Wrap Text
Condensed unaudited consolidated interim financial results for the six months ended 31 December 2016
Attacq Limited
(Incorporated in the Republic of South Africa)
(Registration number 1997/000543/06)
JSE share code: ATT ISIN: ZAE000177218
("Attacq" or "the Company" or "the Group")
CONDENSED UNAUDITED CONSOLIDATED INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2016
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited Unaudited Audited
31 December 31 December 30 June
2016 2015 2016
R'000 R'000 R'000
Assets
Non-current assets
Property, plant and equipment 48 078 10 620 33 925
Investment properties 18 880 950 17 521 479 18 043 192
Per valuation 19 600 881 18 077 984 18 644 041
Straight-line lease debtor (719 931) (556 505) (600 849)
Straight-line lease debtor 719 931 556 505 600 849
Deferred initial lease expenditure 8 327 7 658 6 539
Intangible assets 302 617 334 540 312 599
Goodwill 67 774 67 774 67 774
Investment in associates 3 524 896 3 091 557 3 126 328
Other financial assets 253 163 327 716 222 651
Other investments 191 866 440 280 408 339
Deferred tax assets 16 562 21 761 24 627
Total non-current assets 24 014 164 22 379 890 22 846 823
Current assets
Taxation receivable 2 529 - 2 411
Trade and other receivables 221 154 280 178 290 579
Deferred initial lease expenditure 606 - -
Loans to associates 1 755 028 2 386 559 2 302 472
Other financial assets 186 824 1 229 461 100 266
Cash and cash equivalents 211 554 303 055 437 281
Total current assets 2 377 695 4 199 253 3 133 009
Non-current assets held for sale 733 498 536 572 1 649 845
Total assets 27 125 357 27 115 715 27 629 677
Equity and liabilities
Equity
Stated capital 6 454 839 6 442 805 6 442 805
Distributable reserves 5 964 563 5 811 556 5 891 513
Available-for-sale reserve 781 464 900 574 847 499
Share-based payment reserve 114 938 97 943 100 453
Foreign currency translation reserve (7 722) 433 017 318 734
Acquisition of non-controlling interests reserve (116 483) (129 483) (116 483)
Equity attributable to owners of the holding company 13 191 599 13 556 412 13 484 521
Non-controlling interests (16 673) 41 614 (13 201)
Total equity 13 174 926 13 598 026 13 471 320
Non-current liabilities
Long-term borrowings 10 787 800 9 565 069 10 445 221
Deferred tax liabilities 1 829 870 1 697 902 1 892 145
Other financial liabilities 65 260 1 772 50 705
Cash-settled share-based payments 1 268 - 787
Provisions for liabilities relating to associates - 1 079 -
Finance lease obligation 80 401 73 864 77 745
Total non-current liabilities 12 764 599 11 339 686 12 466 603
Current liabilities
Other financial liabilities 121 128 299 113 109 400
Finance lease obligation - 1 304 -
Loans from associates 4 150 323 572 2 880
Taxation payable 9 458 1 334 2 260
Cash-settled share-based payments 1 589 - 5 172
Trade and other payables 393 073 370 105 557 662
Provisions 2 888 2 121 2 081
Short-term portion of long-term borrowings 304 647 1 066 304 265 276
Total current liabilities 836 933 2 063 853 944 731
Liabilities directly associated with non-current assets held for sale 348 899 114 150 747 023
Total liabilities 13 950 431 13 517 689 14 158 357
Total equity and liabilities 27 125 357 27 115 715 27 629 677
The following information does not form part of the statement of financial position:
Net asset value per share (cents) 1 877 1 933 1 923
Net asset value per share adjusted for deferred tax (cents) 2 135 2 172 2 189
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Unaudited Unaudited Audited
31 December 31 December 30 June
2016 2015 2016
R'000 R'000 R'000
Gross revenue 1 037 305 769 456 1 621 018
Rental income 916 718 689 671 1 472 656
Straight-line lease income adjustment 120 587 79 785 148 362
Property expenses (368 757) (238 427) (502 745)
Net rental income 668 548 531 029 1 118 273
Other income 34 411 569 871 448 579
Operating and other expenses (531 509) (121 744) (347 315)
Operating profit 171 450 979 156 1 219 537
Amortisation of intangible asset (9 982) (9 982) (19 964)
Fair value adjustments 246 957 635 703 1 041 553
Investment properties 274 130 426 805 1 074 224
Other financial assets and liabilities (28 524) 229 568 (32 452)
Other investments 1 351 (20 670) (219)
Gain on available-for-sale financial assets - - 507 524
Share of profit of associates 45 223 87 286 35 098
Investment income 106 775 74 191 235 785
Finance costs (495 526) (403 895) (839 975)
Profit before taxation 64 897 1 362 459 2 179 558
Income tax expense 4 681 (332 125) (794 559)
Profit for the period / year 69 578 1 030 334 1 384 999
Attributable to:
Owners of the holding company 73 050 995 972 1 387 828
Non-controlling interests (3 472) 34 362 (2 829)
Other comprehensive (loss) income
Items that will be reclassified subsequently to profit and loss
(Loss) gain on available-for-sale financial assets (79 785) 153 734 315 813
Taxation relating to components of other comprehensive income 13 750 64 261 93 720
Realisation of available-for-sale financial assets - - (507 524)
Other comprehensive (loss) income for the period / year net of taxation (66 035) 217 995 (97 991)
Total comprehensive income for the period / year 3 543 1 248 329 1 287 008
Attributable to:
Owners of the holding company 7 015 1 213 967 1 289 837
Non-controlling interests (3 472) 34 362 (2 829)
Earnings per share
Basic (cents) 10.4 142.0 197.9
Diluted (cents) 10.3 141.6 196.7
RECONCILIATION BETWEEN EARNINGS AND HEADLINE EARNINGS
Unaudited Unaudited Audited
31 December 31 December 30 June
2016 2015 2016
R'000 R'000 R'000
Profit for the period / year 73 050 995 972 1 387 828
Headline earnings adjustments (33 640) (617 789) (1 303 490)
Profit on disposal of associates (190) (145 019) (116 734)
Profit on disposal of other investments - (1 994) (30 862)
(Profit) loss on disposal of investment property (25 282) 9 364 (836)
Impairment of associates and other investments 268 850 43 706 53 880
Realisation of other comprehensive income - - (507 524)
Impairment of intangible asset - - 11 960
Fair value adjustments (246 957) (635 703) (1 041 553)
Share of profit of associates (45 223) (87 286) (35 099)
Loss on disposal of subsidiary - - 6 033
Tax effect of adjustments 9 335 173 811 369 517
Non-controlling interests' share 5 827 25 332 (12 272)
Headline earnings 39 410 378 183 84 338
Number of shares in issue* 702 665 224 701 395 224 701 395 224
Weighted average number of shares in issue* 702 000 822 701 382 181 701 388 667
Diluted weighted average number of shares in issue* 707 306 634 703 265 640 705 418 136
Headline earnings per share
Basic (cents) 5.61 53.9 12.0
Diluted (cents) 5.57 53.8 12.0
* Adjusted for 46 427 553 treasury shares (December 2015 and June 2016: 46 427 553)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
31 December 31 December 30 June
2016 2015 2016
R'000 R'000 R'000
Cash flow generated from (utilised in) operating activities 58 644 (108) 140 551
Cash generated from operations 396 257 307 303 837 693
Investment income 34 436 118 641 336 949
Finance costs (344 382) (403 895) (839 975)
Taxation paid (27 667) (22 157) (194 116)
Cash flow generated from (utilised in) investing activities 136 607 (1 923 647) (1 166 362)
Cash flow (utilised in) generated from financing activities (420 978) 1 499 014 735 296
Total cash movement for the period / year (225 727) (424 741) (290 515)
Cash at the beginning of the period / year 437 281 727 796 727 796
Total cash at the end of the period / year 211 554 303 055 437 281
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Stated Distributable Available- Share-based Foreign Acquisition of Equity Non-controlling Total
capital reserves for-sale payment currency non-controlling attributable interests equity
R'000 R'000 reserve reserve translation interests to owners of R'000 R'000
R'000 R'000 reserve reserve the holding
R'000 R'000 company
R'000
Audited balance at 1 July 2015 6 439 419 4 815 584 682 579 90 359 45 740 (116 483) 11 957 198 7 252 11 964 450
Total comprehensive income - 995 972 217 995 - - - 1 213 967 34 362 1 248 329
Profit for the period - 995 972 - - - - 995 972 34 362 1 030 334
Other comprehensive income - - 217 995 - - - 217 995 - 217 995
Foreign currency translation reserve - - - - 387 277 - 387 277 - 387 277
Issue of shares 3 386 - - - - - 3 386 - 3 386
Recognition of non-controlling interests reserve - - - - - (13 000) (13 000) - (13 000)
Recognition of share-based payments reserve - - - 7 584 - - 7 584 - 7 584
Unaudited balance at 31 December 2015 6 442 805 5 811 556 900 574 97 943 433 017 (129 483) 13 556 412 41 614 13 598 026
Total comprehensive income - 391 856 (315 986) - - - 75 870 (37 191) 38 679
Profit for the period - 391 856 - - - - 391 856 (37 191) 354 665
Other comprehensive income - - (315 986) - - - (315 986) - (315 986)
Foreign currency translation reserve - - - - 44 029 - 44 029 - 44 029
Derecognition reserves and non-controlling interests due to sale of subsidiaries - (311 899) 262 911 - (158 312) 13 000 (194 300) (17 624) (211 924)
Modification of equity-settled share-based payments - - - (9 035) - - (9 035) - (9 035)
Recognition of share-based payment reserve - - - 11 545 - - 11 545 - 11 545
Audited balance at 30 June 2016 6 442 805 5 891 513 847 499 100 453 318 734 (116 483) 13 484 521 (13 201) 13 471 320
Total comprehensive income - 73 050 (66 035) - - - 7 015 (3 472) 3 543
Profit for the period - 73 050 - - - - 73 050 (3 472) 69 578
Other comprehensive income - - (66 035) - - - (66 035) - (66 035)
Foreign currency translation reserve - - - - (326 456) - (326 456) - (326 456)
Issue of shares 12 034 - - - - - 12 034 - 12 034
Recognition of share-based payment reserve - - - 14 485 - - 14 485 - 14 485
Unaudited balance at 31 December 2016 6 454 839 5 964 563 781 464 114 938 (7 722) (116 483) 13 191 599 (16 673) 13 174 926
CONDENSED SEGMENTAL ANALYSIS
Business segment Notes Unaudited 31 December 2016 Unaudited 31 December 2015 Audited 30 June 2016
Revenue Net profit Investment Net asset Revenue Net profit Investment Net asset Revenue Net profit Investment Net asset
R'000 (loss) properties value R'000 (loss) properties value R'000 (loss) properties value
R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000 R'000
Brooklyn Bridge Office Park 1 36 757 9 912 615 657 311 606 38 561 20 942 624 768 299 206 80 683 4 472 636 999 308 217
Great Westerford* 2 - - - - 19 405 14 385 284 822 273 382 33 904 10 792 - -
Lynnwood Bridge - Offices 54 673 20 097 846 436 484 809 42 201 29 418 823 854 464 215 100 565 39 666 825 629 483 448
Aurecon Building 49 641 17 780 671 575 308 577 49 464 16 699 650 641 254 639 98 556 26 705 662 560 281 201
Newtown Junction - Offices 40 403 12 768 637 210 117 842 45 741 (8 961) 639 511 138 816 68 852 (1 024) 626 693 196 487
Majestic Offices 9 592 1 175 134 108 31 191 11 233 (7 038) 124 907 23 272 21 136 (1 652) 132 510 29 687
PwC Sunninghill 22 797 (66 702) 287 903 (96 413) 25 518 (1 080) 346 041 (48 001) 45 533 (2 154) 345 199 (44 001)
Waterfall - Altech 1 3 228 1 524 44 746 31 957 (1 487) 2 674 48 500 24 192 6 431 4 546 43 944 29 991
Waterfall - Cell C Campus 65 388 8 273 776 582 450 938 71 120 22 231 761 717 390 691 135 372 65 671 794 486 396 015
Waterfall - Group Five 36 923 17 241 573 317 264 713 30 725 1 726 536 577 198 566 71 570 36 430 562 318 238 546
Waterfall - Maxwell Office Park - Phase I, II and III* 29 109 17 334 510 455 279 664 18 550 19 545 381 774 190 127 43 170 37 334 486 240 290 359
Waterfall - Novartis 13 847 3 766 212 770 95 583 12 628 3 894 200 461 55 594 25 247 9 443 207 963 63 930
Waterfall - Allandale Building 9 945 21 594 384 201 163 767 - - - - - - - -
Office and mixed-use 372 303 64 762 5 694 960 2 444 234 363 659 114 435 5 423 573 2 264 699 731 019 230 229 5 324 541 2 273 880
Glenfair Boulevard Shopping Centre 27 651 17 923 436 698 239 378 27 506 22 166 404 462 203 604 56 849 27 256 419 044 222 217
Lynnwood Bridge - Retail 24 376 11 270 335 495 193 897 28 300 3 917 311 350 165 785 44 858 21 616 335 267 175 244
Newtown Junction - Retail 37 236 (8 046) 643 160 41 914 32 609 19 675 677 525 173 873 83 465 (40 331) 637 826 (56 580)
Garden Route Mall 76 469 28 127 1 296 907 556 071 66 692 31 938 1 221 072 475 849 139 701 56 848 1 247 711 502 504
Brooklyn Mall# 39 154 15 127 764 288 344 023 37 857 20 800 701 064 277 496 75 601 49 971 740 972 330 398
MooiRivier Mall 61 188 11 356 1 122 667 470 696 59 811 8 573 1 055 221 418 786 119 751 51 998 1 106 356 459 450
Eikestad Mall Precinct^ 57 694 17 787 824 330 356 858 50 320 36 886 822 800 337 909 104 153 63 512 851 983 380 957
Waterfall - Mall of Africa^ 231 632 104 676 3 844 967 2 337 610 - - - - 79 675 528 840 3 730 216 2 125 461
Waterfall - Waterfall Corner 17 273 (5 947) 200 205 69 830 14 980 5 638 191 822 57 680 29 268 18 503 204 741 136 623
Waterfall - Waterfall Lifestyle 11 962 3 571 118 119 47 209 10 920 6 149 114 567 37 451 21 142 464 116 153 40 125
Retail 584 635 195 844 9 586 836 4 657 486 328 995 155 742 5 499 883 2 148 433 754 463 778 677 9 390 269 4 316 399
Waterfall - Angel Shack 2 - - - - 1 559 3 290 35 794 27 922 2 587 3 546 36 692 27 505
Waterfall - Medtronic 2 - - - - 7 842 10 005 118 614 56 134 9 434 11 741 137 800 55 670
Waterfall - Cummins* 2 - - - - 6 179 8 416 86 437 30 286 9 074 9 187 94 740 34 339
Waterfall - Drager 2 - - - - 4 712 2 050 72 562 31 678 5 663 1 626 75 294 31 073
Waterfall - Massbuild 19 644 5 476 258 608 93 891 18 555 9 003 252 297 84 430 39 793 16 486 256 380 87 619
Waterfall - Torre 5 249 15 601 123 666 49 416 - - - - - - - -
Waterfall - Dimension Data 3 737 11 908 83 578 24 789 - - - - - - - -
Waterfall - Amrod - 255 340 902 201 562 - - - - - - - -
Waterfall - Westcon 2 - - - - 6 542 4 429 102 228 40 489 8 718 2 990 106 068 39 501
Waterfall - Hilti 2 - - - - 1 991 (32) 52 615 25 716 4 591 3 148 59 276 28 978
Waterfall - Servest 2 - - - - 6 185 14 406 148 271 69 052 11 999 12 581 157 013 69 180
Waterfall - Stryker 2 - - - - 2 026 4 352 59 659 28 127 4 511 2 820 61 314 24 896
Light industrial 28 630 33 240 806 754 369 658 55 591 55 919 928 477 393 834 96 370 64 125 984 577 398 761
Newtown Junction - City Lodge 7 126 1 651 110 568 24 236 - - 93 401 24 506 5 298 11 894 109 484 23 015
Lynnwood Bridge - City Lodge 28 823 10 045 169 173 104 914 10 329 5 684 174 431 90 736 21 042 14 089 180 838 91 234
Waterfall - City Lodge 6 785 5 697 99 983 52 983 7 687 5 241 101 907 45 081 12 897 (1 858) 94 526 44 980
Hotel 42 734 17 393 379 724 182 133 18 016 10 925 369 739 160 323 39 237 24 125 384 848 159 229
Le Chateau - (1) 5 000 2 753 - (2) 17 000 14 754 - (12 004) 5 000 2 753
Waterfall - Development rights - 23 562 1 059 720 1 059 724 - (155 053) 1 188 704 1 188 708 - (178 510) 1 174 018 1 174 022
Waterfall - Infrastructure and services - (5 427) 1 100 556 804 287 - (13 543) 733 803 467 897 - (24 502) 1 115 750 832 447
Vacant land - 18 134 2 165 276 1 866 764 - (168 598) 1 939 507 1 671 359 - (215 016) 2 294 768 2 009 222
Waterfall - PwC Tower and PwC Annex- - 21 952 705 873 175 063 - 41 145 271 388 150 692 - 13 106 463 401 170 114
Waterfall - Gateway West - 6 874 183 183 183 183 - - - - - - - -
Waterfall - K101 Warehouse - 660 18 747 18 747 - - - - - - - -
Newtown - Carr Street - - - - - - 15 519 15 521 - - 27 577 27 418
Waterfall - Allandale Building - - - - - 16 015 174 991 121 108 - 52 542 322 095 242 397
Waterfall - Mall of Africa^ - - - - - 319 789 3 006 156 1 748 338 - - - -
Waterfall - Maxwell Office Park - Phase IV* - - - - - 5 868 41 730 44 903 - - - -
Waterfall - Torre Industries - - - - - 3 846 46 222 46 222 - 7 003 78 301 50 108
Waterfall - Amrod - - - - - 7 725 114 162 114 162 - 12 490 261 942 131 537
Waterfall - Dimension Data - - - - - - 23 454 23 454 - 4 879 59 345 34 868
Developments under construction - 29 486 907 803 376 993 - 394 388 3 693 622 2 264 400 - 90 020 1 212 661 656 442
MAS Real Estate Inc. - (11 916) - 2 377 696 - (10 050) - 3 121 169 - 192 968 - 2 722 460
Atterbury Cyprus Limited - 39 379 - 802 842 - 216 946 - 967 950 - 124 060 - 891 980
Atterbury Africa Limited - (180 096) - (21 465) - 115 103 - 132 008 - (1 685) - 13 380
Stenham European Shopping Centre Fund Limited - (155 617) - 180 568 - 90 963 - 386 170 - 43 747 - 380 803
Atterbury Serbia B.V. - (41 966) - 171 231 - 49 842 - 38 427 - (557) - 34 237
Gruppo Investment Nigeria Limited (Ikeja City Mall) - (21 324) - 292 495 - 30 983 - 360 813 - (23 396) - 324 751
The Grove Mall of Namibia - 8 378 - 173 845 - 24 828 - 168 314 - 36 521 - 163 049
Bagapop Limited 2 - - - - - 145 019 - 146 975 - 145 019 - -
Other international - (6 350) - 155 170 - (27 994) - 25 117 - 5 633 - 104 369
International - (369 512) - 4 132 382 - 635 640 - 5 346 943 - 522 310 - 4 635 029
Corporate 9 003 14 196 - (854 724) 3 195 49 878 - (651 965) (71) (207 462) - (977 642)
Total 1 037 305 3 543 19 541 353 13 174 926 769 456 1 248 329 17 854 801 13 598 026 1 621 018 1 287 008 19 591 664 13 471 320
Notes:
1. Held for sale at 31 December 2016
2. Sold during the prior year
Represents Attacq's undivided share in the property: *50% #25% ^80% ~75%
COMMENTARY
Introduction
Attacq is a capital growth company in the real estate sector, founded in 2005 and listed on the Johannesburg Stock Exchange ("JSE") since October 2013.
Attacq's vision is to be the premier property company in South Africa and pursues this vision through its strategic pillars of Invest, Develop and Grow.
Attacq has a total asset value of R27.1 billion at 31 December 2016 and strives to deliver capital growth to investors. Since inception to 31 December 2016
Attacq has achieved a Compound Annual Growth Rate ("CAGR") of 27.7% for net asset value per share adjusted for deferred tax ("Adjusted NAVPS").
Attacq has a creative approach to real estate investments and developments. The investment portfolio is geographically diversified and consists of quality
commercial and retail property investments, with investments in South Africa and selected emerging and developed markets. Attacq's development portfolio is
focused in Waterfall, Gauteng. Development in Waterfall is a strategic priority for Attacq as an infill development that is easily accessible and centrally
located between Johannesburg and Pretoria. The concept behind Waterfall is to create a new lifestyle city where people can live, work and play. It includes
the Mall of Africa, a key retail development and a catalyst for growth in Waterfall; as well as mixed-use, office and light industrial developments.
Attacq has a multi-disciplinary team which includes skills and experience in property, asset management and property development.
Performance comments
Attacq's interim results for the six months ended 31 December 2016 were negatively impacted by market fluctuations and impairments on certain assets, some
of which are non-core.
Notwithstanding restrained trading conditions, the South African portfolio performed at a satisfactory level with the newly opened Mall of Africa trading
densities exceeding expectations. Significant progress has also been made at Waterfall through new developments and increased bulk.
The international portfolio consisting of East European and Cyprus property investments delivered sound results at trading level, offset to some extent by
losses due to the volatility in exchange rates.
Our investment in Mas Real Estate Inc. ("MAS") continues to show promise as MAS rolls out its strategy, including promising joint ventures with Prime
Kapital Limited ("Prime Kapital") focusing on new developments and investments in Central and Eastern Europe.
Our African portfolio has stood up well under the circumstances of difficult economic conditions in the countries of operation.
Highlights
- Adjusted NAVPS CAGR for the three years ended 31 December 2016 of 14.4%
- Net rental income increased by 25.9% to R668.5 million over the last six months
- The crown jewel, Mall of Africa, generated a monthly average trading density of R2 777 per m2 and achieved more than 1.1 million visitors per
month since opening on 28 April 2016
- Total operating cost is 0.46% of gross assets
- Four buildings were completed in Waterfall, increasing the total directly held portfolio to 694 770 m2 primary gross lettable area
- Internalised the development team to take control of the Waterfall development
- Secured jointly with Sanlam Properties (a division of Sanlam Life Insurance Limited) ("Sanlam Properties") a further 665 425 m2 bulk in the
prestigious Waterfall development
- MAS' revised strategy is well progressed and the company is positioned for income and distribution per share growth
Adjusted NAVPS and net asset value per share ("NAVPS")
Adjusted NAVPS decreased by 1.7% year-on-year from R21.72 to R21.35 and NAVPS decreased by 2.9% from R19.33 to R18.77.
Restructuring of Eikestad Precinct properties
Sale of 20.0% undivided share in Andringa Walk
Attacq entered into a sale agreement with the existing co-owner, Key Capital Property Holdings Proprietary Limited, in which it sold a 20.0% undivided
share in Andringa Walk for an amount of R37.0 million. The effective date of the sale transaction was 1 July 2016. The sale transaction was concluded to
create alignment on the entire Eikestad precinct with the local Stellenbosch partner and to create further value from this dominant retail centre in the
heart of Stellenbosch.
Disposals
Waterfall industrial properties - joint venture with Equites Property Fund Limited ("Equites")
Attacq and Equites have established a joint venture, EA Waterfall Logistics JV Proprietary Limited ("EAJV"), in respect of a portfolio of industrial
properties at Waterfall with effect from 1 July 2016. The following eight completed industrial properties were transferred on 31 August 2016 into EAJV:
Angel Shack, Cummins (50.0% undivided share), Drager, Hilti, Medtronic, Servest, Stryker and Westcon. Equites has subscribed for an 80.0% shareholding in
EAJV, for a subscription consideration of R292.7 million. Attacq holds the remaining 20.0% of EAVJ. This partnership aligns Attacq and Equites, a Cape
Town-based industrial property focused company, which has strong relationships with industrial tenants.
Waterfall Access Park (Land Parcel 3 and 24) - two joint ventures with Sanlam Properties
Attacq entered into an agreement for the disposal of its development rights in respect of Land Parcel 24, Waterfall, on loan account for R86.4 million, to
a new joint venture company, Winter Robin Investments 26 Proprietary Limited ("WRI"). The shareholding in WRI is 20.0% held by Attacq and 80.0% by Sanlam
Properties. Attacq has an option to increase its shareholding in WRI to 50.0%. As part of the transaction, WRI acquired additional light industrial
development rights from a Mia affiliate company for R371.6 million. Attacq advanced R16.9 million on loan account to WRI to part fund the acquisition. The
balance of the acquisition was funded by Sanlam Properties. After conclusion of the transaction, the total development rights in WRI amount to 635 425 bulk
m2. The effective date of the transaction was 1 July 2016.
In addition, Attacq has contracted to dispose of its 15 000 m2 retail development rights on Land Parcel 3 to a separate joint venture company with Sanlam
Properties titled AWIC Pocket 3 JVCO Proprietary Limited ("P3JV"). Attacq disposed of the retail rights for R28.3 million, which amount remains outstanding
on loan account. P3JV also acquired the remaining retail development rights on the same land parcel from a Mia affiliate company for R28.3 million. Attacq
and Sanlam Properties each hold 50.0% in P3JV. The effective date of the transaction was 1 July 2016.
Attacq was appointed developer and asset manager for both of these joint ventures.
Financial position
Investment properties (excluding non-current asset held for sale)
31 December 31 December 30 June
2016 2015 2016
R'000 R'000 R'000
Completed buildings 16 527 802 12 444 855 15 282 887
Developments under construction 907 803 3 693 622 1 185 084
Development rights 1 059 720 1 188 704 1 059 298
Infrastructure and services 1 100 556 733 803 1 111 772
Vacant land 5 000 17 000 5 000
Per valuation 19 600 881 18 077 984 18 644 041
Straight-line lease debtor (719 931) (556 505) (600 849)
Total 18 880 950 17 521 479 18 043 192
Buildings completed during the period
During the six months ended 31 December 2016 the following four buildings, totalling 70 424 m2 in attributable primary gross lettable area ("PGLA"), were
completed in Waterfall:
Property Sector Completion PGLA Occupancy
date* (m2) %
Allandale Building Office August 2016 15 266 >70
Dimension Data Industrial August 2016 8 291 100
Torre Industries Industrial October 2016 8 930 100
Amrod Industrial December 2016 37 937 100
Total 70 424 >94
* Practical completion date
Developments under construction
The following properties were under development at 31 December 2016. Attacq's attributable share of the total of 67 637 m2 PGLA is 56 331 m2.
Property Sector Anticipated PGLA % pre-let
completion (m2)*
date
Waterfall
PwC Tower and Annex~ Office January 2018 45 223 100
Gateway West Office November 2017 13 891 -
K101 warehouse Industrial September 2017 8 523 -
Total 67 637 >67
* Estimated PGLA for 100% of development. Subject to change upon final re-measurement post completion
- Attacq has an undivided share in the property of 75%
~ Attacq has an undivided share in the property of 75%
Development rights
Development rights relate to the contractual rights held by Attacq Waterfall Investment Company Proprietary Limited to develop certain land parcels in
Waterfall. These rights form a material element of the overall land valuation. As at 31 December 2016, 1.2 million m2 (30 June 2016: 1.3 million m2) of
Waterfall's total bulk of 1.9 million m2 (30 June 2016: 1.9 million m2) remains available for development. This excludes the development rights relating to
the Sanlam Properties joint ventures. A roll-out development period of up to a maximum of 13 years was incorporated in the development rights valuation
process.
Infrastructure and services
The value increase in infrastructure and services, from 31 December 2015, is a result of the costs incurred to service the Waterfall land. While this asset
generates no cash return, it creates the platform for future economic benefits from top structure developments.
Investments in and loans to associates
MAS
As at 31 December 2016, Attacq held a 38.6% shareholding in MAS (30 June 2016: 41.4%). Attacq's equity-accounted investment in MAS decreased by 11.1% from
R2.7 billion as at 30 June 2016 to R2.4 billion as at 31 December 2016, mainly as a result of the 12.7% strengthening of the Rand against the Euro. The
market value of Attacq's 146.8 million shares is R3.3 billion as at 31 December 2016 (30 June 2016: R2.9 billion) and the annualised economic return to
Attacq through dividends and share price appreciation was 25.4%.
MAS' adjusted NAVPS decreased by 4.7% from 118.5 Euro cents per share as at 31 December 2015 to 112.9 Euro cents per share as at 31 December 2016. The 5.6
Euro cents per share reduction is the sum of 4.5 Euro cents per share distributed to the shareholders, and 1.1 Euro cents per share due to a 29.3% increase
in MAS' issued number of shares over the period, as well as foreign exchange losses from the strengthening of the Euro against the Sterling.
MAS has extended the scope of its relationship with Prime Kapital in Central and Eastern Europe ("CEE") to include an investment joint venture to
complement its existing Prime Kapital development joint venture. The investment joint venture focuses on accretive acquisitions with value add potential.
During the period, the investment joint venture acquired its first property, the 32 580 m2 Nova Park Shopping Centre in Gorzow, Poland. The intention is to
expand the mall by a further 6 800 m2. The development joint venture has made significant progress in securing a number of large-scale retail-focused
development opportunities in Romania and Slovenia.
During the period, MAS successfully completed Phase I of its New Waverley development, located on the historic Royal Mile in Edinburgh, Scotland. The final
component of Phase I, the Adagio hotel, was completed in December 2016, on time and within budget. Phase II, which includes the development of the office
and mixed-use components of the development will commence soon as MAS has been selected by the British government to develop 19 000 m2 of prime office
space on the site. Detailed design and leasing agreements are in the process of being finalised and construction is expected to commence in March 2017
for completion in mid-2019. Pre-letting discussions for the balance of the site are also underway.
Atterbury Serbia B.V. ("Atterbury Serbia")
On 12 August 2016, Attacq invested a further R100.3 million into Atterbury Serbia to part fund Atterbury Serbia's increase in shareholding in BreAtt B.V.
("BreAtt") from 33.0% to 50.0%. Attacq's effective shareholding in BreAtt increased from 8.3% to 12.5%. As at 31 December 2016, Attacq's investment into
Atterbury Serbia amounted to R465.1 million (30 June 2016: R367.1 million).
BreAtt is the owner of a portfolio of six operational Serbian retail properties with a gross asset value of EUR263.3 million, including Serbia's largest
mall, Usce Shopping Centre, located in Belgrade. A seventh Serbian property was acquired post the reporting period, details of which are included in
subsequent events.
Artisan Development Partners Limited ("ADP")
During the reporting period, Attacq invested a total of R68.8 million into ADP for investments into two UK-based development opportunities located in Kent,
England and Edinburgh, Scotland. ADP's investment focus is on acquiring properties and land for re-zoning and development.
African assets
Attacq's African investments are held via its 31.3% shareholding in AttAfrica Limited ("AttAfrica"), which is invested into retail properties in Ghana and
Zambia, and via its 25.0% shareholding in Gruppo Investment Nigeria Limited ("Gruppo"), the owner of Ikeja City Mall, located in Lagos, Nigeria.
The poor economic and operating conditions in sub-Saharan Africa continued on the back of weaker commodity prices, volatile exchange rates and rising local
interest rates. Nigeria in particular is experiencing significant economic pressures due to continued low global oil prices, a lack of USD liquidity and
high inflation, which placed severe pressure on tenants and consumers.
As at 31 December 2016, the Group's investment in AttAfrica, through its shareholder loan, amounted to R791.6 million (30 June 2016: R877.4 million) and
its investment into Ikeja City Mall totalled R292.5 million (30 June 2016: R326.7 million). As a result of the unfavourable economic conditions,
impairments totalling R111.8 million have been recognised on these investments in the current period.
The remaining development under construction, Kumasi City Mall located in Kumasi, Ghana, is due to open in March 2017, completing AttAfrica's retail
portfolio.
At 31 December 2016, the Group's underlying African assets were as follows:
Property Location Owner PGLA Attacq's
(m2) effective
interest
%
Completed buildings
Manda Hill Mall Lusaka, Zambia AttAfrica 40 561 15.9
Accra Mall Accra, Ghana AttAfrica 21 230 15.0
West Hills Mall Accra, Ghana AttAfrica 27 558 14.3
Achimota Mall Accra, Ghana AttAfrica 14 662 23.9
Ikeja City Mall Lagos, Nigeria Gruppo 22 223 25.0
Development under construction
Kumasi City Mall* Kumasi, Ghana AttAfrica 18 000 23.9
* Estimated completion date of March 2017
Other financial assets
The year-on-year decrease in other financial assets is as a result of the prior period settlement of the MAS Karoo agterskot in March 2016 as well as the
settlement of the loan account to Atterbury for the acquisition of their 20.0% undivided share in the Mall of Africa. The amount due by Atterbury in
respect of 18.8% of the Mall was settled on completion of the Mall, with the balance of 1.2% to be settled based on the 30 June 2017 fair market value of
the Mall, as determined by an external independent valuer.
Other investments
Attacq's 19.9% interest in Stenham European Shopping Centre Fund Limited ("Stenham"), the owner of the Nova Eventis regional shopping centre in Leipzig,
Germany, is included in other investments at a value of R180.6 million (30 June 2016: R380.8 million). Following a protracted disposal process, Stenham
concluded a conditional agreement to dispose of the intermediary holding company which owns Nova Eventis at net asset value determined with reference to a
valuation of EUR208.5 million for the shopping centre. The disposal is subject to, inter alia, the merger clearance from the European Commission and
shareholder approval. Included in the results for this reporting period relating to Stenham is a foreign exchange loss of R30.4 million, and a negative
fair value adjustment of R169.8 million.
Assets held for sale
Brooklyn Bridge Office Park
Attacq management considers Brooklyn Bridge Office Park to no longer be a core asset. This property is therefore classified as a non-current asset held for
sale.
50.0% undivided share in the Altech Building
Altech has been sold as management considers the asset to be non-core. The sale is subject to Competition Commission approval which is currently underway.
Atterbury Pemba Properties Limited ("Pemba")
Attacq's 33.3% shareholding in Pemba and its shareholder loan are included under assets held for sale as at 31 December 2016. Subsequent to period end, the
shareholding has been disposed of at a nominal value with the shareholder loan proceeds to be received on or before 31 March 2017.
Borrowings
Total net interest-bearing borrowings increased by 1.9% compared with 30 June 2016 due to additional debt being incurred to fund the growing property
portfolio.
Gearing, calculated as total interest-bearing debt less cash on hand as a percentage of total assets, increased from 39.9% as at 30 June 2016 to 41.4% as
at 31 December 2016. In order to mitigate interest rate risk, approximately R11.0 billion or 80.0% of total committed facilities as at 31 December 2016 (30
June 2016: R11.0 billion or 79.5%) were hedged by way of fixed interest rate loans and interest rate swaps. This is within the 70.0% minimum interest hedge
policy set by the Attacq Board. The weighted average cost of funding increased slightly over the last six months from 9.2% at 30 June 2016 to 9.4% as at 31
December 2016.
Approximately 5.7% (R653.5 million) of the Group's debt is due for repayment over the next 12 months, which includes R348.9 million (31 December 2015:
R114.2 million) relating to non-current assets held for sale. None of the Group's interest rate swaps or fixed-rate loans are maturing over the next 12
months.
Financial performance
Net rental income
Net rental income, which includes straight-line lease income adjustments, increased by 25.9% to R668.5 million compared with the prior comparative period.
A year-on-year comparison of net rental income is less meaningful, due to four buildings that were completed during the current reporting period (31
December 2015: six buildings) as well as the completion of the Mall of Africa in April 2016. The weighted average lease expiry profile is 6.5 years as at
31 December 2016 (31 December 2015: 6.8 years).
Vacancies
Overall portfolio vacancies, measured in terms of PGLA, have decreased by 2 086 m2 compared with 31 December 2015. Vacancies comprise mainly of portions of
the newly completed Allandale Building as well as Brooklyn Bridge Office Park. Both the industrial and hotel sectors do not have any vacancies.
31 December 2016 31 December 2015 30 June 2016
Vacancy Vacant Vacancy Vacant Vacancy Vacant
Sector % GLA m2 % GLA m2 % GLA m2
Retail 0.7 4 729 1.1 6 728 1.0 7 070
Office and mixed-use 1.9 13 384 2.3 13 471 1.4 9 203
Portfolio vacancy 2.6 18 113 3.4 20 199 2.4 16 273
Property expenses
Property expenses increased by 54.7% mainly due to the additional properties that were added to the portfolio. Property expenses on a like-for-like basis,
adjusted for municipal charges, as a percentage of the adjusted rental income, increased from 14.0% to 15.9% for the six month period ended 31 December
2016. This is a result of increased repairs, maintenance and security costs.
Other income
Other income of R34.4 million mainly relates to the profit on disposal of the 25.0% interest in the new PwC property. Included in the December 2015 figure
are unrealised foreign exchange gains of R420.4 million and a profit of R145.0 million on the disposal of the interest in Bagaprop Limited and Mall of
Mauritius at Bagatelle Limited.
Operating and other expenses
Operating and other expenses consist of operating expenses of R77.2 million (December 2015: R58.0 million) and other expenses of R454.3 million (December
2015: R63.8 million). The 33.1% increase in operating expenses is largely due to internalisation of the development manager as well as a R14.5 million
(December 2015: R7.6 million) share-based payment expense.
The material increase in other expenses is primarily attributable to the R173.1 million foreign exchange loss due to the Rand strengthening, as well as
R268.9 million impairments on the AttAfrica loan account and the Nova Eventis and Ikeja City Mall investments.
Fair value adjustments
Compared with the corresponding prior period, fair value adjustments on investment properties decreased by 35.8% to R274.1 million and are made up as
follows:
6 months 6 months 12 months
ended ended ended
31 December 31 December 30 June
2016 2015 2016
R'000 R'000 R'000
Completed buildings 165 620 221 931 557 949
Developments under construction 78 147 420 226 758 314
Development rights 30 363 (215 352) (230 039)
Vacant land - - (12 000)
Total 274 130 426 805 1 074 224
Property valuations for the interim reporting period are directors' valuations which are in the main, supported by external desktop valuations performed by
Jones Lang LaSalle Proprietary Limited, Old Mutual Investment Group: South Africa and Mills Fitchet Magnus Penny & Wolffs. The directors have made
adjustments in respect of completed buildings for the straight-lining of leases as required by the International Financial Reporting Standards ("IFRS"),
and cost to complete in the case of developments under construction.
The directors' valuation in respect of Waterfall's development rights is based on an external desktop valuation performed on a freehold basis. The desktop
valuation is then adjusted downward by management to take into account, inter alia, the nature of the contractual rights and the estimated future rental
obligations attached to the development rights. In the current reporting period, a positive fair value adjustment of R30.4 million was accounted for as
additional bulk was secured.
Over the last six months the mark-to-market value of the interest rate swaps decreased by R28.5 million (December 2015: increase of R229.6 million) as a
result of improved interest rate expectations and the recovery of the Rand.
Investment income
Investment income in the current period relates to interest income of R106.8 million (December 2015: R64.4 million exclusive of dividend income of R9.8
million).
Finance costs
The increase in finance costs of 22.7% (from R403.9 million in December 2015 to R495.5 million in December 2016) is attributable to the four buildings (31
December 2015: two buildings) completed over the last six months, resulting in the finance costs post completion being expensed and no longer capitalised
to the specific development.
Change in directors
There were no changes in directors during the reporting period.
Subsequent events
Further investment into Atterbury Serbia
On 31 January 2017, the Group invested a further R23.9 million in Atterbury Serbia to fund its share of the acquisition by BreAtt in the seventh retail
property, Borca Retail Park, a 13 000 m2 convenience shopping centre located in Belgrade.
Further investment into ADP
On 9 February 2017, an amount of R50.3 million was invested into APD to part fund an office property located in Glasgow, Scotland. The intention is to
apply for planning consent to convert the property into a hotel. The property will be fully occupied until such time as the conversion, if approved, is
undertaken.
Future developments
Waterfall Corporate Campus Office Park - Land Parcel 10B
Attacq and Zenprop Property Holdings Proprietary Limited have established a 50/50 joint venture to develop the Corporate Campus Office Park, with an
approximate total development cost of R875.9 million. The development comprises of six multi-tenanted office buildings in Waterfall with an estimated total
PGLA of 34 068 m2. The first tenant has been secured and development of Phase I has commenced.
Waterfall Point Office Park - Land Parcel 15
Waterfall Point is a P-Grade office park which will be situated opposite Waterfall Corner along the R55 in Waterfall. The office park will consist of four
similar office buildings that will be offered for sale on a sectional title basis. The total development cost is estimated at R225.7 million. Each building
is estimated to consist of 2 396 m2 of saleable area and the total saleable area is estimated at 9 584 m2.
Mixed-use development with the Barrow Group - Land Parcel 10
Attacq and the Barrow Group have established a 50/50 joint venture to develop a mixed-use precinct adjacent to the Mall of Africa comprising two office
buildings and one residential tower with approximately 120 apartments that will be held for rental and one hotel to be sold. The total development cost is
estimated at R981.5 million.
Prospects
In South Africa, Attacq has strategically invested in Waterfall, with the objective of developing Gauteng's new lifestyle city built around the newly
completed Mall of Africa. The node continues to grow, with four new buildings completed during the period under review adding 70 424 m2 PGLA.
Waterfall is the ideal location for corporate consolidation due to its central location and ease of access to the rest of Gauteng. Tenants who have
relocated to take advantage of the location include Premier Foods, Group Five, Novartis, Schneider Electric and Cell C. In addition PwC will be
consolidating in Waterfall on completion of the PwC Tower in 2018.
Waterfall's location between Johannesburg and Pretoria, within close proximity of major highways and transport routes, makes it a natural location for
distribution centres and other light industrial activity. The recently secured joint venture with Sanlam Properties has increased the land available for
these types of developments.
Approximately 609 000 m2 of Waterfall bulk is already serviced and ready for roll-out. The Mall of Africa's trading is expected to increase as Waterfall
City and its surrounds continue to densify, extracting further value from Mall of Africa in the years to come.
Outside of Waterfall, Attacq will continue to optimise and extract further value from its South African portfolio of high quality properties, including its
portfolio of regional malls. On an international front, Attacq's strategic investment in MAS is expected to benefit from MAS' revised strategy of focusing
on distributable income growth underpinned by its attractive income-generating and development pipelines and expansion into CEE.
Attacq is confident in meeting its rolling three year Adjusted NAVPS CAGR target of at least 15.0% and will continue to focus on capital allocation and
recycling existing capital into higher return opportunities.
Basis of preparation
The condensed unaudited consolidated interim financial statements for the six months ended 31 December 2016 have been prepared in accordance with 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 Listings Requirements and the requirements of the Companies Act of South
Africa. This report was compiled under the supervision of M Hamman CA(SA), Chief Financial Officer of Attacq.
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 independent valuers 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 interest
rate derivatives are measured at fair value through profit or loss and are categorised as level 2 investments. In terms of IAS 39, listed investments are
measured at fair value being the quoted closing price at the reporting date and are categorised as level 1 investments. Unlisted investments are
categorised as level 3. 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 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 Attacq's auditors.
On behalf of the Board
P Tredoux MC Wilken
Chairman Chief Executive Officer
28 February 2017
Directors
P Tredoux#* (Chairman)
MC Wilken (CEO)
M Hamman (CFO)
MM du Toit#*
HR El Haimer#*
KR Moloko#*
BT Nagle#*
S Shaw-Taylor#*
JHP van der Merwe#*
LLS van der Watt*
# Independent
* Non-executive
Company Secretary
T Kodde
Registered office
ATT House, 2nd Floor
Maxwell Office Park
Magwa Crescent West
Waterfall City
2090
Postal address
PostNet Suite 016
Private Bag X81
Halfway House
1685
Transfer Secretaries
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, Johannesburg, 2196
(PO Box 61051, Marshalltown, 2107)
Sponsor
Java Capital
28 February 2017
Date: 28/02/2017 08:38:00 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 
