 and 3 during the period. The
valuation methods applied are consistent with those applied in preparing
the previous consolidated financial statements.
The board has resolved to impair the R1,7 million of goodwill that arose
on the Lodestone merger due to all the cash flows from Lodestone's assets
being carried at fair value. The directors are not aware of any matters or
circumstances arising subsequent to 31 December 2016 that require any
additional disclosure or adjustment to the financial statements. The
condensed interim financial statements have not been audited or reviewed
by Fortress' auditors.
2 LEASE EXPIRY PROFILE
Based on
Based on contractual
GLA rental revenue
Vacant 6,0%
Jun 2017 17,4% 15,0%
Jun 2018 18,9% 19,5%
Jun 2019 20,2% 20,9%
Jun 2020 10,9% 13,7%
Jun 2021 8,5% 10,9%
> Jun 2021 18,1% 20,0%
100,0% 100,0%
3 SEGMENTAL ANALYSIS
Unaudited Unaudited
for the six Audited for the six
months for the year months
ended ended ended
Dec 2016 Jun 2016 Dec 2015
R'000 R'000 R'000
Rental revenue
Logistics 661 538 850 957 112 844
Industrial 61 505 95 439 54 931
Offices 254 876 321 547 45 986
Retail 584 304 995 978 422 231
Other 64 732 12 423 5 228
1 626 955 2 276 344 641 220
Profit/(loss) for the period
Logistics 480 150 639 548 76 034
Industrial 31 129 115 150 32 550
Offices 161 413 62 397 31 587
Retail 356 668 1 108 332 282 535
Other 12 950 28 669 10 078
Corporate - South Africa (999 788) (7 808 628) (8 014 082)
Corporate - Europe 1 513 949 482 775 (232 681)
1 556 471 (5 371 757) (7 813 979)
Total assets
Logistics 10 175 119 10 034 954 12 025 035
Industrial 3 606 347 3 252 085 936 084
Offices 4 510 070 4 232 922 4 607 154
Retail 9 669 784 9 419 134 9 002 963
Other 456 694 500 638 474 243
Corporate - South Africa 9 349 887 8 826 751 8 622 500
Corporate - Europe 21 958 233 18 900 516 18 176 948
59 726 134 55 167 000 53 844 927
Reconciliation of profit/(loss)
for the period to
dividend declared
Profit/(loss) for the period 1 556 471 (5 371 757) (7 813 979)
Fair value gain on
investment property (34 272) (524 586) (8 000)
Fair value loss/(gain)
on investments 994 963 (1 915 616) (2 175 372)
Fair value (gain)/loss on
currency derivatives (815 864) 980 816 1 509 940
Impairment of goodwill
on Capital merger - 8 846 837 8 846 837
Impairment of goodwill
on Lodestone merger 1 707 - -
Profit on sale of interest
in associates - (54 004) (23 781)
Non-distributable (income)/
loss from associates and
joint venture (567 489) (99 843) 531 767
Fair value adjustment on
interest rate derivatives 50 104 20 897 (251 920)
Income tax 197 410 96 014 (48 296)
Non-controlling interests 1 819 - -
Antecedent dividend 104 095* 758 405 710 776
Dividends accrued 141 644 94 554 43 485
Amount available for distribution
under best practice 1 630 588 2 831 717 1 321 457
Interim dividend declared
- A shares
(net of treasury shares) (792 012) (720 080) (701 984)
- B shares (838 576) (637 035) (619 473)
Final dividend declared
- A shares
(net of treasury shares) (717 076)
- B shares (757 526)
- - -
* The antecedent dividend includes the performance of Lodestone prior to
1 December 2016.
The methodology applied in calculating the dividend is consistent with that
of the prior periods.
Reconciliation of profit/(loss) for the period to headline earnings
Basic earnings - profit/(loss)
for the period attributable to
equity holders 1 558 290 (5 371 757) (7 813 979)
Adjusted for: 16 301 8 300 269 8 815 856
- fair value loss/(gain)
on investment property 14 768 (396 759) 17 997
- profit on sale of interest
in associates - (54 004) (23 781)
- fair value loss on investment
property of associates and
joint venture - 23 725 -
- impairment of goodwill on
Capital merger - 8 846 837 8 846 837
- impairment of goodwill on
Lodestone merger 1 707 - -
- income tax effect (174) (119 530) (25 197)
Headline earnings 1 574 591 2 928 512 1 001 877
Headline earnings
per A share (cents) 73,50 181,38 89,07
Headline earnings per
B share (cents) 73,50 181,38 89,07
Diluted earnings per share and diluted headline earnings per share are the
same as basic earnings per share and headline earnings per share as there
are no dilutionary instruments in issue.
Basic earnings per share and headline earnings per share are based on the
following weighted average shares in issue during the period:
Dec 2016 Jun 2016 Dec 2015
- A share 1 120 282 759 835 699 554 570 310 401
- B share 1 021 900 615 778 829 752 554 501 720
4 PAYMENT OF INTERIM DIVIDENDS
The board has approved and notice is hereby given of interim dividends of
67,96 cents per A share and 78,59 cents per B share for the six months ended
31 December 2016. The dividends are payable to Fortress shareholders in
accordance with the timetable set out below:
Last date to trade cum dividend Tuesday, 7 March 2017
Shares trade ex dividend Wednesday, 8 March 2017
Record date Friday, 10 March 2017
Payment date Monday, 13 March 2017
Share certificates may not be dematerialised or rematerialised between
Wednesday, 8 March 2017 and Friday, 10 March 2017, both days inclusive.
In respect of dematerialised shareholders, the dividend will be transferred
to the CSDP accounts/broker accounts on Monday, 13 March 2017. Certificated
shareholders' dividend payments will be deposited on or about Monday,
13 March 2017. An announcement informing shareholders of the tax treatment
of the dividend will be released separately on SENS.
Directors Iraj Abedian (chairman); Jeff Zidel (deputy chairman); Mark Stevens*;
Rual Bornman*; Kura Chihota; Jan Potgieter; Wiko Serfontein*; Andrew Teixeira*
(alternate: Steven Brown*); Fareed Wania*; Banus van der Walt; Djurk Venter;
Tshiamo Matlapeng-Vilakazi (*executive director)
Changes to the board of directors Nontando Mahlati resigned from the board
on 31 December 2016.
Company secretary Tamlyn Stevens
Registered address 3rd Floor Rivonia Village, Rivonia Boulevard, Rivonia, 2191
PO Box 138, Rivonia, 2128
Transfer secretaries Link Market Services South Africa Proprietary Limited,
13th Floor, Rennie House, 19 Ameshoff Street, Braamfontein, 2001
PO Box 4844, Johannesburg, 2000
Sponsor Java Capital
Date: 09/02/2017 01:25:00 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
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