Wrap Text
Summarised audited group financial statements for the eighteen months ended 31 December 2016
ROCKCASTLE GLOBAL REAL ESTATE COMPANY LIMITED
INCORPORATED IN THE REPUBLIC OF MAURITIUS REG NO 108869
C1/GBL ISIN MU0364N00003
PRIMARY LISTING SEM (SEM CODE ROCK.N0000) AND JSE (JSE CODE ROC)
("ROCKCASTLE" OR "THE COMPANY" OR "THE GROUP")
SUMMARISED AUDITED CONSOLIDATED FINANCIAL STATEMENTS
for the eighteen months ended 31 December 2016
DIRECTORS' COMMENTARY
1 STRUCTURE AND LISTING
Rockcastle is a Category One Global Business Licence Company registered in Mauritius. The Company has primary listings on
both the Stock Exchange of Mauritius Ltd ("SEM") and the JSE Limited ("JSE"). It is internally asset managed and invests
in dominant retail centres in Central and Eastern Europe as well as in listed real estate securities globally.
Shareholders were provided with the option to receive their June 2016 interim dividend in shares rather than cash. Over
77% of shareholders elected to take the scrip dividend resulting in the issue of 14 024 700 new shares.
2 CHANGE IN FINANCIAL YEAR-END
Rockcastle changed its financial year-end from 30 June to 31 December to better align the Company with the market in which
it operates. The change in year-end will not affect the distribution cycle which will continue to be bi-annually in June
and December. Shareholders are referred to the announcement released on 21 December 2015 for further information.
3 FINAL DISTRIBUTION AND OPTION TO RECEIVE A SCRIP DIVIDEND
The Board of Directors declares a distribution of 5.189 USD cents per share for the period 1 July 2016 to 31 December
2016, which, combined with 4.782 USD cents per share for the period 1 January 2016 to 30 June 2016 and 4.631 USD cents per
share for the period 1 July 2015 to 31 December 2015 results in an aggregate distribution of 14.602 USD cents per share
for the 18 month period ended 31 December 2016. This final distribution represents an increase of 12,1% compared to the
six month period ending 31 December 2015 and is within guidance. Shareholders can elect to receive distribution either in
cash or as an issue of fully-paid shares based on a ratio between distribution declared and the reference price. The
reference price will be calculated using a maximum 7% discount to the five-day volume-weighted average traded price, less
the distribution of 5.189 USD cents per share, of Rockcastle shares on the Johannesburg Stock Exchange (JSE), no later
than 31 March 2017.
A circular containing full details of the election being offered to shareholders, accompanied by announcements on the
Stock Exchange News Service (SENS) of the JSE and the Stock Exchange of Mauritius (SEM), will be issued in due course.
4 DIRECT PROPERTY
Central and Eastern Europe
During the financial period the Company concluded USD 1.08 billion of direct property acquisitions in Poland and the Czech
Republic. The portfolio of retail centres represents 52% of investment assets (based on gross listed security exposure).
Total capital invested in Central and Eastern Europe now amounts to USD 1.29 billion and is expected to increase further
in the 2017 financial year.
Rockcastle opened its first two new developments in Poland, Galeria Tomaszow and Galeria Wolomin, within budget and on
schedule during October 2016. The two shopping centres represent an increase of 44 000m2 GLA in the retail portfolio. Both
centres are trading well and following strong tenant demand, the development of a retail park adjacent to Galeria Wolomin
has been approved by the board and is currently in construction. Tenants include JYSK, Media Expert, Abra Meble, Komfort,
Maxi Bazar and Opoczno. A new free-standing Leroy Merlin outlet, currently being developed on an adjacent site not owned
by Rockcastle, will further strengthen the node and is scheduled to be opened in 2017.
Bonarka City Centre, the dominant regional mall in Krakow, was acquired during September 2016. Krakow is the second
largest city in Poland. Despite a modest decline in footfall due to extensive road reconstruction around its access
routes, the mall recorded an impressive 8,85% increase in turnover. The centre was passively managed by a private equity
owner and management believes that there is considerable potential to increase income from this investment.
During December 2016 the Company concluded its acquisition of Galeria Warminska in Olsztyn, Poland. This 42 711m2 GLA
regional mall offering 150 stores is the leading retail destination in the region. The mall is performing well with
footfall and sales growing by 21,5% and 15% respectively.
The Focus Mall centres in Zielona Góra and Piotrków Trybunalski were acquired in November 2016. Focus Mall Zielona Góra is
overtrading and strong tenant demand supports a substantial extension to this mall. As a result, additional rights have
been applied for to extend the centre by 15 000m2 and construction is planned for the first half of 2018.
With the conclusion of these developments and acquisitions the Group's retail portfolio has an approximate gross lettable
area of 450 000m2 and comprises 10 shopping centres in Poland and one in the Czech Republic.
During the period the Company's investment in its retail asset management and development resources has positioned it
strongly for future growth. Redevelopments of over EUR 100 million are planned for the upcoming financial year. These
include Solaris in Opole and Platan in Zabrze that are being extended to accommodate or extend under-sized major
multinational tenants.
Strong competition exists in the dominant regional mall market with European competitors with low costs of capital and
long-term investment mandates being active in the region. This strong competition will result in a continued reduction in
capitalisation rates for prime assets in the region. A number of portfolios of secondary assets are being offered by
public tender. Rockcastle is not pursuing these opportunities but instead targets specific assets on an off-market basis.
Unwavering discipline towards property fundamentals will ensure that the portfolio is well positioned for long-term
growth.
The Company's strategy of selling listed investments and re-investing the proceeds in direct properties and developments
will continue during 2017. It is anticipated that direct property will make up approximately 90% of Rockcastle's assets by
December 2017. Several large strategic acquisitions are currently under negotiation or evaluation.
5 LISTED SECURITY PORTFOLIO
The past year has seen significant volatility because of geopolitical, macro-economic and regulatory changes in the US, UK
and Europe. Rockcastle's NAV per share increased from USD 1.56 at December 2015 to USD 1.65 at December 2016. There was a
modest decrease in the NAV from USD 1.70 at June 2016.
The geographic spread and composition of the portfolio have changed with the UK and Europe now representing a larger share
than the US and the retail sector now making up 75% of the total listed security exposure.
Direct property and listed security portfolio composition
Gross asset exposure by jurisdiction
Europe 58,9%
United States of America 21,3%
United Kingdom 18,1%
Australia 1,2%
Singapore 0,5%
6 CAPITAL STRUCTURE AND HEDGING
In addition to fully-funded positions, Rockcastle utilises equity derivatives to obtain exposure to listed real estate
companies. During the period revised prime brokerage agreements were signed with improved terms. Rockcastle's listed
security investments disclosed in its statement of financial position represent only fully-funded positions.
The equity derivative collateral of USD 244.5 million included in current assets provided the Group with exposure to
investments of USD 1 126.6 million. The income from derivatives and listed securities of USD 90.3 million includes
interest of USD 20.87 million on the implied gross interest-bearing borrowings of USD 551.1 million. Positions disclosed
under listed security investments of USD 383.9 million include physical positions held at 31 December 2016 as well as
derivative positions that are 100% collateralised in cash.
Interest rate swaps are used to hedge the interest rate risk relating to listed security investments. The principal
counter parties in all derivative transactions are Morgan Stanley and BoA Merrill Lynch. The group does not hedge the
currency relating to its capital positions but 95% of the distributable income to June 2017 was hedged. No further hedges
relating to distributable income were entered into beyond this point due to the proposed merger with New Europe Property
Investments PLC ("NEPI") that has the Euro as its reporting currency. Rockcastle's loan-to-value ratio was 37.7% as at
December 2016 (This ratio includes the implied gearing on the equity swap positions as detailed above).
Rockcastle successfully extended its debt maturity profile and signed more than USD 405 million of secured facilities at
attractive rates. Rockcastle has now established solid partnerships with most of the major banks active in the region
which is evidenced by the diverse counterparty exposure and favourable debt facility terms. The Company's weighted average
cost of long-term debt is now 1.75% and is fully hedged. The company is well advanced in negotiations to secure an
additional EUR 108 million in secured funding at a blended all-in rate below 1.8%. These proceeds will be drawn down in
the first quarter of 2017 and used to further advance the direct property strategy.
The debt maturity profile on long-term borrowings is listed below:
Debt maturity profile (financial year) Equivalent amount USD'000
Dec 2017 -
Dec 2018 13 100
Dec 2019 -
Dec 2020 235 332
Dec 2021 171 063
Dec 2022 and beyond 5 735
425 230
Long-term debt by counterparty
ING 42,0%
Berlin Hyp 20,7%
Deutsche Pfandbriefbank 13,0%
Helaba 13,0%
Nationale-Nederlanden 8,3%
Standard Bank 3,0%
7 SUMMARY OF FINANCIAL PERFORMANCE
Dec Jun Dec Jun
2016 2016 2015 2015
Dividend/ distribution
per share (USD cents) 5.189 4.782 4.631 4.42
Shares in issue 945 502 019 930 994 319 912 540 104 847 862 018
Net asset value per
share (USD) 1.65 1.70 1.56 1.46
Loan to value ratio* 37.7% 33.9% 41.6% 46.9%
* The loan to value ratio is calculated by dividing gross interest-bearing borrowings - cash by investment property and
related intangibles (excluding goodwill) + listed securities + loans. The calculation furthermore includes the equity
derivative positions on a gross basis.
8 OUTLOOK
The Board expects growth in dividends per share for the 2017 financial year to be approximately 21%. This guidance is
based on the assumptions that a stable macro-economic environment prevails and no major corporate failures occur.
This forecast has not been audited or reviewed by Rockcastle's auditors and are the responsibility of the Board.
9 MERGER OF NEPI AND ROCKCASTLE
During the fourth quarter of 2016, NEPI and Rockcastle, issued joint cautionary announcements regarding a potential
transaction. On 14 December 2016, a framework agreement was announced (Framework Agreement), pursuant to which their
respective businesses would be merged into an entity newly incorporated in the Isle of Man, NEPI Rockcastle plc (NewCo).
This is expected to be implemented with an effective share swap ratio of 4.5 Rockcastle shares for one NEPI share (the
Swap Ratio).
In accordance with the Framework Agreement, NEPI and Rockcastle will transfer all assets and liabilities, including their
subsidiaries, effectively transferring their entire businesses to NewCo. In exchange, NewCo will issue ordinary shares
(NewCo Shares) to NEPI and Rockcastle, in line with the Swap Ratio.
NewCo is expected to benefit from enhanced liquidity, and be the largest listed real estate company in Central and Eastern
Europe (CEE). NewCo Shares are expected to be listed on the Main Board of the JSE and Euronext Amsterdam, as well as other
stock exchanges NEPI and Rockcastle agree upon. The transaction will integrate two complementary management teams,
unlocking strategic synergies and creating additional value for shareholders.
Considering the envisaged merger, including anticipated improvements in portfolio size and diversification, Standard &
Poor's Global Ratings (S&P) revised NEPI's outlook from 'Stable' to 'Positive', and reaffirmed the long-term 'BBB'
corporate credit rating. Moody's Investors Service (Moody's) retained NEPI's Baa3 Stable, but considers the merger credit
positive.
These transactions will be implemented following the fulfilment, or waiver, of several conditions precedent, including
approval by Boards of Directors and shareholders, as well as all relevant authorities, on or before 30 June 2017.
A circular detailing this transaction, accompanied by announcements on the relevant stock exchanges, is expected to be
issued by 30 April 2017.
By order of the
Intercontinental Trust Limited
Mauritius
15 February 2017
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Audited as at Audited as at
31 Dec 2016 30 Jun 2015
ASSETS USD'000 USD'000
Non-current assets 1 739 084 2 295 139
Investment property 1 258 786 58 708
Straight-lining of rental revenue adjustment 199 415
Investment property under development 5 611 7 436
Intangible assets 7 341 -
Goodwill 17 433 -
Listed security investments 383 994 2 161 724
Property, plant and equipment 499 -
Investment in and loans to joint ventures 37 000 41 727
Rockcastle management incentive loans 26 968 25 129
Deferred tax assets 1 253 -
Current assets 340 218 31 366
Investment income receivable 2 810 7 589
Cash and cash equivalents 24 090 3 035
Trade and other receivables 50 376 561
Equity derivative collateral 244 524 -
Financial assets at fair value through
profit or loss 18 004 14 849
Income tax receivable 414 -
Loans to development partners - 5 332
Total assets 2 079 302 2 326 505
EQUITY AND LIABILITIES
Total equity attributable to equity holders 1 556 106 1 241 128
Stated capital 1 383 676 1 180 670
Retained income 371 467 183 601
Non-distributable reserves (168 723) (123 947)
Currency translation reserve (30 314) 804
Non-controlling interest 532 -
Total equity 1 556 638 1 241 128
Total liabilities 522 664 1 085 377
Non-current liabilities 450 552 16 614
Interest-bearing borrowings 425 230 16 614
Deferred tax liabilities 25 322 -
Current liabilities 72 112 1 068 763
Trade and other payables 63 872 2 991
Interest-bearing borrowings 1 538 1 063 777
Financial liabilities at fair
value through profit or loss 6 633 1 975
Income tax payable 69 20
Total equity and liabilities 2 079 302 2 326 505
Total number of shares in issue 945 502 019 847 862 018
Net asset value per share (USD) 1,65 1,46
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited for the Audited for the
18 months ended 12 months ended
31 Dec 2016 30 Jun 2015
USD'000 USD'000
Net rental and related revenue 36 942 1 992
Recoveries and contractual rental revenue 49 417 2 240
Straight-lining of rental revenue adjustment 199 415
Rental revenue 49 616 2 655
Property operating expenses (12 674) (663)
Income from derivatives and
listed securities 90 254 77 931
Income from joint ventures 8 263 5 892
Gain on acquisition of subsidiary 1 731 -
Fair value gain on investment property,
listed security investments and derivatives 134 200 14 637
Adjustment resulting from straight-lining
of rental revenue (199) (415)
Fair value gain on investment property 43 228 -
Fair value loss of financial instruments at
fair value through profit or loss (19 407) (6 090)
Fair value gain on listed
security investments 110 578 21 142
Foreign exchange gain/(loss) 12 169 (77 935)
Operating expenses (5 974) (2 994)
Profit before net finance costs 277 585 19 523
Net finance costs (2 656) (9 371)
Finance income 3 359 2 363
Interest income 3 359 2 363
Finance costs (6 015) (11 734)
Interest on borrowings (7 871) (11 913)
Capitalised interest 1 856 179
Profit before income tax expense 274 929 10 152
Income tax expense (6 838) (20)
Profit for the period 268 091 10 132
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Audited for the Audited for the
18 months ended 12 months ended
31 Dec 2016 30 Jun 2015
USD'000 USD'000
OTHER COMPREHENSIVE INCOME NET OF TAX
Items that may be reclassified subsequently to profit or loss
Exchange differences on translation of foreign operations
- equity holders of the Company (32 775) 804
Exchange differences on translation of foreign operations
- non-controlling interest (121) -
Exchange differences on joint ventures
on sale of investments 1 657 -
(31 239) 804
Total comprehensive income for the period 236 852 10 936
Profit for the period attributable to:
Equity holders of the Company 267 449 10 132
Non-controlling interest 642 -
268 091 10 132
Total comprehensive income for the period attributable to:
Equity holders of the Company 236 331 10 936
Non-controlling interest 521 -
236 852 10 936
Weighted average number of
shares in issue 916 429 393 772 800 853
Basic earnings per share (USD cents) 29,18 1,31
Headline earnings per share (USD cents) 23,77 0,69
Basic profit per share and headline profit per share are based on the weighted average of 916 429 393 shares in issue for
the period ended 31 December 2016 (year ended 30 June 2015: 772 800 853 shares).
RECONCILIATION OF PROFIT FOR THE PERIOD TO HEADLINE EARNINGS
Audited for the Audited for the
18 months ended 12 months ended
31 Dec 2016 30 Jun 2015
USD'000 USD'000
Basic earnings - profit for the period
attributable to equity holders 267 449 10 132
Adjusted for:
- fair value gain on investment property
of joint ventures (5 360) (4 814)
- adjustment on sale
of interest in joint ventures 706 -
- fair value gain on investment property (43 228) -
- gain on acquisition of subsidiary (1 731) -
Headline earnings 217 836 5 318
Headline earnings per share (USD cents) 23,77 0,69
Rockcastle has no dilutionary instruments in issue.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Non- Non- Currency
Stated Retained controlling distributable translation
capital income interest reserves reserve Total
USD'000 USD'000 USD'000 USD'000 USD'000 USD'000
Balance at
30 June 2014
871 154 131 714 (19 684) - 983 184
Issue of
shares 277 242 277 242
Dividends
declared 32 274 (62 508) (30 234)
Exchange differences
on translation of foreign
operations 804 804
Profit for the year 10 132 10 132
Transfer to nondistributable
reserves
104 263 (104 263) -
Balance at
30 June 2015
1 180 670 183 601 - (123 947) 804 1 241 128
Shares issued and cum
distribution portion on
issue during the period
92 641 3 378 - - 96 019
Dividends declared
110 365 (126 080) (15 715)
Exchange differences
on translation of foreign
operations (121) (32 775) (32 896)
Reclassification of
exchange differences on
joint ventures on sale of
investments (1 657) 1 657 -
Profit for the period
267 449 642 268 091
Equity contributed by
minorities 11 11
Transfer to non-
distributable
reserves 44 776 (44 776) -
Balance at
31 December 2016
1 383 676 371 467 532 (168 723) (30 314) 1 556 638
CONSOLIDATED STATEMENT OF CASH FLOWS
Audited for the Audited for the
18 months ended 12 months ended
31 Dec 2016 30 Jun 2015
USD'000 USD'000
Cash inflow from operating activities 127 142 53 759
Cash outflow from investing activities (347 131) (751 235)
Cash inflow from financing activities 241 044 700 025
Increase in cash and cash equivalents 21 055 2 549
Cash and cash equivalents at beginning of period 3 035 486
Cash and cash equivalents at end of period 24 090 3 035
Current accounts 24 090 3 035
NOTES
1 PREPARATION, ACCOUNTING POLICIES AND AUDIT OPINION
The summarised audited consolidated financial statements for the 18 months ended 31 December 2016 have been prepared in
accordance with the measurement and recognition requirements of International Financial Reporting Standards ("IFRS"), the
requirements of IAS 34: Interim Financial Reporting, the JSE Listings Requirements, the SEM Listing Rules and the
requirements of the Mauritian Companies Act 2001.
The Group is required to publish financial results for the 18 months ended 31 December 2016 in terms of the Listing Rule
12.14 of the SEM. This report was compiled under the supervision of Nick Matulovich CA(SA), the chief financial officer.
This communiqué is issued pursuant to SEM Listing Rule 12.14 and section 88 of the Mauritian Securities Act 2005. The
board accepts full responsibility for the accuracy of the information contained in these summarised audited consolidated
financial statements. The directors are not aware of any matters or circumstances arising subsequent to the period ended
31 December 2016 that require any additional disclosure or adjustment to the financial statements. These summarised
audited consolidated financial statements were approved by the board on 15 February 2017.
BDO & Co have issued their unmodified audit opinion on the Group's audited financial statements for the period ended 31
December 2016. The summarised audited consolidated financial statements have been derived from the Group financial
statements (but is not itself audited) and are, in all material respects, consistent with the Group financial statements.
A copy of their audit report is available for inspection at Rockcastle's registered address.
Copies of the summarised audited consolidated financial statements and the statement of direct and indirect interests of
each officer of the Company, pursuant to rule 8(2)(m) of the Securities (Disclosure Obligations of Reporting Issuers)
Rules 2007, are available free of charge, upon request at Rockcastle's registered address.
Contact person: Mrs Smitha Algoo
2 SEGMENTAL ANALYSIS
Audited for the Audited for the
18 months ended 12 months ended
31 Dec 2016 30 Jun 2015
USD'000 USD'000
Profit before income tax expense
Direct property 117 683 7 080
Listed securities 162 170 5 845
Corporate (4 924) (2 773)
274 929 10 152
Audited Audited
as at as at
31 Dec 2016 30 Jun 2015
USD'000 USD'000
Total assets
Direct property 1 399 644 109 703
Listed securities 649 821 2 191 633
Corporate 29 837 25 169
2 079 302 2 326 505
Unaudited for the Unaudited for the
18 months ended 12 months ended
31 Dec 2016 30 Jun 2015
USD'000 USD'000
Reconciliation of profit for the period
to dividend declared
Profit for the period 267 449 10 132
Foreign exchange (gain)/loss (12 169) 77 935
Fair value loss on bond shorts - 11 421
Fair value gain on listed
security investments (110 578) (21 142)
Unrealised fair value loss of financial instruments
at fair value through profit or loss
20 969 (5 331)
Fair value gain on investment property (43 228) -
Income from derivatives and listed securities (90 254) (77 931)
Gain on acquisition of subsidiary (1 731) -
Accrued income from listed
securities investments 102 118 76 962
Adjustments related to joint ventures
Fair value adjustments of investment property (6 066) (4 729)
Adjustment on sale of interest in joint ventures 706 -
Shares issued cum dividend 1 977 3 102
Deferred tax expense 6 649 -
Distributable earnings for the period 135 842 70 419
Less:
Interim dividend declared (42 260) (32 943)
Interim dividend declared (44 520) -
Final dividend declared (49 062) (37 476)
- -
Directors
Mark Olivier (chairman); Spiro Noussis (CEO)*; Nick Matulovich*; Barry Stuhler; Rory Kirk; Andre van der Veer; Yan Ng;
Karen Bodenstein*: Marek Noetzel* (*executive director)
Company secretary
Intercontinental Trust Limited
Registered address
c/o Intercontinental Trust, Level 3, Alexander House, 35 Cybercity, Ebene, 72201, Mauritius
Transfer secretary in South Africa
Link Market Services South Africa Proprietary Limited
JSE sponsor
Java Capital
SEM authorised representative and sponsor
Perigeum Capital Ltd
www.rockcastleglobal.com
Date: 15/02/2017 04:35:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
