Wrap Text
Unaudited results for the 6 months ended 31 March 2017
INDLUPLACE PROPERTIES LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 2013/226082/06)
JSE share code: ILU ISIN: ZAE000201125
(Approved as a REIT by the JSE)
("Indluplace" or "the company")
UNAUDITED RESULTS FOR THE 6 MONTHS ENDED 31 MARCH 2017
On track to meet forecast guidance
Under 7% geared portfolio
Concluded agreement with Diluculo to acquire 1 319 residential units
NATURE OF BUSINESS
Indluplace was the first focused residential REIT listed on the JSE. Since listing on the main board of the JSE, the company has grown
its residential portfolio by over 49% to 5 511 residential units. It is Indluplace's stated intention to continue to grow the portfolio
aggressively by acquiring yield enhancing properties and portfolios that provide income from the day of acquisition enabling Indluplace
to pay growing dividends to its shareholders. Indluplace is positioned to assist in overcoming the shortage of rental housing in
South Africa by providing an exit for developers and owners of residential stock or portfolios who may reinvest the capital in additional
stock. By utilising specialist outsourced property managers for the respective portfolios, Indluplace ensures that its growing portfolio
remains professionally managed to provide investment returns while providing value for money accommodation to all its tenants.
SUMMARISED DISTRIBUTABLE INCOME ANALYSIS FOR THE PERIOD ENDED:
Unaudited for Unaudited for Audited for
the 6 months ended the 6 months ended the year ended
R 31 March 2017 31 March 2016 30 September 2016
Contractual rental income 156 784 816 137 845 868 284 565 745
Net property expenses (36 474 094) (33 305 548) (66 141 768)
Net property income 120 310 722 104 540 320 218 423 977
Distributable income 117 451 114 110 517 984 222 474 034
Reconciliation to amount distributable
Amount available for distribution 117 451 114 110 517 984 222 474 034
Distributed for the quarter ended:
31 December (57 654 490) (55 087 474) (55 087 474)
31 March (55 430 505)
30 June (55 863 048)
Amount declared for quarter ended 31 March and year ended 30 September 59 796 624 55 430 510 56 093 007
Cents Cents Cents
31 December 23,82951 22,93067 22,93067
31 March 24,71489 23,07346 23,07346
30 June 23,25351
30 September 23,34923
Dividend for the period ended 48,54440 46,00413 92,60687
Property expense ratio - Net 23,3% 24,2% 23,2%
Net asset value per share (cents) 1 024,32 1 007,56 1 023,54
Shares used in calculation of the dividends for the quarter ended:
31 December 241 945 767 240 234 907 240 234 907
31 March 241 945 767 240 234 907 240 234 907
30 June 240 234 907
30 September 240 234 907
COMMENTARY
REVENUE
Total revenue includes contractual rental income and expenditure that is recoverable from tenants. Revenue, excluding straight line
rental income, has increased from R160,7 million at 31 March 2016 to R195,0 million at 31 March 2017 as the full effect of the
acquisitions concluded during the previous financial year, as well as escalations are taken into account.
PROPERTY PORTFOLIO
31 March 2017 31 March 2016 30 September 2016
Residential Buildings 117 109 116
Units 5 511 5 037 5 447
Vacancy 4,5% 6,2% 3,4%
Retail GLA - m2 12 647 12 647 12 647
Vacancy 9,6% 5,1% 2,1%
Residential unit spread %
Johannesburg suburbs 41
Johannesburg inner city 37
Pretoria/Midrand 9
Witbank 8
Vanderbijlpark 5
100
Residential unit category %
Rooms 6
Bachelors 20
One bed 16
Two Bed 44
Three bed 11
Other 3
100
Residential building type %
High rise 37
Walk-up 63
100
Residential vacancies of 4,5% have decreased from 6,2% at 31 March 2016, being the comparable reporting period. While there is an
increase from the 3,4% reported as at 30 September 2016, Indluplace continues to focus on reducing vacancies and is working closely
with its property managers to implement agreed strategies to reduce the vacancies.
PROPERTY EXPENSES
Property expenses have increased from R56,2 million to R74,7 million which is in line with the increased property portfolio.
The net property expense ratio of 23,3% is in line with expectations and the nature of our current portfolio.
ADMINISTRATION COSTS
Administration costs have increased from R5,8 million to R5,9 million which is in line with the increased expansion of the
company's management team.
FINANCE INCOME
31 March 2017 31 March 2016 30 September 2016
Interest on Share Purchase and Option Scheme 9 365 374 8 087 966 16 280 431
Interest received from Arrowhead Properties Limited and cash balances 1 992 222 330 835 3 393 241
Total 11 357 596 8 418 801 19 673 672
Finance income has increased from R8,4 million for the six months ended 31 March 2016 to R11,4 million for the six months ended
31 March 2017 as a result of excess funds being placed with Arrowhead Properties Limited ("Arrowhead"), and/or in the bank facilities,
in terms of the group treasury policy. The excess cash arose from the R200 million loan facility entered into during the second half
of 2016.
FINANCE CHARGES
31 March 2017 31 March 2016 30 September 2016
Interest paid on secured financial liabilities and swaps 8 228 465 - 1 669 808
Interest paid to Arrowhead - 499 304 5 815 518
Amortisation of structuring fee 104 214 - 17 178
Other - - 131 490
Total 8 332 679 499 304 7 633 994
Finance charges increased as a result of the R200 million loan facility entered into with The Standard Bank of South Africa, the details
of which have been included in the secured financial liabilities and derivative instrument note below.
INVESTMENT PROPERTY
The increase in investment property mainly relates to the acquisition of Garden Views, a 64 unit complex in Randburg, for R25 million in
December 2016. This increased the number of residential properties in the portfolio by one to 117.
TRADE AND OTHER RECEIVABLES
Trade and other receivables increased from R46,6 million to R55,6 million which is in line with the increased portfolio. Of this amount,
net trade receivables amounts to R1,9 million which is comparable to 30 September 2016. The balance comprises municipal deposits, amounts
receivable from property managers and the interest element relating to the loans to participants of the Indluplace Share Purchase and
Option Scheme. Cash in excess of R19 million, held by the company's property managers in trust accounts, is included in the aforesaid balance.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents decreased from R46,3 million at 30 September 2016 to R19,2 million at 31 March 2017. The decrease in cash is due to
the above mentioned acquisition of Garden Views.
SECURED FINANCIAL LIABILITIES AND DERIVATIVE INSTRUMENT
Secured financial liabilities increased from R149,4 million to R158,5 million. With excess funds being placed in Indluplace's R200 million,
9,20% three-year loan facility with Standard Bank. R158,5 million was owing at 31 March 2017 representing a loan to value ratio of 6,5%
measured against properties valued at R2,4 billion. R150 million of the R200 million facility is covered by a three-year fixed rate swap of
10,11%, the fair value of which is R2,5 million.
TRADE AND OTHER PAYABLES
Trade and other payables decreased from R50,8 million to R49,7 million.
CHANGE IN DIRECTORATE
As released on SENS on 19 December 2016, Gerald Leissner, one of Indluplace's founders and executive directors, passed away on Friday,
16 December 2016.
PROSPECTS
The board is confident that ample opportunities for acquisitions exist and that Indluplace will grow the portfolio substantially over the next
few years notwithstanding the uncertain financial climate. Given the defensive nature of its diverse residential portfolio with the strong
fundamentals in this sector, Indluplace is well placed to weather the current uncertain economic environment. Without taking the effects of
acquisitions finalised but not yet transferred or any potential transactions currently under offer or being negotiated into account, Indluplace
projects that the current portfolio of properties will deliver dividend growth of between 5,5% and 6,5% for the full year to 30 September 2017.
With Indluplace's current gearing of 6,5% and taking into account the significant available headroom, an appropriate amount of gearing
could improve the dividend growth going forward. This forecast has not been reviewed or reported on by the company's auditors. Given the nature
of its business, Indluplace uses dividend per share as its key performance measure as it is considered a more relevant performance measure than
earnings or headline earnings per share.
PAYMENT OF DIVIDEND FOR THE QUARTER ENDED 31 MARCH 2017
The board of directors has declared a gross dividend of 24,71489 cents per share (dividend number 8) for the quarter ended 31 March 2017,
in accordance with the timetable set out below:
2017
Last date to trade cum dividend Tuesday, 30 May
Shares trade ex dividend Wednesday, 31 May
Record date Friday, 2 June
Payment date Monday, 5 June
Shares may not be dematerialised or rematerialised between Wednesday, 31 May 2017 and Friday, 2 June 2017, both days inclusive.
Payment of the dividend will be made to shareholders on Monday, 5 June 2017. In respect of dematerialised shares, the dividend will be
transferred to the CSDP/ broker accounts on Monday, 5 June 2017. Certificated shareholders' dividend payment will be deposited on or about
Monday, 5 June 2017.
TAX TREATMENT OF DIVIDEND
In accordance with Indluplace'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"). The distribution on shares will
be deemed to be a dividend, for South African tax purposes, in terms of section 25BB of the Income Tax Act. The dividend received by or
accrued to South African tax residents must be included in the gross income of such shareholders and will not be exempt from income tax
(in terms of the exclusion to the general dividend exemption, contained in paragraph (aa) of section 10(1)(k)(i) of the Income Tax Act)
because they are dividends distributed by a REIT. This dividend is, however, exempt from dividends withholding tax in the hands of
South African tax resident shareholders, provided that the South African resident shareholders 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 company,
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 company, 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 company, 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.
Dividends received by non-resident shareholders will not be taxable as income and instead will be treated as dividends which are exempt
from income tax in terms of the general dividend exemption in section 10(1)(k)(i) of the Income Tax Act. On 22 February 2017 the
dividends withholding tax rate was increased from 15% to 20% and accordingly any dividend received by a non-resident from a REIT is
subject to dividends withholding tax at 20%, 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 shareholders. Assuming dividend withholding tax will
be withheld at a rate of 20%, the net dividend amount due to non-resident shareholders is 19,77191 cents per share. A reduced dividend
withholding rate in terms of the applicable DTA, may only be relied on if the non-resident shareholders have provided the following
forms to their CSDP or broker, as the case may be, in respect of uncertificated shareholders, or the company, in respect of certificated
shareholders:
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 company, 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 company, 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.
Shares in issue at the date of declaration of this dividend: 241 945 767
Indluplace's income tax reference number: 9390/649/177
DIVIDEND DECLARATION AFTER REPORTING DATE
In line with IAS 10 Events after the Reporting Period, the declaration of the dividend occurred after the end of the reporting period,
resulting in a non-adjusting event which is not recognised in the financial statements.
DIVIDENDS
Dividends will be paid in respect of the quarters ending 31 December, 31 March, 30 June and 30 September in March, June, September
and December respectively.
LITIGATION STATEMENT
There are no legal or arbitration proceedings, including any proceedings that are pending or threatened, of which Indluplace is aware,
that may have or have had in the recent past, being the previous 12 months, a material effect on the group's financial position.
BASIS OF PREPARATION
The unaudited interim group financial statements for the six months ended 31 March 2017 have not been reviewed or reported on by the
company's independent auditors, Grant Thornton Johannesburg. The financial statements have been prepared in accordance with the
requirements of International Financial Reporting Standards, the SAICA Financial Reporting Guides as issued by the Financial Practices
Committee and the Financial Reporting pronouncement as issued by the Financial Reporting Standard Council, IAS 34: Interim Financial
Reporting, the JSE Listings Requirements and the requirements of the South African Companies Act, 2008. The unaudited interim group
financial statements have been prepared in accordance with the accounting policies adopted in the group's most recent annual financial
statements for the year ended 30 September 2016. These results have been prepared under the supervision of Terry Kaplan CA (SA),
Indluplace's Financial Director.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE PERIOD ENDED 31 MARCH 2017
Unaudited for Unaudited for Audited for
the 6 months ended the 6 months ended the year ended
31 March 2017 31 March 2016 30 September 2016
Property portfolio revenue
Contractual rental income 156 784 816 137 845 868 284 565 745
Recoveries 38 207 087 22 891 954 64 420 785
Straight line rental income accrual - - 2 052 249
Total revenue 194 991 903 160 737 822 351 038 779
Operating costs (74 681 181) (56 197 502) (130 562 553)
Administration costs (5 884 525) (5 797 274) (11 845 062)
Net operating profit 114 426 197 98 743 046 208 631 164
Changes in fair values (18 103) - 35 722 600
Profit from operations 114 408 094 98 743 046 244 353 764
Net finance income/(charges) 3 024 917 7 919 497 12 039 678
Finance charges (8 332 679) (499 304) (7 633 994)
Finance income 11 357 596 8 418 801 19 673 672
Profit before taxation 117 433 011 106 662 543 256 393 442
Taxation - - -
Total comprehensive income for the year 117 433 011 106 662 543 256 393 442
RECONCILIATION OF EARNINGS AND HEADLINE EARNINGS
Unaudited for Unaudited for Audited for
R the period ended the period ended the year ended
31 March 2017 31 March 2016 30 September 2016
Profit for the year attributable to equity holders 117 433 011 106 662 543 256 393 442
Change in fair value of investment property - - (38 177 641)
Deferred tax thereon - - -
Headline profit attributable to equity holders 117 433 011 106 662 543 218 215 801
Number of shares in issue at period end 241 945 767 240 234 907 240 234 907
Number of shares in issue used for the calculation of
distribution per share (last quarter) 241 945 767 240 234 907 240 234 907
Weighted average number of shares in issue used for
the calculation of earnings
and headline earnings per share 240 612 882 232 742 844 236 360 737
Basic and diluted earnings per share (cents) 48,81 45,83 108,48
Headline and diluted headline earnings per share (cents) 48,81 45,83 92,32
Dividends per share (cents) 48,54 46,00 92,61
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
R Unaudited at Unaudited at Audited at
31 March 2017 31 March 2016 30 September 2016
Assets
Non-current assets 2 614 194 018 2 382 936 624 2 567 674 551
Investment property 2 422 356 232 2 207 142 994 2 391 762 000
Fair value of property portfolio for accounting purposes 2 419 619 352 2 206 458 363 2 389 025 120
Straight line rental income accrual 2 736 880 684 631 2 736 880
Computer software 133 158 - 118 921
Loans to participants of Indluplace Share Purchase and Option Scheme 191 704 628 175 793 630 175 793 630
Current assets 74 761 514 68 889 694 93 894 256
Trade and other receivables 55 607 325 43 192 306 46 589 696
Loan to shareholder - 1 684 008 1 037 797
Cash and cash equivalents 19 154 189 24 013 380 46 266 763
Total assets 2 688 955 532 2 451 826 318 2 661 568 807
Equity and liabilities
Shareholders' interest 2 478 310 813 2 420 522 500 2 458 890 539
Stated capital 2 290 271 465 2 274 606 016 2 274 536 709
Reserves 188 039 348 145 916 484 184 353 830
Other non-current liabilities 160 967 536 - 151 845 219
Secured financial liabilities 158 494 392 - 149 390 178
Derivative instruments 2 473 144 - 2 455 041
Current liabilities 49 677 183 31 303 818 50 833 049
Trade and other payables 49 677 183 31 303 818 50 833 049
Total equity and liabilities 2 688 955 532 2 451 826 318 2 661 568 807
Number of shares in issue 241 945 767 240 234 907 240 234 907
Net asset value per ordinary share (cents) 1 024,32 1 007,56 1 023,54
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
R Stated capital Reserves Total
Balance at 30 September 2015 1 786 251 674 148 596 834 1 934 848 508
Issue of shares 488 354 342 - 488 354 342
Dividends - (109 342 893) (109 342 893)
Total comprehensive income for the 6 months - 106 662 543 106 662 543
Balance at 30 March 2016 2 274 606 016 145 916 484 2 420 522 500
Share issue expenses (69 307) - (69 307)
Dividends - (111 293 553) (111 293 553)
Total comprehensive income for the 6 months - 149 730 899 149 730 899
Balance at 30 September 2016 2 274 536 709 184 353 830 2 458 890 539
Issue of shares 15 734 756 - 15 734 756
Dividends - (113 747 493) (113 747 493)
Total comprehensive income for the 6 months - 117 433 011 117 433 011
Balance at 30 March 2017 2 290 271 465 188 039 348 2 478 310 813
CONSOLIDATED STATEMENTS OF CASH FLOW
Unaudited for the Unaudited for the Audited for the
R 6 months ended 6 months ended year ended
31 March 2017 31 March 2016 30 September 2016
Net cash generated from operating activities (6 448 082) (3 008 343) 13 187 080
Cash generated from operations 104 274 494 102 671 974 221 783 848
Dividend paid (113 747 493) (109 342 893) (220 636 446)
Finance charges paid (8 332 679) (499 304) (7 633 994)
Finance income received 11 357 596 4 161 880 19 673 672
Net cash utilised in investing activities (30 632 982) (474 685 634) (640 204 579)
Net acquisition and improvements of investment property (30 594 232) (474 685 634) (640 074 750)
Net acquisition and improvements of computer software (38 750) - (129 829)
Net cash generated from financing activities 9 968 490 466 301 548 637 878 453
Net proceeds from share issue (69 307) 467 354 342 488 285 035
Proceeds from secured financial liabilities 9 000 000 - 150 000 000
Movement in loan from shareholder 1 037 797 (1 052 794) (406 582)
Net movement in cash and cash equivalents (27 112 574) (11 392 429) 10 860 954
Cash and cash equivalents at the beginning of the period 46 266 763 35 405 809 35 405 809
Cash and cash equivalents at the end of the period 19 154 189 24 013 380 46 266 763
CONDENSED CONSOLIDATED SEGMENTAL ANALYSIS
The entity has two reportable segments based on the geographic split of the country which are the entity's strategic business segments.
For each strategic business segment, the entity's executive directors review internal management reports on a monthly basis.
All segments are located in South Africa. There are no single major tenants. The following summary describes the operations in each
of the entity's reportable segments.
Unaudited for the 6 months ended 31 March 2017
R Gauteng Mpumalanga Total
Property portfolio revenue
Rental income and recoveries 172 643 434 22 348 469 194 991 903
Straight line rental income
accrual - -
Total revenue 172 643 434 22 348 469 194 991 903
Operating costs (67 944 086) (6 737 095) (74 681 181)
Segmental profit 104 699 348 15 611 374 120 310 722
Administration costs (5 884 525)
Net operating profit 114 426 197
Changes in fair values (18 103)
Profit from operations 114 408 094
Net finance income/(charges) 3 024 917
Finance charges (8 332 679)
Finance income 11 357 596
Profit before taxation 117 433 011
Taxation -
Total comprehensive income for the year 117 433 011
Reportable segment assets 2 155 906 529 318 220 890 2 474 127 419
Corporate segment assets - - 214 828 113
Reportable segment liabilities (46 111 107) (4 599 960) (50 711 067)
Corporate segment liabilities - - (159 933 652)
2 109 795 422 313 620 930 2 478 310 813
Unaudited for the 6 months ended 31 March 2016
R Gauteng Mpumalanga Total
Property portfolio revenue
Rental income and recoveries 141 019 838 19 717 984 160 737 822
Straight line rental income
accrual - - -
Total revenue 141 019 838 19 717 984 160 737 822
Operating costs (51 271 839) (4 925 663) (56 197 502)
Segmental profit 89 747 999 14 792 321 104 540 320
Administration costs (5 797 274)
Net operating profit 98 743 046
Changes in fair values -
Profit from operations 98 743 046
Net finance income/(charges) 7 919 497
Finance charges (499 304)
Finance income 8 418 801
Profit before taxation 106 662 543
Taxation -
Total comprehensive income for the year 106 662 543
Reportable segment assets 1 932 200 919 313 365 504 2 245 566 423
Corporate segment assets - - 206 259 895
Reportable segment liabilities (23 772 171) (3 149 600) (26 921 771)
Corporate segment liabilities - - (4 382 047)
1 908 428 748 310 215 904 2 420 522 500
Audited for the year ended 30 September 2016
R Gauteng Mpumalanga Total
Property portfolio revenue
Rental income and recoveries 307 479 317 41 507 213 348 986 530
Straight line rental income
accrual 2 052 249 - 2 052 249
Total revenue 309 531 566 41 507 213 351 038 779
Operating costs (119 499 150) (11 063 403) (130 562 553)
Segmental profit 190 032 416 30 443 810 220 476 226
Administration costs (11 845 062)
Net operating profit 208 631 164
Changes in fair values 35 722 600
Profit from operations 244 353 764
Net finance income/(charges) 12 039 678
Finance charges (7 633 994)
Finance income 19 673 672
Profit before taxation 256 393 442
Taxation -
Total comprehensive income for the year 256 393 442
Reportable segment assets 2 115 731 980 316 674 589 2 432 406 569
Corporate segment assets - - 229 162 238
Reportable segment liabilities (48 352 011) (2 481 038) (50 833 049)
Corporate segment liabilities - - (151 845 219)
2 067 379 969 314 193 551 2 458 890 539
RECONCILIATION OF HEADLINE EARNINGS TO DISTRIBUTABLE EARNINGS
Unaudited for Unaudited for Audited for
R the period ended the period ended the year ended
31 March 2017 31 March 2016 30 September 2016
Headline profit attributable to equity holders 117 433 011 106 662 543 218 215 801
Changes in fair values of financial instruments 18 103 - 2 455 041
Deferred tax thereon - - -
Straight line rental income accrual - - (2 052 249)
Deferred tax thereon - - -
Antecedent dividends - 3 855 441 3 855 441
Amount available for distribution 117 451 114 110 517 984 222 474 034
Reconciliation of amount available for distribution
Amounts available for distribution to shareholders 117 451 114 110 517 984 222 474 034
31 Decemeber (57 654 490) (55 087 474) (55 087 474)
31 March - - (55 430 505)
30 June - - (55 863 048)
Amount available for distribution for the quarter ended 59 796 624 55 430 510 56 093 007
Dividends per share (cents) 48,54 46,00 92,61
By order of the Board
10 May 2017
Directors
T Adler (Chairperson)*, C Abrams*^, C de Wit (CEO), M Kaplan, T Kaplan (FD), G Kinross*^ (Lead independent director),
S Noik*, A Rehman*^, I Suleman.
* Non-executive, ^ Independent. All directors are South African.
Registered office
2nd Floor, 18 Melrose Boulevard, Melrose Arch, Melrose, Johannesburg 2196.
PO Box 685, Melrose Arch, 2076.
Transfer secretaries
Computershare Investor Services Proprietary Limited
Sponsor
Java Capital
Company secretary
CIS Company Secretaries Proprietary Limited
Website
www.indluplace.co.za
Date: 10/05/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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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,
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