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Unaudited interim results for the 6 months to 31 Dec 2016, dividend distribution declaration & change in directorate
Emira Property Fund Limited
(Incorporated in the Republic of South Africa)
Registration number: 2014/130842/06
Share code: EMI ISIN: ZAE000203063
(“Emira” or “the Fund” or “the Company”)
Tax number: 9995/739/15/9
(Approved as a REIT by the JSE)
Unaudited interim financial results for the six months to 31 December 2016,
dividend distribution declaration and change in directorate
Highlights
Dividend per share 68,93c
Distributable income R351,9m
Net asset value 1 759c
Commentary
The Emira Board of Directors announces that a dividend for the six months
to 31 December 2016 of 68,93 cents per share has been declared (Dec 2015:
70,34 cents per share), which is in line with expectations, as communicated
to shareholders on 20 June 2016.
Vacancies and tenant renewals
Vacancies have increased from 4,7% at 31 December 2015 to 7,0% at 31
December 2016. Retail sector vacancies have increased marginally to 3,6%,
which is below the national average of 3,7% and industrial vacancies of
1,2% are well below the national average of 4,0%. As anticipated,
Emira’s office sector vacancies have increased to 16% and are above SAPOA
national levels of 10,7%. Emira continues to manage its vacancies through
a combination of tenant retention and letting strategies and in some
instances the sale of properties.
A total of 72,8% by GLA (66,3% by revenue) of expiring tenants were renewed
and retained during the six months to 31 December 2016.
Major leases concluded
The largest new leases concluded for the period were at Universal Industrial
Park in Durban (2 830m2), Summit Place in Pretoria (2 484m2), Menlyn Corporate
Park (1 533m2), Steelpark Industrial Park in Cape Town (1 213m2) and Podium
in Pretoria (1 170m2). The largest renewals were Auction Operation at Epping
Warehouse in Cape Town (13 662m2), RTT at RTT Continental in Johannesburg
(12 921m2), Disaki at Epping Warehouse in Cape Town (4 696m2), Amadeus Global
Travel at Amadeus Place in Bryanston (2 800m2), Tenova at 96 Loper Road in
Johannesburg (2 344m2) and Johnson & Johnson at the Johnson & Johnson Building
in Midrand (2 309m2).
Disposals
The strategy to dispose of non-core buildings continued during the six months
under review to 31 December 2016. Two properties, Southern Life Plaza and
Cochrane Avenue, totalling R130,2m, were sold and transferred out of Emira
during the period. These two properties were sold at a combined forward yield
of 10,9% and a combined 26,7% premium to book value. Sales transactions to the
value of a further R381,2m have become unconditional and are expected to be
transferred within the next six months.
Emira will continue with its strategy to balance the Fund’s sector allocations
by reducing its office exposure, in order to ensure that the portfolio is better
positioned for future periods of lower growth economic conditions.
At 31 December 2016, the Fund had committed to selling 19 properties valued at
R917,1m, which have been classified as held for sale.
Developments and refurbishments
Projects to modernise, extend and redevelop five buildings are currently underway
totalling approximately R703,5m, the most significant of which is the redevelopment
of Knightsbridge Manor Office Park (“Knightsbridge”) in Bryanston.
The 29 419m2 prime (“P-grade”) Knightsbridge is being undertaken in phases. The
first phase of 12 384m2 is on track to be completed by August 2017 at a total cost
of R339m with 47% pre-let to WSP|Parsons Brinckerhoff. The second phase, which
measures 3 692m2 at a cost of R108m, commenced in February 2017 and will house the
South African head offices of KFC and Pizza Hut. The new office park will attain
a minimum 4-Star Green Star SA rating from the Green Building Council South Africa.
The number of projects underway reflects the Fund’s strategy to continually upgrade
and maintain the portfolio and extract value from existing bulk.
Debt
Emira has diversified sources of funding and banking facilities in place with all
of the major South African banks. In addition, Emira continues to successfully
access funding via the debt capital markets at competitive rates.
Total debt as at 31 December 2016 was R5,4bn with a weighted average duration to
expiry of 1,5 years. The average duration of the debt has decreased slightly as a
result of the passage of time, however active steps are underway to extend debt
facilities, which are expiring over the next 12 months. The debt expiry profile
has been managed to ensure that the amount of debt expiring in any one period is
manageable. At 31 December 2016, the Fund had R646,0m of undrawn, backup facilities
which further reduces debt refinance risk.
Funding activities during the first six months of the financial year under
review included:
Amount All-in-rate
Date (Rm) (%)
22 Aug 16 Repayment of 12-month commercial paper 158 8,45
22 Aug 16 Repayment of 6-month commercial paper 42 8,17
22 Aug 16 Repayment of 6-month commercial paper 30 8,27
22 Aug 16 Issue of 6-month commercial paper 184 8,17
22 Aug 16 Issue of 12-month commercial paper 48 8,56
12 Sep 16 Repayment of 2-year domestic medium term notes 270 8,60
12 Sep 16 Issue of 3-year domestic medium term notes 240 9,16
30 Sep 16 Issue of 18-month domestic medium term notes 60 8,66
4 Nov 16 Repayment of 12-month commercial paper 170 8,43
4 Nov 16 Repayment of 6-month commercial paper 70 8,17
4 Nov 16 Issue of 6-month commercial paper 70 8,11
4 Nov 16 Issue of 12-month commercial paper 160 8,51
6 Nov 16 Repayment of 2-year domestic medium term notes 100 8,65
7 Nov 16 Issue of 3-year domestic medium term notes 100 9,14
During the six months to 31 December 2016, the Fund concluded a new R300m four-year
secured facility with Standard Bank.
As at 31 December 2016, Emira had a moderate level of gearing with interest-bearing debt
to total property assets of 37,8%. The Fund has fixed 84,0% of its debt for periods of
between 0,2 and 7,9 years, with a weighted average duration of 2,9 years. The hedging
percentage should be maintained at or around this level with further interest rate
hedges to be acquired as new debt is drawn down on Knightsbridge.
Weighted Weighted Amount % of
average rate % average term (Rm) debt
Debt - Fixed swap 7,9 2,9 years 4 518,4 84,0
Debt - Floating 8,6 861,4 16,0
Total 7,9 5 379,8 100,0
Less: Costs capitalised not yet amortised (2,2)
Per statement of financial position 5 377,6
As at 31 December 2016, Emira had effective Australian dollar (“AUD”) denominated debt
of AUD87,5m through its cross-currency interest-rate swaps. The cross-currency interest-
rate swaps relate to the Fund’s investment in Growthpoint Australia Limited.
Growthpoint Australia Limited (“GOZ”)
On 21 October 2016, Emira acquired a further 1 332 753 shares in GOZ at a price of
AUD3,15 per share.
As at 31 December 2016, GOZ’s unit price was AUD3,28. Emira’s investment of 28 558 566
units, comprising 4,9% of the total units in issue, is valued at R924,2m compared to
the initial cost price of R416,8m, a 121,7% increase in this investment.
Results
The retail and industrial sectors continued to perform well, with vacancies stable and
well below national averages. Continued weak local economic conditions impacted the
Fund’s performance in the office sector during the period. In certain instances, tenants
were unwilling to commit to new space due to flat local economic growth. The over-supply
of office space has meant the Fund has needed to be competitive when trying to attract or
retain tenants through reduced rentals and increased incentives. Further increases in
municipal expenses placed an added burden on the income statements of businesses in
South Africa, which resulted in the shrinking of net rentals payable to landlords.
Revenue rose marginally year-on-year by 0,9%, excluding the straight- lining adjustments
in respect of future rental escalations. Contractual escalations on the core portfolio
were offset by vacancies, rent reversions and disposals. Despite the tough economic
conditions, Emira has made progress with the letting of vacant space, the benefit of which
should seen in the 2018 financial year.
Dividend income of R10,6m was received during the period, arising from the share buybacks
implemented earlier in the year.
Property expenses increased by 7,3% with the gross cost-to-income ratio up to 37,9%
(December 2015: 35,7%) mainly due to the low income growth in the period.
Administration expenses, which include staff costs and property management fees,
increased by 8,7% to R46,7m (December 2015: R43,0m).
Income from the Fund’s listed investment in GOZ increased by 1,7%. The increase in the
distribution per unit received was largely offset by the effect of a stronger Rand
against the AUD.
Net finance costs decreased marginally by 0,3%. While debt levels for the period were
higher as a result of the funding of new developments and refurbishments and the share
buybacks, the increased interest was reduced and offset by lower funding rates achieved
on cross-currency interest-rate swaps.
The 1,4% increase in net asset value (“NAV”) from 1 735 cents per share at
30 June 2016 to 1 759 cents per share at 31 December 2016 was mainly due
to an increase in the value of the property portfolio.
Distribution statement
Half-year Half-year
ended ended %
R’000 31 Dec 2016 31 Dec 2015 change
Operating lease rental income and tenant
recoveries excluding straight-lining of
leases 890 839 882 934 0,9
Property expenses (338 114) (315 121) 7,3
Net property income 552 725 567 813 (2,7)
Dividend received 10 618 — 100,0
Income from listed property investment 29 216 28 715 1,7
Administration expenses (46 681) (42 951) 8,7
Depreciation (146) (134) 9,0
Net finance costs (193 810) (194 322) (0,3)
Finance income 6 263 5 075 23,4
Finance costs (200 073) (199 397) 0,3
Interest paid and amortised borrowing costs (214 306) (199 986) 7,2
Interest capitalised to the cost of
developments 14 233 589 2 316,5
Dividend payable to shareholders 351 922 359 121 (2,0)
Number of shares in issue 510 550 084 510 550 084 —
Dividend per share (cents) 68,93 70,34 (2,0)
Disposals
In accordance with the strategy of the Fund to rebalance the portfolio, certain properties
that are deemed non-core, are underperforming or pose excessive risk, have been earmarked
for disposal.
Properties transferred out of Emira during the six months to 31 Dec 2016
Property Sector Location GLA(m2)
Southern Life Plaza Office Bloemfontein 10 697
Cochrane Avenue Industrial Cape Town 5 870
Book Sale Exit
value price yield Effective
Property (Rm) (Rm) (%) date
Southern Life Plaza 79,6 98,2 12,0 Oct 2016
Cochrane Avenue 23,2 32,0 7,3 Nov 2016
102,8 130,2 10,9
Vacancies
Number of GLA Vacancy
buildings Jun 2016 Jun 2016
Jun 2016 (m2) (m2) %
Office 61 404 081 42 225 10,5
Retail 38 415 242 11 581 2,8
Industrial 45 366 666 8 910 2,4
Total 144 1 185 989 62 716 5,3
Number of GLA Vacancy
buildings Dec 2016 Dec 2016
Dec 2016 (m2) (m2) %
Office 60 394 332 63 188 16,0
Retail 38 415 643 14 862 3,6
Industrial 44 360 796 4 306 1,2
Total 142 1 170 771 82 356 7,0
Valuations
Total portfolio movement
Jun 2016
Sector (R’000) R/m2
Office 5 713 237 14 139
Retail 5 370 812 12 934
Industrial 1 880 830 5 130
12 964 879
Dec 2016
Sector (R’000) R/m2
Office 5 758 134 14 602
Retail 5 601 374 13 476
Industrial 1 896 150 5 255
13 255 658
Difference Difference
Sector (%) (R’000)
Office 0,8 44 897
Retail 4,3 230 562
Industrial 0,8 15 320
2,2 290 779
Worley Parsons update
The arbitration hearing between Emira and Worley Parsons, regarding their lease
obligations at Corobay Corner, took place in November 2016. The arbitrator delivered
his judgment on 3 February 2017 and ruled that the lease existed, had been unlawfully
repudiated by Worley Parsons and that Emira is entitled to damages. Emira has commenced
its damages claim against Worley Parsons.
For the six-month period to 31 December 2016, no income has been accrued in respect of
rentals due by Worley Parsons.
Enyuka Property Fund (“Enyuka”)
On 2 September 2016, Emira entered into an agreement with One Property Holdings to form
Enyuka. Emira has contributed its 15-asset rural retail portfolio to the new venture.
The transaction became effective on 16 January 2017 when the final suspensive condition
was met.
Share buybacks
During the period, the Fund completed a buy-back programme where 14 016 201
shares were purchased at an average price of 1 427 cents per share.
The shares are being held as treasury shares. While the divergence between
the Fund’s equity value on the stock exchange compared to its net book value
remains, Emira will continue to consider investing a portion of its proceeds
received from disposals into its own shares.
Change in directorate
Ben van der Ross, who has served as Emira’s Chairman since its listing in
2003 has reached retirement age and has announced his retirement from the Board
with effect from 14 February 2017. We thank Ben for his valued contributions over
the years and wish him well in his retirement. Gerhard van Zyl, an existing independent
non-executive director, has taken up the position of Chairman with effect from
15 February 2017. Thys Neser, an independent non-executive director, has also retired
effective 14 February 2017. We would like to thank Thys for his sage advice and the
wealth of experience that he brought to Emira over the past 14 years.
Prospects
Local macro-economic conditions are expected to remain challenging with low GDP growth
for the balance of 2017. The continued pressure on tenants, together with the over-supply
of commercial office space, will likely continue to have a negative impact on rentals.
As announced on SENS on 20 June 2016, the growth in Emira’s distributions per share
for the year to 30 June 2017 is still forecast at negative 2%. This is primarily
as a result of increased vacancies in the Fund’s office portfolio together with
expected negative rental reversions.
The filling of vacancies in the portfolio remains a critical priority. With an increased
focus on new letting, tenant retention and the effective utilisation of proceeds from the
disposal of non-core assets together with a more stable local and global economic outlook,
the Fund expects to return to a positive growth in distributions in the 2018 financial year.
This forecast has not been reviewed and reported on by Emira’s external auditors.
Dividend distribution declaration
The Board has approved and notice is hereby given that a gross interim dividend of
68,93 cents per share has been declared (2015: 70,34 cents), payable to the registered
shareholders of Emira Property Fund Limited on 13 March 2017. The issued share capital
at the declaration date is 510 550 084 listed ordinary shares. The source of the dividend
comprises net income from property rentals, income earned from the Company’s listed property
investment and interest earned on cash on deposit. Please refer to the condensed
consolidated statement of comprehensive income for further details.
Tax implications
In accordance with Emira’s status as a REIT, shareholders are advised that the dividend
meets the requirements of a “qualifying distribution” for the purposes of section 25BB
of the Income Tax Act, No. 58 of 1962 (“Income Tax Act”). Accordingly, qualifying
distributions received by local tax residents must be included in the gross income of
such shareholders (as a non-exempt dividend in terms of section 10(1)(k)(aa) of the Income
Tax Act), with the effect that the qualifying distribution is taxable as income in the
hands of the shareholder. These qualifying distributions are, however, exempt from dividend
withholding tax in the hands of South African tax resident shareholders, provided that
the South African resident shareholders have provided the following forms to their Central
Securities Depository Participant (“CSDP”) or broker, as the case may be, in respect of
uncertificated shares, or the transfer secretaries, in respect of certificated shares:
a) a declaration that the dividend is exempt from dividends tax; and
b) a written undertaking to inform the CSDP, broker or the transfer secretaries, as the
case may be, should the circumstances affecting the exemption change or the beneficial
owner cease to be the beneficial owner, both in the form prescribed by the Commissioner
for the South African Revenue Service. Shareholders are advised to contact their CSDP,
broker or the transfer secretaries, as the case may be, to arrange for the abovementioned
documents to be submitted prior to payment of the dividend, if such documents have not
already been submitted.
Qualifying dividends received by non-resident shareholders will not be taxable as income and
instead will be treated as ordinary dividends but which are exempt in terms of the usual
dividend exemptions per section 10(1)(k) of the Income Tax Act. It should be noted that
until 31 December 2013 qualifying distributions received by non-residents were not subject
to dividend withholding tax. From 1 January 2014, any qualifying distribution received by a
non-resident from a REIT will be subject to dividend withholding tax at 15%, unless the rate
is reduced in terms of any applicable agreement for the avoidance of double taxation (“DTA”)
between South Africa and the country of residence of the shareholder. Assuming dividend
withholding tax will be withheld at a rate of 15%, the net amount due to non-resident
shareholders will be 58,5905 cents per share. A reduced dividend withholding tax rate in
terms of the applicable DTA, may only be relied on if the non-resident shareholder has
provided the following forms to their CSDP or broker, as the case may be, in respect of
the uncertificated shares, or the transfer secretaries, in respect of certificated shares:
a) a declaration that the dividend is subject to a reduced rate as a result of the
application of a DTA; and
b) a written undertaking to inform their CSDP, broker or the transfer secretaries, as the
case may be, should the circumstances affecting the reduced rate change or the beneficial
owner cease to be the beneficial owner, both in the form prescribed by the Commissioner
for the South African Revenue Service. Non-resident shareholders are advised to contact
their CSDP, broker or the transfer secretaries, as the case may be, to arrange for the
abovementioned documents to be submitted prior to payment of the dividend if such documents
have not already been submitted, if applicable.
Local tax resident shareholders as well as non-resident shareholders are encouraged to consult
their professional advisors should they be in any doubt as to the appropriate action to take.
Last day 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.
By order of the Emira Property Fund Limited Board
Meredith Leyds
Company Secretary
Gerhard van Zyl Geoff Jennett
Chairman Chief Executive Officer
Bryanston
15 February 2017
Basis of preparation and accounting policies
These unaudited condensed consolidated interim financial statements have been prepared in
accordance with International Financial Reporting Standards (“IFRS”) including IAS 34:
Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting
Practices Committee, Financial Pronouncements as issued by the Financial Reporting Standards
Council, the JSE Listings Requirements and the requirements of the Companies Act of South Africa.
The accounting policies used in the preparation of these financial statements are consistent with
those used in the audited annual financial statements for the year ended 30 June 2016.
This report was compiled under the supervision of Greg Booyens CA (SA), the Chief
Financial Officer of Emira.
These condensed consolidated interim financial statements have not been reviewed or
audited by Emira’s independent auditor, PricewaterhouseCoopers Inc.
Condensed consolidated statement of financial position at 31 Dec 2016
Unaudited Unaudited Audited
R’000 31 Dec 2016 31 Dec 2015 30 June 2016
Assets
Non-current assets 13 265 373 13 876 168 13 085 752
Investment properties 11 954 055 12 455 618 11 757 917
Fixtures and fittings 83 357 61 336 61 784
Allowance for future rental
escalations 281 941 282 516 292 077
Unamortised upfront lease costs 19 220 27 728 18 101
Fair value of investment
properties 12 338 573 12 827 198 12 129 879
Listed property investment 924 160 942 712 940 364
Accounts receivable and
prepayments — 40 775 —
Derivative financial instruments 2 640 65 483 15 509
Current assets 381 622 328 661 373 709
Accounts receivable and
prepayments 299 606 222 419 301 312
Derivative financial instruments 75 863 32 998 16 848
Cash and cash equivalents 6 153 73 244 55 549
Investment properties held for
sale 917 085 170 000 835 000
Total assets 14 564 080 14 374 829 14 294 461
Equity and liabilities
Share capital and reserves 8 932 583 9 195 474 8 857 648
Treasury shares (200 207) — —
8 732 376 9 195 474 8 857 648
Non-current liabilities 3 523 136 3 845 191 3 969 252
Interest-bearing debt 3 519 077 3 801 905 3 944 172
Derivative financial instruments 4 059 43 286 25 080
Current liabilities 2 308 568 1 334 164 1 467 561
Short-term portion of interest-
bearing debt 1 858 532 957 000 1 034 000
Accounts payable 423 500 372 427 396 250
Derivative financial instruments 26 536 2 960 37 311
Taxation — 1 777 —
Total equity and liabilities 14 564 080 14 374 829 14 294 461
Net asset value per share (cents) 1 758,7 1 801,1 1 734,9
(excluding treasury shares)
Condensed consolidated statement of comprehensive income
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
R’000 31 Dec 2016 31 Dec 2015 30 Jun 2016
Revenue 878 314 878 818 1 796 951
Operating lease rental income and
tenant recoveries 890 839 882 934 1 780 516
Allowance for future rental
escalations (12 525) (4 116) 16 435
Income from listed property
investment 29 216 28 715 58 045
Property expenses (343 952) (331 530) (637 805)
Advisory fees (5 184) — —
Administration expenses (49 100) (39 863) (84 612)
Depreciation (6 055) (8 850) (14 840)
Operating profit 503 239 527 290 1 117 739
Net fair value adjustments 69 472 225 771 (83 347)
Net fair value gain/(loss) on revaluation
of investment properties 124 170 84 530 (201 028)
Change in fair value as a result of
straight-lining lease rentals 12 525 4 116 (16 435)
Change in fair value as a result of
amortising upfront lease costs 5 838 16 409 24 778
Change in fair value as a result of
property appreciation/(depreciation)
in value 105 807 64 005 (209 371)
Revaluation of derivative financial
instrument relating to share
appreciation rights scheme 6 287 (4 541) (25 753)
Unrealised (loss)/gain on fair
valuation of listed property
investment (60 985) 145 782 143 434
Profit before finance costs 572 711 753 061 1 034 392
Net finance costs (121 047) (138 187) (394 306)
Finance income 6 263 5 075 10 896
Interest received 6 263 5 075 10 896
Finance costs (127 310) (143 262) (405 202)
Interest paid and amortised borrowing
costs (214 306) (199 986) (411 767)
Interest capitalised to the cost of
developments 14 233 589 10 378
Unrealised surplus/(deficit) on
revaluation of interest-rate swaps 72 763 56 135 (3 813)
Profit before income tax charge 451 664 614 874 640 086
Income tax charge — — (6)
SA normal taxation — — (6)
Profit for the year 451 664 614 874 640 080
Attributable to Emira shareholders 451 664 614 874 640 080
451 664 614 874 640 080
Total comprehensive income
Attributable to Emira shareholders 451 664 614 874 640 080
451 664 614 874 640 080
Condensed consolidated statement of changes in equity
Revaluation
and
other
R’000 Shares reserves
Balance at 30 June 2015 3 795 509 4 808 755
REIT restructure costs (3 970) —
Acquisition of non-controlling interest in STREM — (5 262)
Total comprehensive income for the period — —
Transfer to fair value reserve — 261 381
Dividends paid — —
Balance at 31 December 2015 3 791 539 5 064 874
Balance at 1 July 2016 3 787 628 4 713 252
REIT restructure costs (554) —
Total comprehensive income for the period — —
Dividend received on treasury shares — —
Transfer to fair value reserve — 123 873
Dividend paid — —
Balance at 31 December 2016 3 787 074 4 837 125
Non-
Retained controlling
R’000 earnings interest Total
Balance at 30 June 2015 341 013 (5 262) 8 940 015
REIT restructure costs — — (3 970)
Acquisition of non-controlling interest
in STREM — 5 262 —
Total comprehensive income for the
period 614 874 — 614 874
Transfer to fair value reserve (261 381) — —
Dividends paid (355 445) — (355 445)
Balance at 31 December 2015 339 061 — 9 195 474
Balance at 1 July 2016 356 768 — 8 857 648
REIT restructure costs — — (554)
Total comprehensive income for the
period 451 664 — 451 664
Dividend received on treasury shares 10 618 — 10 618
Transfer to fair value reserve (123 873) — —
Dividend paid (386 793) — (386 793)
Balance at 31 December 2016 308 384 — 8 932 583
Reconciliation between earnings and headline earnings and distributable earnings
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
R’000 31 Dec 2016 31 Dec 2015 30 Jun 2016
Profit for the period attributable
to shareholders 451 664 614 874 640 080
Adjusted for:
Net fair value (gain)/loss on
revaluation of investment properties (124 170) (84 530) 201 028
Headline earnings 327 494 530 344 841 108
Adjusted for:
Allowance for future rental
escalations 12 525 4 116 (16 435)
Amortised upfront lease costs 5 838 16 409 24 778
Unrealised (surplus)/deficit on
revaluation of interest-rate swaps (72 763) (56 135) 3 813
Revaluation of share appreciation
rights scheme derivative financial
instrument (6 287) 4 541 25 753
Unrealised loss/(gain) on fair valuation
of listed property investment 60 985 (145 782) (143 434)
Charge/(credit) in respect of leave
pay provision and share
appreciation rights scheme 2 419 (3 088) (4 238)
Dividend received on treasury
shares 10 618 — —
Depreciation 5 909 8 716 14 563
Advisory fees 5 184 — —
SA normal taxation — — 6
Distributable earnings 351 922 359 121 745 914
Distribution per share
Interim (cents) 68,93 70,34 70,34
Final (cents) — — 75,76
68,93 70,34 146,10
Number of shares in issue at the end
of the period (including
treasury shares) 510 550 084 510 550 084 510 550 084
Treasury shares (14 016 201) — —
Number of shares in issue at the
end of the period (excluding
treasury shares) 496 533 883 510 550 084 510 550 084
Weighted average number of
shares in issue (excluding treasury
shares) 500 482 281 510 550 084 510 550 084
Earnings per share (cents) 90,25 120,44 125,37
The calculation of earnings per
share is based on net profit for
the period of R451,7m (2015: R614,9m),
divided by the weighted average
number of shares in issue during
the period of 500 482 281
(2015: 510 550 084).
Headline earnings per share (cents) 65,44 103,87 164,75
The calculation of headline earnings
per share is based on net profit for
the period, adjusted for non-trading
items, of R327,5m (2015: R530,3m),
divided by the weighted average
number of shares in issue during
the period of 500 482 281
(2015: 510 550 084).
Diluted headline earnings per share
(cents) 65,44 103,87 164,75
Condensed consolidated statement of cash flows
Unaudited Unaudited Audited
Six months Six months Year
ended ended ended
R’000 31 Dec 2016 31 Dec 2015 30 Jun 2016
Cash generated from operations 569 245 526 025 1 097 191
Finance income 6 263 5 075 10 896
Interest paid (214 306) (199 986) (411 767)
Taxation paid — — (1 783)
Dividend received on treasury
shares 10 618 — —
Dividends paid to shareholders (386 793) (355 445) (714 566)
Net cash utilised in operating
activities (14 973) (24 331) (20 029)
Acquisition of, and additions to,
investment properties and fixtures
and fittings (318 518) (450 210) (722 063)
Proceeds on disposal of investment
properties and fixtures and fittings 130 200 250 000 284 500
Acquisition of investment in listed
property fund (44 781) — —
Net cash utilised in investing
activities (233 099) (200 210) (437 563)
REIT restructure costs (554) — (7 881)
Capital restructure — (3 970) —
Treasury shares purchased (200 207) — —
Interest-bearing debt raised 1 497 000 2 543 906 2 620 327
Interest-bearing debt repaid (1 097 563) (2 295 362) (2 152 516)
Net cash generated from financing
activities 198 676 244 574 459 930
Net (decrease)/increase in cash and
cash equivalents (49 396) 20 033 2 338
Cash and cash equivalents at the
beginning of the period 55 549 53 211 53 211
Cash and cash equivalents at the end
of the period 6 153 73 244 55 549
Segmental information
R’000 Office Retail Industrial
Sectoral segments
Revenue 345 918 391 892 140 504
Revenue 355 420 392 797 142 622
Allowance for future rental escalations (9 502) (905) (2 118)
Segmental result
Operating profit 195 360 225 866 85 625
Investment properties 5 758 134 5 601 374 1 896 150
Geographical segments
Revenue
— Gauteng 242 710 276 926 92 495
— Western and Eastern Cape 62 328 46 102 27 152
— KwaZulu-Natal 29 124 49 072
— Free State 11 756 19 792 20 857
345 918 391 892 140 504
Investment properties
— Gauteng 4 346 734 4 071 124 1 272 300
— Western and Eastern Cape 941 150 597 050 367 400
— KwaZulu-Natal 407 950 707 800
— Free State 62 300 225 400 256 450
5 758 134 5 601 374 1 896 150
Administrative
R’000 and corporate Total
Sectoral segments
Revenue 878 314
Revenue 890 839
Allowance for future rental escalations (12 525)
Segmental result
Operating profit (3 612) 503 239
Investment properties 13 255 658
Geographical segments
Revenue
— Gauteng 612 131
— Western and Eastern Cape 135 582
— KwaZulu-Natal 78 196
— Free State 52 405
878 314
Investment properties
— Gauteng 9 690 158
— Western and Eastern Cape 1 905 600
— KwaZulu-Natal 1 115 750
— Free State 544 150
13 255 658
Measurements of fair value
1. Financial instruments
The financial assets and liabilities measured at fair value in the statement
of financial position are grouped into the fair value hierarchy as follows:
Level 1 Level 2 Level 3 Total
R’000 Dec 2016 Dec 2016 Dec 2016 Dec 2016
Group
Assets
Investments 924 160 — — 924 160
Derivative financial instruments — 75 193 3 310 78 503
Total 924 160 75 193 3 310 1 002 663
Liabilities
Derivative financial instruments — 30 595 — 30 595
Total — 30 595 — 30 595
Net fair value 924 160 44 598 3 310 972 068
Level 1 Level 2 Level 3 Total
R’000 Dec 2015 Dec 2015 Dec 2015 Dec 2015
Group
Assets
Investments 942 712 — — 942 712
Derivative financial instruments — 89 941 8 540 98 481
Total 942 712 89 941 8 540 1 041 193
Liabilities
Derivative financial instruments — 46 246 — 46 246
Total — 46 246 — 46 246
Net fair value 942 712 43 695 8 540 994 947
The methods and valuation techniques used for the purpose of measuring fair
value are unchanged compared to the previous reporting period.
Investments
This comprises shares held in a listed property company at fair value
which is determined by reference to quoted closing prices at the reporting date.
Derivative financial instruments
The fair values of the interest-rate swap contracts are determined using discounted
cash flow projections based on estimates of future cash flows, supported by the
terms of the relevant swap agreements and external evidence such as the ZAR 0-coupon
perfect-fit swap curve.
The fair values of the cross-currency interest-rate swap contracts are valued by
discounting the future cash flows using the basis swap curve of the respective
currencies at the dates when the cash flows will take place.
The AUD forward exchange contracts are valued by discounting the forward rates
applied at the period end to the open hedged positions.
The call option contracts relating to the employee share scheme are valued using a
Black Scholes option pricing model. The expected volatility of the unit price of the
call options was 28,9% and the risk-free discount rate used ranged between 7,4% and
7,5%. Management considers the key input in the valuation to be the spot price.
A 10% increase in the spot price results in an increase to the call options of R1,7m.
A 10% decrease in the spot price results in a decrease to the call options of R1,3m.
The call option contracts have been classified as Level 3. During the period R1,1m of
the option premiums relating to these contracts were amortised and a fair value gain
of R0,1m was recognised at 31 December 2016.
The forward contracts relating to the employee share scheme are valued using a Black
Scholes option pricing model. The risk-free discount rate used ranged between 7,4% and
7,9%. Management considers the key input in the valuation to be the spot price. A 10%
increase in the spot price results in a decrease to the forward contracts of R11,5m.
A 10% decrease in the spot price results in an increase to the forward contracts
of R11,5m.
2. Non-financial assets
The following table reflects the levels within the hierarchy of non- financial assets
measured at fair value at 31 December 2016:
2016 2015
R’000 Level 3 Level 3
Assets
Investment properties 12 338 573 12 827 198
Investment properties held for sale 917 085 170 000
Fair value measurement of investment properties
The fair value of commercial buildings is estimated using an income approach which
discounts the estimated rental income stream, net of projected operating costs, as
well as an exit value, using a discount rate derived from market yields. The estimated
rental stream takes into account current occupancy levels, estimates of future vacancy
levels, the terms of in-place leases and expectations of rentals from future leases
over the remaining economic life of the buildings.
The most significant inputs, all of which are unobservable, are the estimated rental
value, assumptions regarding vacancy levels, the discount rate and the reversionary
capitalisation rate. The estimated fair value increases if the estimated rentals
increase, vacancy levels decline or if discount rates (market yields) and reversionary
capitalisation rates decline. The overall valuations are sensitive to all four
assumptions. Management considers the range of reasonable possible alternative
assumptions to be greatest for reversionary capitalisation rates, rental values
and vacancy levels and that there is also an interrelationship between these inputs.
The inputs used in the valuations at 31 December 2016 were the following:
* The range of the reversionary capitalisation rates applied to the portfolio are
between 7,25% and 18,0% with the weighted average being 10,11% (2015: 10,20%).
* The discount rates applied range between 12,50% and 17,00% with the weighted
average being 14,96% (2015: 15,00%).
* Changes in discount rates and reversionary capitalisation rates attributable
to changes in market conditions can have a significant impact on property valuations.
A 25 basis points increase in the discount rate will decrease the value of investment
property by R254,9m (1,9%) and a 25 basis points decrease will increase the value of
investment property by R174,4m (1,3%). A 25 basis points decrease in the reversionary
capitalisation rate will increase the value of investment property by R141,1m (1,1%)
and a 25 basis points increase will decrease the value of investment property by
R136,2m (1,0%).
Fair values are estimated twice a year by Emira’s internal registered valuer, whereafter
they are reviewed by the executive directors and approved by the Board of Directors.
One third of the portfolio is valued externally each year on a rolling basis.
Fair value measurement of investment properties held for sale
The fair value of investment properties held for sale is based on the expected sale price.
Directors: G van Zyl (Chairman)*, GM Jennett (CEO), MS Aitken*, GS Booyens (CFO),
BH Kent*, V Mahlangu*, NE Makiwane*, W McCurrie*, V Nkonyeni*, U van Biljon (COO)
*Independent Non-executive Director
Registered address: Optimum House, Epsom Downs Office Park, 13 Sloane Street, Bryanston, 2191
Sponsor: Rand Merchant Bank (a division of FirstRand Bank Limited)
Transfer Secretaries: Computershare Investor Services (Pty) Ltd, 70 Marshall Street,
Johannesburg, 2001
www.emira.co.za
Date: 15/02/2017 11:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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