Wrap Text
Preliminary summarised audited consolidated financial statements for the year ended 28 February 2017
Equites Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number 2013/080877/06)
JSE share code: EQU ISIN: ZAE000188843
(Approved as a REIT by the JSE)
("Equites" or "the company")
Summarised audited consolidated financial statements for the year ended
28 February 2017
Highlights
- Total distribution of 110.37 cents per share for the year ended
28 February 2017, which is 14.2% higher than the prior year.
- The growth in distributable earnings was slightly higher than the
upper end of the 12-14% as previously guided.
- NAV per share growth of 9.1% from R12.94 to R14.12 for the year.
- 51.4% growth in fair value of property portfolio from R4.1 billion
to R6.2 billion (including assets held for sale at year end).
- Net property expense ratio decreased from 3.5% in the prior year to 2.5%.
- R1 billion capital raised through an accelerated book-build in
November 2016.
- Acquisition of 8 A-grade premium logistics properties in Waterfall
from Attacq
- Expansion into the United Kingdom through the acquisition of two
completed distribution warehouses in key logistics nodes and the
conclusion of a third deal to acquire a property currently under
development.
- Headline earnings per share growth of 12.1% from 147.35 cents to
165.26 cents.
Commentary
1. Nature of the business
Equites listed as the only specialist industrial property fund on the
JSE on 18 June 2014. The company is a Real Estate Investment Trust
("REIT") and both the property and asset management functions are
managed internally. Equites' value proposition includes a focus on
the top-end of the logistics property market in major centres in
South Africa and key logistics nodes in the United Kingdom ("UK"),
and is based on sound property fundamentals. This is complemented by
its proven ability to develop A-grade logistics buildings internally
and unlock key logistics nodes.
2. Commentary on results
The financial year under review presented some of the toughest
political and economic challenges to date, particularly in the
South African market. The group remained insulated from many of the
shocks to the market and the sector as a result of its focus on
strong property fundamentals which resulted in virtually no vacancies
across the portfolio and no tenant defaults.
Following a strong first 6 months to the year, growth in
distributable earnings remained stable in the second half of the
year. The growth in distribution was primarily attributable to the
following:
- strong performance from the base portfolio, healthy escalations
and no significant reversions;
- the completion of a speculative development in Epping, which
was let on completion to an international tenant at a highly
attractive yield;
- the acquisition of two buildings in the United Kingdom coupled
with an effective currency hedging strategy;
- maintaining low vacancy rate of 0.1% of gross lettable area;
- economies of scale and cost containment leading to a reduction in
the net property expense ratio from 3.5% in the prior year to
2.5%; and
- a reduction in finance costs following the accelerated book-build
undertaken by the company during November 2016.
Whilst building scale in its portfolio, Equites has continued to
improve the quality of its portfolio. 88.3% of revenue is now
derived from blue chip tenants on long leases, with some 70.1%
of leases expiring more than 5 years into the future. Following the
acquisitions and disposals during the current year, 96% of the
passing rent is derived from the industrial sector. All new
acquisitions were logistics facilities with 'triple net' leases,
which now make up 89.0% and 95.0% of the portfolio respectively.
The company continues to see strong demand for modern distribution
centres in the major logistics nodes and the value of its committed
capital projects has increase to R419 million at year end. This
demand continues to be supported by the centralisation of
distribution by major retailers, increased levels of imports into
South Africa and a shift towards online retailing. Equites has a
proven ability to meet major tenants' requirements to upgrade to
modern facilities with high specification levels, which improve the
efficiency of their operations. These specifications include
high-spec flat floors, higher eaves heights, multiple offloading
options and large yards to cater for high volume truck traffic.
During this period, net asset value per share increased by 9.1% from
R12.94 at 29 February 2016 to R14.12 at 28 February 2017.
Importantly, HEPS also grew by 12.1% during this period. The strong
growth in net asset value and HEPS is testimony to the company's
efforts to improve the fundamentals of the property portfolio.
3. Distributable earnings
The board of directors ("the board") declared a final dividend of
55.92574 cents per share on 9 May 2017, in addition to the interim
dividend of 54.44 cents per share. This brings the total distribution
for the year ended 28 February 2017 to 110.37 cents per share, which
is a 14.2% growth over the prior year total distribution of 96.6
cents per share. The distribution slightly outperforms the previous
guidance of 12% - 14%.
Dividends declared (cents per share) % change Feb 17 Feb 16
Interim dividends 19.9 54.44 45.42
Final dividend 9.3 55.93 51.18
Total distribution for the period 14.2 110.37 96.60
The net asset value of the company was 1 412 cents per share at
28 February 2017. This amounts to a 9.1% growth on the prior year
closing net asset value of 1 294 cents per share.
4. Material transactions and acquisitions
4.1. Acquisition of EA Waterfall Logistics JV (Pty) Ltd
Equites acquired 8 prime industrial properties from Attacq Limited
("Attacq") through the acquisition of 80% of the shares in EA
Waterfall Logistics (Pty) Ltd. The effective date of the transaction
was 1 July 2016. The portfolio represents exceptional property
fundamentals - all of the properties are modern facilities in an
excellent logistics property location, let to A-grade tenants
on long-dated leases. Attacq is the leading capital growth fund on
the JSE and the relationship forged with Attacq through this joint
venture presents exceptional opportunities for further collaboration
on development opportunities in Gauteng and the Western Cape.
4.2. Expansion to the United Kingdom
Equites is seeking to countenance the instability and uncertainty
relating to the South African economy, currency and political
dispensation, by investing in the UK logistics property sector, a
jurisdiction that offers a mature and stable economic and political
outlook. The UK is one of the leading countries when it comes to
distribution penetration and technology advancement in the
distribution warehousing sector of the property market. The UK is
a sophisticated and transparent market with a constant flow of
quality information on supply and demand assisting informed decision
making.
4.2.1. Acquisition of Tesco Distribution Centre, Hinckley, United Kingdom
Equites acquired its first property in the UK through its Isle of
Man based wholly-owned subsidiary, Equites International Ltd
("Equites International"), which concluded an agreement to acquire a
Tesco Distribution Centre in Hinckley, England for a purchase
consideration of GBP28 million effective June 2016. The transaction
is consistent with Equites' growth and investment strategy of
building a high quality industrial portfolio that promotes capital
growth and increasing income returns in the medium to long term.
The property, which meets modern logistics requirements, is located
in a strategic position just off the A5 in Hinckley in the Golden
Triangle, which is the logistics hub in the United Kingdom. The
building is 27 725 square meter in extent on an 8.21 hectare site
which translates into a coverage of 31.0%. There were 7.5 years
remaining on the lease with Tesco Distribution Ltd., with Tesco PLC
being the guarantor in respect of the obligations of the tenant.
4.2.2. Acquisition of Amazon Distribution Centre, Stoke-On-Trent, United Kingdom
Equites expanded its UK operations further through the acquisition of
a 20 410 square meter distribution centre let to Amazon situated at
Stanley Matthews Way, Trentham Lakes, Stoke-on-Trent. The acquisition
was concluded on the 26 September 2016 for the consideration of GBP17
million and the transaction was concluded off-market.
4.2.3. Acquisition of DSV Distribution Centre, Stoke-On-Trent, United Kingdom
Equites concluded its third acquisition in the UK in terms of which
Equites International acquired a 19 511 square meter distribution
centre let to DSV Solutions Ltd situated at Prologis Park, Sideway,
Stoke-on-Trent, England. The purchase consideration was GBP18 million
and the transaction was concluded off-market. The distribution centre
is in the process of being developed by Prologis on behalf of the
seller and is on track to be completed in June 2017.
4.3. New Epping facility completed
In the prior financial year, the board of Equites approved the
construction of a speculative distribution warehouse development at
160 Gunners Circle, Epping, Cape Town. The modern distribution
facility has a total GLA of 8 133 square meter and was completed
in September 2016. Upon completion of the development, it was let to
an international tenant at a highly attractive yield.
4.4. New Puma Atlantic Hills facility completed
The new Puma South Africa head office and distribution centre at
Atlantic Hills, Durbanville was completed shortly after year end
and the tenant took beneficial occupation in April 2017. The tenant
was an existing tenant of the group - occupying the warehouses and
office buildings at Printer's Way, Montague Gardens. The new
warehouse at Atlantic Hills has a GLA of 17 598 square meter and a
capital value of R163 million on completion. This asset clearly
illustrates the group's ability to engage with existing tenants and
to develop facilities to suit their growing requirements.
4.5. Rohlig-Grindrod distribution centre nearing completion
Equites concluded a joint venture agreement with Grindrod Property
Holdings Limited, a wholly-owned subsidiary of Grindrod Limited,
in terms of which Equites is developing a 28 527 square meter state-
of-art distribution centre and offices for Rohlig-Grindrod
Proprietary Limited, which is an associate of Grindrod Limited. The
Grindrod group, which is listed on the JSE, is a fully integrated
freight logistics and shipping service provider with offices in 43
countries worldwide.
The completed development will be owned in equal shares by Equites
and Grindrod, with each party owning an undivided half share of the
developed property. The development is expected to be completed in
June 2017.
4.6. Land available for development
Following the above transactions, the group has 35.7 hectares of
prime, serviced industrially zoned land available for development
in Cape Town and Gauteng. Equites is pursuing a number of
opportunities for distribution centres on these parcels of land which
will continue to contribute to a healthy development pipeline.
5. Funding
Following a successful accelerated book-build that raised
R1 billion in November 2016, the group ended the year with a
loan-to-value ratio of 21.2%. Combined with undrawn bank loans
of some R1.3 billion, this puts Equites in a strong position to
roll out its pipeline and pursue opportunities as they arise.
Equites continues to take a prudent approach to interest rate
risk, which limited the impact of a 0.25% increase in the repo
rate and increasing bank margins to a 0.12% increase in its
marginal all-in cost of South African debt from 8.99% in the
prior year to 9.11% at year end. 100% of outstanding debt and
committed expenditure is hedged against further interest rate
increases on maturities of nearly 5 years.
Equites also agreed funding arrangements with the Royal Bank of
Scotland and HSBC in the UK to fund its acquisitions in the UK.
100% of UK debt is hedged on 5 year maturities with all in rates
of around 3%.
6. Vacancies
Currently, a 239 square meter portion of one of the commercial
properties is the only vacancy across the portfolio, representing
less than 0.06% of total GLA. Only a small proportion of the group's
leases expire in the next 24 months and management is actively
engaging with the tenants to extend the leases. 2 of the 3 industrial
lease expiring in the year to 28 February 2018 have already been
extended for a further 5 years with the existing tenants and the
group has had a 100% retention rate in the industrial portfolio
since listing. As a testament to the location and quality of the
group's properties, these renewals were not reversionary on passing
rental as a whole.
7. Prospects
The company aims to continue providing investors with pure
exposure to modern logistics properties, an asset class which
has proven its resilience. A focus on strong property fundamentals
and low gearing provides protection from the volatile economic
climate and should enable to company to continue delivering sector
beating returns. Acquisitions of quality logistic assets and
portfolios in South Africa, acquisitions of high quality assets in
the UK and a healthy development pipeline will grow the portfolio
value and distributions above this baseline.
The board is confident that the company will achieve 10%-12%
distribution growth over the next financial year. This guidance is
based on the assumptions that a stable macro-economic environment
will prevail, no major corporate failures will occur, the rand /
pound exchange rate remains materially unchanged and tenants will
be able to absorb the recovery of rising utility costs and municipal
rates. This forecast has not been audited or reviewed by Equites'
auditors.
8. Subsequent events
The following significant subsequent events have occurred since year
end, none of which had an effect on the results in the financial
statements:
The office property Belvedere, situated in Bellville, Cape Town,
which is classified as "held for sale" at the reporting date was
transferred on 2 March 2017. The purchase price was reflective of
the fair value of the property and the sale of the property is in
line with Equites' strategy to focus on logistics properties with
strong fundamentals.
Shortly after the financial year end, the group restructured 3 of its
interest rate swaps into a single instrument with an extended
maturity and lower fixed rate. This new instrument totalling
R550 million now expires in March 2022. The group hedged the LIBOR
component of its equity investment in the UK from October 2021 to
October 2026 at an effective fixed base rate of 1.75%. This fixes the
interest rate on the equity component of the group's investments in
the UK for just short of 10 years.
9. Final dividend
Notice is hereby given of the declaration of the final gross
dividend number 7 of 55.92574 cents per share.
As Equites is a REIT, the dividend meets the definition of a
'qualifying distribution' for the purposes of section 25BB of the
Income Tax Act, No. 58 of 1962 (Income Tax Act). Qualifying
distributions received by South African tax residents will form part
of their gross income in terms of section 10(1)(k)(i)(aa) of the
Income Tax Act. Consequently, these dividends are treated as
income in the hands of the shareholders and are not subject to
dividends withholding tax. The exemption from dividends withholding
tax is not applicable to non-resident shareholders, but they may
qualify for relief under a tax treaty.
Holders of uncertificated shares have to ensure that they have
verified their residence status with their Central Securities
Depository Participant ("CSDP") or broker. Holders of certificated
shares will be asked to complete a declaration to the Company.
The dividend is payable to shareholders in accordance with the
timetable set out below:
2017
Declaration date Tuesday, 9 May
Last day to trade cum dividend distribution Tuesday, 30 May
Shares trade ex dividend distribution 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. In
respect of dematerialised shareholders, the dividend will be
transferred to the CSDP account / broker accounts on Monday,
5 June 2017. Certificated shareholders' dividend payments will be
paid to certificated shareholders' bank accounts on Monday,
5 June 2017.
An announcement with further details regarding the tax treatment of
dividend will be released separately on SENS.
By order of the Board
Equites Property Fund Limited
9 May 2017
Summarised consolidated statement of financial position
Audited Audited
28 February 29 February
2017 2016
R'000 R'000
ASSETS
Non-current assets
Fair value of investment property
(excluding straight-lining) 5 853 590 4 017 578
Straight-lining lease accrual 137 803 93 581
Property, plant and equipment 9 186 1 786
Derivative financial asset 134 632 -
6 135 211 4 112 945
Current assets
Investment property held-for-sale 234 381 -
Trade and other receivables 134 778 62 360
Financial assets held at fair value 3 353 47 100
Cash and cash equivalents 11 042 3 962
383 554 113 422
TOTAL ASSETS 6 518 765 4 226 367
EQUITY AND LIABILITIES
Equity and reserves
Stated capital 4 193 749 3 180 784
Accumulated profit 919 099 438 689
Foreign currency translation reserve (173 374) -
Share-based payment reserve 7 881 1 366
Total attributable to owners 4 947 355 3 620 839
Non-controlling interest 93 535 -
5 040 890 3 620 839
Liabilities
Non-current liabilities
Deferred tax liability - 1 424
Derivative financial liabilities 11 208 -
Financial liabilities 1 086 097 432 221
1 097 305 433 645
Current liabilities
Financial liabilities 285 983 94 103
Trade and other payables 94 587 77 780
380 570 171 883
TOTAL LIABILITIES 1 477 875 605 528
TOTAL EQUITY AND LIABILITIES 6 518 765 4 226 367
Summarised consolidated statement of comprehensive income
Audited Audited
year ended year ended
28 February 29 February
2017 2016
R'000 R'000
Revenue
Contractual revenue and tenant recoveries 458 209 257 026
Straight-lining of leases adjustment 44 222 78 653
502 431 335 679
Other gains 12 095 1 248
Property operating and management expenses (77 408) (42 454)
Net property income 437 118 294 473
Administrative expenses (27 243) (16 627)
Depreciation (483) (346)
Operating profit before financing and fair
value adjustments 409 392 277 500
Fair value adjustments - investment property 309 138 138 529
Fair value adjustments - financial instruments 119 687 4 248
Operating profit before financing activities 838 217 420 277
Finance costs (70 399) (40 074)
Finance income 38 245 3 667
Net profit before tax 806 063 383 870
Income tax expense - -
Profit for the period 806 063 383 870
OTHER COMPREHENSIVE INCOME
Items that may subsequently be reclassified to profit
or loss - translation of foreign operations (173 374) -
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 632 689 383 870
PROFIT ATTRIBUTABLE TO:
Owners of the parent 784 746 383 870
Non-controlling interest 21 317 -
806 063 383 870
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO:
Owners of the parent 611 372 383 870
Non-controlling interest 21 317 -
632 689 383 870
Basic earnings per share (cents) 264.4 230.6
Diluted earnings per share (cents) 263.3 229.9
Summarised consolidated statement of cash flows
Audited Audited
year ended year ended
28 February 29 February
2017 2016
R'000 R'000
Cash flows from operating activities
Profit before tax 806 063 383 870
Adjusted for:
Finance costs 70 399 40 074
Finance income (38 245) (3 667)
Straight-lining of leases adjustment (44 222) (78 653)
Fair value adjustments (428 825) (138 529)
Foreign exchange differences 28 974 -
Depreciation 483 346
Share based payment charge 6 515 1 165
Increase in trade and other receivables (70 242) (44 573)
Increase in trade and other payables 15 993 16 566
Cash generated from operations 346 893 176 599
Finance costs paid (134 050) (65 484)
Finance income received 38 245 606
Tax paid - 91
Dividends paid (305 134) (105 396)
Net cash flows from operating activities (54 046) 6 417
Cash flows utilised by investing activities
Acquisition of investment properties (1 356 594) (398 246)
Development of investment property (341 130) -
Proceeds from disposal of investment property 232 746 -
Cash acquired as part of acquisition - 20 807
Investment in financial instrument - (180 000)
Amount including interest received from sale
of financial instrument - 144 000
Purchase and development of Property, Plant
and Equipment (6 231) (285)
Net cash flows utilised by investing activities (1 471 209) (413 725)
Cash flows from financing activities
Proceeds from share issue (net of costs) 992 502 1 491 268
Proceeds from bank loans 2 288 722 1 482 532
Bank loans repaid (1 797 837) (2 566 112)
Proceeds from financial instruments held at
fair value 43 747 -
Disposal of financial instruments held at fair value (3 737) -
Increase in other borrowings 8 938 -
Net cash flows from financing activities 1 532 335 407 688
Net increase in cash and cash equivalents 7 080 380
Effect on exchange rate movements in cash and
cash equivalents - -
Cash and cash equivalents at the beginning
of the period 3 962 3 582
Cash and cash equivalents at the end of the year 11 042 3 962
Summarised consolidated statement of changes in equity
Audited February 2016
Foreign
currency
Stated Retained translation
capital earnings reserve
Audited R'000 R'000 R'000
Balance at 1 March 2015 1 140 599 160 215 -
Total comprehensive income - 383 870 -
Shares issued for cash 1 500 000 - -
Shares issued for property and
subsidiary acquisitions 548 917 - -
Equity-settled share-based
payment charge - - -
Dividends distributed to shareholders - (105 396) -
Share issue costs (8 732) - -
Balance at 29 February 2016 3 180 784 438 689 -
Audited February 2016
Total Non-
Equity attributable controlling
reserve to parent Interest Total
Audited R'000 R'000 R'000 R'000
Balance at 1 March 2015 201 1 301 015 - 1 301 015
Total comprehensive income - 383 870 - 383 870
Shares issued for cash - 1 500 000 - 1 500 000
Shares issued for
property and subsidiary
acquisitions - 548 917 - 548 917
Equity-settled share-based
payment charge 1 165 1 165 - 1 165
Dividends distributed to
shareholders - (105 396) - (105 396)
Share issue costs - (8 732) - (8 732)
Balance at
29 February 2016 1 366 3 620 839 - 3 620 839
Audited February 2017
Foreign
currency
Stated Retained translation
capital earnings reserve
Audited R'000 R'000 R'000
Balance at 1 March 2016 3 180 784 438 689 -
Total comprehensive income - 784 746 -
Other comprehensive income - - (173 374)
Shares issued for cash 1 000 000 - -
Shares issued for property and
subsidiary acquisitions 20 463 - -
Equity-settled share-based payment charge - - -
Acquisition of EA Waterfall
Logistics JV (Pty) Ltd - - -
Dividends distributed to shareholders - (304 336) -
Share issue costs (7 498) - -
Balance at 28 February 2017 4 193 749 919 099 (173 374)
Audited February 2017
Total Non-
Equity attributable controlling
reserve to parent Interest Total
Audited R'000 R'000 R'000 R'000
Balance at 1 March 2016 1 366 3 620 839 - 3 620 839
Total comprehensive income - 784 746 21 317 806 063
Other comprehensive income - (173 374) - (173 374)
Shares issued for cash - 1 000 000 - 1 000 000
Shares issued for property
and subsidiary acquisitions - 20 463 - 20 463
Equity-settled share-based
payment charge 6 515 6 515 - 6 515
Acquisition of EA Waterfall
Logistics JV (Pty) Ltd - - 73 016 73 016
Dividends distributed
to shareholders - (304 336) (798) (305 134)
Share issue costs - (7 498) - (7 498)
Balance at
28 February 2017 7 881 4 947 355 93 535 5 040 890
Summarised operating segment information
Segments are reported in a manner that is consistent with the internal
reporting provided to the chief operating decision maker ("CODM"), which
comprises the three executive directors. With the expansion into the UK
market, the CODM reviews the operating segments based on location as well as
asset class and reviews an additional segment which includes treasury,
corporate and other administrative functions. The UK operations commenced in
April 2016, therefore there are no comparative segmental results.
Audited Audited
year ended year ended
28 February 29 February
2017 2016
R'000 R'000
Revenue
SA industrial 383 293 214 777
SA office 43 803 42 249
UK industrial 31 113 -
Non-property - -
458 209 257 026
Operating profit
SA industrial 396 402 267 958
SA office 23 304 26 515
UK industrial 16 929 -
Non-property (27 243) (16 627)
409 392 277 846
Total assets
Industrial 5 314 766 4 022 776
Office 392 769 152 529
UK industrial 794 823 -
Non-property 16 407 51 062
6 518 765 4 226 367
Total liabilities
Industrial 1 231 011 566 412
Office 11 316 6 896
UK industrial 235 547 -
Non-property - 32 220
1 477 874 605 528
Selected explanatory notes to the results
1. Basis of preparation
The preliminary summarised consolidated financial statements are
prepared in accordance with the requirements of the JSE Limited
Listings Requirements for preliminary reports, and the requirements
of the Companies Act applicable to summary financial statements.
The Listings Requirements require preliminary reports to be prepared
in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards
(IFRS) and Financial Pronouncements as issued by the Financial
Reporting Standards Council and to also, as a minimum, contain the
information required by IAS 34 Interim Financial Reporting. The
accounting policies applied in the preparation of the consolidated
financial statements from which the summarised consolidated financial
statements were derived are in terms of International Financial
Reporting Standards and are consistent with those accounting policies
applied in the preparation of the previous consolidated annual
financial statements, except for the adoption of revised and new
standards that became effective during the year. There was no
material impact on the annual financial statements as a result
of the adoption of these standards.
These summarised consolidated financial statements for the year
ended 28 February 2017 have been audited by PricewaterhouseCoopers
Inc., who expressed an unmodified opinion thereon. The auditor
also expressed an unmodified opinion on the annual financial
statements from which these summary consolidated financial
statements were derived.
A copy of the auditor's report on the summarised consolidated
financial statements and of the auditor's report on the annual
consolidated financial statements are available for inspection
at the company's registered office, together with the financial
statements identified in the respective auditor's reports.
The directors take full responsibility for the preparation of
the preliminary summarised consolidated financial statements and
for ensuring that the financial information has been correctly
extracted from the underlying audited annual financial statements.
The auditor's report does not necessarily report on all of the
information contained in this announcement/financial results.
Shareholders are therefore advised that in order to obtain a full
understanding of the nature of the auditor's engagement they should
obtain a copy of the auditor's report together with the accompanying
financial information from the issuer's registered office.
Bram Goossens (CA) SA, in his capacity as Financial Director, was
responsible for the preparation of these summarised consolidated
financial results.
2. Earnings per share - group
This note provides the obligatory information in terms of IAS 33
Earnings per share and SAICA Circular 2/2015 for the group and should
be read in conjunction with note 3, where earnings are reconciled to
distributable earnings. Distributable earnings determine the dividend
declared to shareholders, which is a meaningful metric for a stakeholder
in a REIT.
2.1 Basic earnings per share
2017 2016
Number Number
Shares in issue of shares of shares
Number of shares in issue at end of year 350 465 000 279 862 466
Weighted average number of shares in issue 296 765 842 166 498 769
Add: weighted potential dilutory impact
of conditional shares 1 279 089 466 308
Diluted weighted average number of
shares in issue 298 044 931 166 965 077
Basic earnings per share cents cents
Basic earnings per share 264.4 230.6
Diluted earnings per share 263.3 229.9
2.2 Headline earnings per share
Year ended Year ended
28 February 29 February
2017 2016
Reconciliation between basic earnings
and headline earnings: R'000 R'000
Earnings (profit attributable to owners of
the parent) 784 746 383 870
Adjusted for:
Fair value adjustments to investment
properties (excluding non-controlling
interest of R14 816 000) (294 322) (138 529)
Headline earnings 490 424 245 341
Headline earnings per share: cents cents
Headline earnings per share 165.3 147.4
Diluted headline earnings per share 164.5 146.9
3. Reconciliation between earnings and distributable earnings - group
3.1 Distributable earnings
Year ended Year ended
28 February 29 February
2017 2016
R'000 R'000
Earnings (profit attributable to
owners of the parent) 784 746 383 870
Adjusted for:
Fair value adjustments to investment
properties (294 322) (138 529)
Headline earnings 490 424 245 341
Adjusted for:
Straight-lining of leases adjustment (41 533) (78 653)
Fair value adjustments to financial
instruments (119 687) (4 248)
Equity-settled share-based payment reserve 6 515 1 165
Income of a capital nature not distributable (8 993) -
Antecedent dividend* 21 930 37 759
Distributable earnings 348 657 201 364
*In the determination of distributable
earnings, the group elects to
make an adjustment for the antecedent dividend
arising as result of the issue of shares
during the period for which the company
did not have full access to the cash flow
from such issue. The group issued shares
pursuant to the accelerated book-build on
1 December 2016 and in relation to certain
property acquisitions. These transactions
gave rise to antecedent dividends
included above.
Number of shares in issue at period-end 350 465 000 279 862 466
3.2 Dividends declared and distribution per share
Total distribution for the year - 2017
Cents
per share R'000
Interim dividend declared on 15 October 2016
(Dividend number 6) 54.44 152 523
Final dividend declared on 9 May 2017
(Dividend number 7) 55.93 196 001
Total distribution for the year ended
28 February 2017 110.37 348 524
Total distribution for the year - 2016
Cents
per share R'000
Special clean-out distribution declared
on 10 September 2015 (Dividend number 3) 29.03 33 218.00
Interim dividend declared on 15 October 2015
(Dividend number 4) 16.39 24 923.54
Final dividend declared on 5 May 2016
(Dividend number 5) 51.18 143 222.00
Total distribution for the year ended
29 February 2016 96.60 201 364
28 February 29 February
2017 2016
R'000 R'000
4. Investment property
Investment property
Investment property (note 4.1) 5 287 942 3 524 981
Investment property under development (note 4.2) 188 768 126 296
Freehold land available for development
(note 4.3) 376 880 366 301
Investment property held for sale (note 4.4) 234 381 -
Straight-lining lease accrual 137 803 93 581
6 225 774 4 111 159
4.1 Reconciliation of investment property
Opening balance 3 524 981 1 402 549
Additions arising from acquisitions 1 818 230 1 855 588
Capitalised costs 115 954 -
Completed projects transferred from investment
property under development 214 124 146 415
Redevelopment site transferred to investment
property under development - (18 100)
Investment property transferred to held for sale (234 381) -
Disposal of Investment Property (232 746) -
Foreign exchange movement (227 358) -
Fair value adjustment 309 138 138 529
Fair value of investment properties
(excluding straight-lining) 5 287 942 3 524 981
4.2 Investment properties under development
Opening balance 126 296 -
Land cost and transfer of redevelopment site 147 940 159 677
Construction and development costs 128 656 113 034
Completed projects transferred to
investment property (214 124) (146 415)
Cost of investment properties under development 188 768 126 296
4.3 Freehold land available for development
Opening balance 366 301 14 400
Acquisition of Land 14 033 349 518
Land transferred to property, plant and equipment (1 652) -
Land transferred to investment property
under development (147 940) -
Construction and development costs 146 138 2 383
Cost of freehold land available for development 376 880 366 301
4.4 Investment property held for sale
Opening balance - -
Transferred from investment property* 234 381 -
Fair value of investment properties
held for sale 234 381 -
*investment property held for sale consist of 3 commercial buildings
which are expected to be transferred shortly after year-end
5. Property analysis
5.1 Tenant profile
Gross Gross Number Number
lettable lettable of of
area area tenants tenants
(square meter) % %
A - Large nationals,
large listeds and
government 359 688 91.7% 39 68.4%
B - Smaller international
and national tenants 22 569 5.8% 7 12.3%
C - Other local
tenants and sole
proprietors 9 591 2.4% 11 19.3%
Vacant 239 0.1% - 0.0%
392 087 100.0% 57 100.0%
5.2 Vacancy profile
Gross
lettable Vacant
area area
(square (square Vacancy
meter) meter) %
Industrial 386 907 - 0.0%
Commercial 5 180 239 4.6%
392 087 239 0.1%
5.3 Lease expiry profile
Based on Based
Lease expiry profile revenue on GLA
Monthly 0.0% 0.1%
Expiry in the year to 28 February 2018 2.3% 7.2%
Expiry in the year to 28 February 2019 7.6% 7.9%
Expiry in the year to 28 February 2020 10.0% 8.4%
Expiry in the year to 29 February 2021 3.8% 2.2%
Expiry in the year to 28 February 2022 6.2% 7.3%
Thereafter 70.1% 66.9%
100.00% 100.00%
5.4 Weighted average escalations and yield
Sector Yield Escalation
South Africa - Industrial 7.9% 7.9%
South Africa - Commercial 8.3% 8.3%
8.2% 8.0%
United Kingdom - Industrial* 6.1% n/a
*The leases for properties in the United Kingdom leases are structured
with five year annual rent reviews and not fixed annual escalations
28 February 29 February
2017 2016
R'000 R'000
6. Capital commitments
Authorised and contracted for construction
of new industrial property 303 129 301 858
Authorised and contracted for improvements
to existing property 20 966 -
Authorised but not contracted 95 106 -
419 201 301 858
7. Related parties
Related party relationships exist between the
company, its subsidiaries, directors as well
as their close family members, and key management
of the company.
In the ordinary course of business, the
company entered into the following other
transactions with related parties:
Dividend paid to related party shareholders 55 840 39 450
Settlement in respect of Mill Street Floor
warrantee from Chiluan (Pty) Ltd and Skymax
Trust in which Andrea Taverna-Turisan is a
director and Giancarlo Lanfranchi is a
trustee 2 018 -
Fees paid to BTKM (Pty) Ltd (in which
Nazeem Khan is a Director) 4 587 1 076
8. Fair value measurement
All assets and liabilities measured at fair value are classified using a
three-tiered fair value hierarchy that reflects the significance of the
inputs used in determining the measurement as follows:
Level 1 - measurements in whole or in part are done by reference to
unadjusted, quoted prices in an active market for identical assets and
liabilities. Quoted prices are readily available from an exchange,
dealer, broker, industry group, pricing service or regulatory agency and
those prices represent actual and regularly occurring market
transactions on an arm's length basis.
Level 2 - measurements are done by reference to inputs other than quoted
prices that are included in level 1.
These inputs are observable for the financial instrument, either
directly (i.e. as prices) or indirectly (i.e. from derived prices).
Level 3 - measurements are done by reference to inputs that are not
based on observable market data.
Assets at fair value at 28 February 2017 Company Group
R'000 R'000
Level 1
None - -
Level 2
Financial assets at fair value 3 353 3 353
Derivative financial asset 134 632 134 632
Derivative financial liability 9 047 11 208
Level 3
Non-financial assets at fair value - investment
properties (note 4) 1 039 294 5 492 795
Derivative assets and liabilities
Interest rate and cross-currency swaps
The fair value is calculated as the present value of the estimated
future cash flows. Estimates of future floating-rate cash flows are
based on quoted swap rates, futures prices and interbank borrowing
rates. Estimated cash flows are discounted using a yield curve
constructed from similar sources which reflects the relevant benchmark
interbank rate used by market participants for this purpose when
pricing interest rate swaps. The fair value estimate is subject to a
credit risk adjustment that reflects the credit risk of the Group and of
the counterparty. This is calculated based on credit spreads derived
from current credit default swap or bond prices.
The key input to the valuation of investment property is the
capitalisation rate. The table below illustrates the sensitivity of the
fair value to changes in the capitalisation rate:
Sensitivity analysis to capitalisation rates Company Group
R'000 R'000
Increase in fair value if capitalisation
rates are decrease by 0.1% 14 618 76 461
Decrease in fair value if capitalisation
rates are increased by 0.1% (14 195) (74 346)
There were no transfers between Level 1, 2 or 3 during the year.
Assets at fair value at 29 February 2016 Company Group
R'000 R'000
Level 1
None
Level 2
Financial assets at fair value 47 100 47 100
Derivative financial asset 3 737 3 737
Level 3
Non-financial assets at fair value - investment
properties (note 4) 855 315 4 111 159
The key input to the valuation of investment property is the
capitalisation rate. The table below illustrates the sensitivity of the
fair value to changes in the capitalisation rate:
Sensitivity analysis to capitalisation rates Company Group
R'000 R'000
Increase in fair value if capitalisation rates
are decrease by 0.5% 39 197 317 098
Decrease in fair value if capitalisation rates
are increased by 0.5% (34 869) (274 546)
There were no transfers between Level 1, 2 or 3 during the year.
Administration
Directors
A Taverna-Turisan (CEO)^, G.R. Gous (COO), B Goossens (CFO),
P.L. Campher*+ (Chairman), G Lanfranchi* (Deputy Chairman),
A.J. Gouws*, K Dreyer*, N Khan*+, R.E. Benjamin-Swales*+,
M.E. Brey *+, G. Mtetwa *+
*Non-executive
+Independent
^Italian
Registered office
14th Floor
Portside Towers
4 Bree Street
Cape Town
8000
Contact details
info@equites.co.za
Company secretary
Riaan Gous
Transfer secretary
Terbium Financial Services Proprietary Limited
Auditors
PricewaterhouseCoopers Inc.
Sponsor
Java Capital
Bankers
Nedbank Limited
Attorneys
Cliffe Dekker Hofmeyr Inc.
Date: 10/05/2017 07:20:00 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 
