Wrap Text
Unaudited condensed consolidated interim results for the six months ended 31 March 2017
Arrowhead Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 2011/000308/06)
JSE share code: AWA ISIN: ZAE000203105
(Approved as a REIT by the JSE)
("Arrowhead" or "the company" or "the group")
ARROWHEAD PROPERTIES INTERIM RESULTS 2017
UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 MARCH 2017
Full year dividend forecast on track
Successful disposal of 100 smaller non-core properties to Gemgrow
NAV growth of 23% to R11,32
Defensive and diversified South African portfolio
NATURE OF BUSINESS
Arrowhead is a Real Estate Investment Trust ("REIT") holding directly a diverse portfolio of office, retail and industrial properties valued at
R5,6 billion. In addition, as at 31 March 2017, Arrowhead held a 59,7% interest (2016: 60,1%) in Indluplace Properties Limited ("Indluplace"),
which owns a portfolio of residential properties. Arrowhead also owned 61,7% of the B-ordinary shares in Gemgrow Properties Limited
("Gemgrow"), equivalent to 55,2% of Gemgrow, which owns a diverse portfolio of office, retail and industrial properties.
Arrowhead also held an interest of 19,48% in Rebosis Property Fund Limited ("Rebosis") as well as a 11,3% interest in Dipula Income Fund
Limited ("Dipula") at 31 March 2017.
The company's main focus is on paying growing income returns to its investors. This is achieved through escalating rentals in terms of leases
with tenants, satisfactory renewal of leases with existing tenants, renting of vacant space within the property portfolio, managing and reducing,
where possible, costs associated with the property portfolio and by acquiring revenue enhancing properties and investments in other REITS.
CONDENSED consolidated financial results
FOR THE SIX MONTHS ENDED 31 MARCH 2017
R'000 2017 2016
Revenue (excluding straight line rental income) 959 324 743 681
Listed securities income 95 893 20 097
Property expenses (360 780) (270 655)
Administration and corporate costs (23 809) (15 333)
Finance expenses (193 283) (111 003)
Finance income 39 940 27 337
Pre-effective date dividend# 19 162 -
Non-controlling interest profits elimination (net of antecedent income) (126 089) (40 765)
Distributable income 410 358 353 359
Antecedent income - 26 145
Antecedent income - subsidiary - 2 316
Accrued dividend on listed securities 120 926 32 220
Listed securities income recognised in previous reporting period (95 893) (19 796)
Total dividend 435 391 394 244
Dividend to the Arrowhead Charitable Trust* 13 404 12 645
Total dividend after effects of Arrowhead Charitable Trust 448 795 406 889
* Dividend to the Arrowhead Charitable Trust is added back as it is eliminated on consolidation
# Pre-effective date dividend is in respect of the dividend declared by Gemgrow as regards the income
earned by Gemgrow on the Cumulative portfolio prior to the accounting effective date.
Property expenses as a percentage of revenue - gross 38% 36%
Property expenses as a percentage of revenue - net 16% 13%
Dividend for the quarter ended 31 December 222 218 198 995
Dividend for the quarter ended 31 March 226 577 207 894
Total dividend 448 795 406 889
Dividend per share (cents) for the quarter ended 31 December 2016 21,41 20,03
Dividend per share (cents) for the quarter ended 31 March 2017^ 21,83 20,76
43,24 40,79
Net asset value per share (cents) 1132,84 923,11
^The dividend was declared on 24 May 2017
COMMENTARY
REVENUE
Revenue includes rental income and expenditure that is recoverable from tenants.
The substantial increase in revenue is due to the effect of the Gemgrow transaction concluded during the period under review as well as
annual escalations to existing leases. In addition, Indluplace acquired R30,2 million worth of residential property.
At 30 September 2016, Arrowhead owned 153 retail, office and industrial ("commercial") properties directly and 116 residential properties
indirectly through Indluplace. At 31 March 2017 Arrowhead owned 51 commercial properties directly, 129 commercial properties indirectly through
Gemgrow and 117 residential properties indirectly through Indluplace.
Arrowhead's direct property portfolio comprises 53% by value of retail properties, 39% of office buildings and 8% of industrial buildings.
The average gross monthly rental per m² per sector is R127 for retail, R116 for office and R44 for industrial. Vacancies have increased
from 7,8% at 30 September 2016 to 10,8% at 31 March 2017 (retail 7,29%, office 15,87% and industrial 15,19%). The increased vacancies are a
direct result of Sasol vacating the 1 Sturdee Avenue building in Rosebank (13 350 m²) as well as Kit Group (6 278 m²) vacating the Maboneng
building. Notwithstanding the difficult economic environment we are presently operating in, we have re-let the Kit Group property to a new
tenant with effect from 1 May 2017. We have also adopted a new strategy in sourcing tenants for the 1 Sturdee Avenue building and have recently
completed an interior upgrade on a small section of the building, including an upgrade of the reception area, to evidence the potential that
the space has. The result of the minimal interior upgrade has transformed the space completely and has had the desired effect. We have now received
our first written offer for approximately a third of the space and are in advanced discussions with a second potential tenant on a significant
portion of the building.
During the period leases in respect of 56 518m² of gross lettable area ("GLA") expired of which 52% was renewed with the 2 buildings discussed
above being the main reason for the low rate of renewal. Average rental escalations of 3% (office 0%, retail 13,5%, industrial -31%) have been
achieved on lease renewals across the property portfolio. A large industrial warehouse of approximately 4 616 m2 was renewed at market rental.
The average lease profile across the portfolio is 3,84 years.
6 MONTH LETTING REPORT (EXCLUDING INDLUPLACE AND GEMGROW PORTFOLIO)
Total (m(2)) Let (m(2)) Vacant (m(2)) Let (%) Vacant (%)
As at 1 October 2016 905 149 835 143 70 006 92,27 7,73
Disposal to Cumulative (353 942) (316 736) (37 206)
Acquisitions - - -
Disposals (4 392) (4 392) -
Net adjustments (761) (348) (413)
Adjusted totals 546 054 513 667 32 387 94,07 5,93
Net (loss)/gain - (26 818) 26 818
As at 31 March 2017 546 054 486 849 59 205 89,16 10,84
LISTED SECURITIES INCOME
Listed securities income comprises income received on shares held in Dipula and Rebosis. During the current financial period, Arrowhead increased its
holding in Rebosis to 19,48%. This investment was made on a distribution enhancing basis for Arrowhead.
In this reporting period, Arrowhead has recognised the anticipated dividends receivable in respect of Dipula and Rebosis in the form of an adjustment
in the distributable earnings reconciliation.
OPERATING COSTS
TOTAL TOTAL
R'000 2017 (%) 2016 (%)
Municipal expenses 212 968 59 166 874 62
Property management 30 713 9 23 923 9
Security 18 359 5 14 730 5
Repairs and maintenance 17 313 5 12 044 4
Letting commission 7 281 2 4 980 2
Cleaning 14 491 4 8 067 3
Insurance 2 163 1 3 234 1
Other 57 492 15 36 803 14
Total 360 780 100 270 655 100
Municipal expenses have increased in line with the increased revenue. The gross expense to income ratio has increased from 36,0% to 38,0%. The net
expense to income ratio increased from 13% to 16%. This is in line with the increased portfolio and increases in the expense ratio for Indluplace
resulting from the mix of the property portfolio.
ADMINISTRATIVE EXPENSES AND CORPORATE COSTS
TOTAL TOTAL
R'000 2017 (%) 2016 (%)
Salaries 13 465 57 11 431 75
Professional service fees 3 954 17 1 791 12
Other 6 390 26 2 111 13
Total 23 809 100 15 333 100
There has been an increase in headcount pursuant to the Gemgrow transaction in terms of which the additional cost in respect of the Gemgrow directorate
is included.
FINANCE INCOME
R'000 2017 % OF TOTAL 2016 % OF TOTAL
Interest on group share purchase and option schemes 35 664 89 24 428 89
Interest on cash balances and tenants 4 276 11 2 909 11
Total 39 940 100 27 337 100
Interest on the group share purchase and option schemes is on outstanding balances of the loans granted to participants of the Arrowhead Share Purchase
and Option Scheme, the Indluplace Share Purchase and Option Scheme, and the Gemgrow group loans to executives.
FINANCE CHARGES
R'000 2017 % OF TOTAL 2016 % OF TOTAL
Interest paid - secured financial liabilities 191 934 99 109 111 98
Amortisation of structuring fee and other interest paid 1 349 1 1 892 2
Total 193 283 100 111 003 100
Finance charges increased from R111,0 million to R193,3 million which is in line with increased facilities in accordance with the growth of
the portfolio, and taking current interest rate increases into consideration.
INVESTMENT PROPERTIES
The company owns a portfolio of 51 retail, industrial and office properties, and indirectly through Gemgrow has exposure to 129 retail, industrial and
office properties. The company further indirectly has exposure to 117 residential properties through Indluplace, comprising of 5 511 units. The Arrowhead
direct portfolio is valued at R5,6 billion, and located in all nine provinces in South Africa. The average value per property as at 31 March 2017 was
R111 million (2016: R49,2 million).
ANALYSIS OF MOVEMENT IN INVESTMENT PROPERTY
PROPERTY PORTFOLIO RESIDENTIAL PORTFOLIO* TOTAL
NO. OF NO. OF NO. OF
BUILDINGS R'000 BUILDINGS R'000 BUILDINGS R'000
Balance at the beginning of the year 153 7 581 276 116 2 391 762 269 9 973 038
Acquisitions, additions and fair value adjustments - 28 054 1 30 594 1 58 648
Disposal to Gemgrow (100) (1 893 300) - - (100) (1 893 300)
Gemgrow transaction 129 4 325 100 - - 129 4 325 100
Disposals (2) (62 499) - - (2) (62 499)
Balance at the end of the period 180 9 978 631 117 2 422 356 297 12 400 987
ARROWHEAD DISPOSED OF THE FOLLOWING DURING THE PERIOD:
Property disposals
PROPERTY NAME PROVINCE SECTOR SOLD R
Tyrwitt Avenue Gauteng Office 16 March 2017 36 000 000
Pentagraph Building Gauteng Commercial 20 December 2016 26 500 000
62 500 000
NET INCOME GROWTH ON PROPERTIES OWNED AT 1 OCTOBER 2015 AND STILL OWNED ON 31 MARCH 2017
1 OCTOBER 2016 TO 1 OCTOBER 2015 TO
31 MARCH 2017 31 MARCH 2016
DESCRIPTION R'000 R'000 GROWTH (%)
Revenue 409 973 392 005 4,58
Property Expenses (152 038) (142 260) 6,87
Net Operating Income 257 935 249 745 3,28
Assuming a gearing ratio on the portfolio of 25% and an annual effective interest rate of 9,2%, the total growth in distributable income for the year
ending 30 September 2017, should be 4,30%. The core portfolio now includes all properties (except the residential properties) that were owned for a
full two-year period from 1 October 2015 and still owned at 31 March 2017. The core portfolio represents 91% of the retail, industrial and office
portfolios (by value).
LOANS TO PARTICIPANTS OF GROUP SHARE PURCHASE AND OPTION SCHEMES
This is in respect of loans to the participants of the Arrowhead and Indluplace share purchase and option schemes and the loans to the Gemgrow
Group executives. The increase from R540,6 million to R652,6 million is as a result of loans issued to participants of the Arrowhead and
Indluplace share purchase scheme and the loan to the Gemgrow Group executives to the value of R280,4 million. During the period under review the
loan of the late Mr Leissner amounting to R168,4 million was settled through the disposal of his shares. The loans bear interest either at
the company's effective rate of borrowings (in respect of earlier loans in Arrowhead) and bear interest at a rate equal to the dividend of the
company (in respect of more recent loans in Arrowhead, Gemgrow and Indluplace) and are secured by a cession of the shares.
TRADE AND OTHER RECEIVABLES
Trade receivables, deposits, other receivables and payments in advance increased from R80,9 million to R165,8 million mainly as a result of growth
in the portfolio. The increase also arises from the Gemgrow transaction where some amounts receivable are reflected in adjustment accounts.
The balance outstanding has increased from the prior year due to the enlarged property portfolio. Bad debts amounting to R0,5 million have
been written off during the period under review, whilst the provision for bad debt increased from R8,7 million to R10,0 million.
SECURED FINANCIAL LIABILITIES
The loans of R4,2 billion (2016: R3,1 billion) measured against investment properties of R12,4 billion (2016: R10,0 billion) represents a loan to
value of 27,8% (2016: 27,5%). The interest rate swaps of R2,9 billion and the fixed rate loan of R717 million results in interest on R3,6 billion
of the total R4,2 billion being fixed. This equates to 86,0% of the total borrowings.
Excess funds are placed in an access facility to reduce the overall interest charge. The effective interest rate for
the period ended 31 March 2017 was 9,53% (30 September 2016: 9,35%).
CAPITAL
1 MONTH JIBAR* 3 MONTH JIBAR* PRIME RATE^ 31 MARCH 2017
MATURITY FIXED RATE % MARGIN % MARGIN % MARGIN % R'000
May 2017 (Gemgrow) 9,14 - - - 90 000
May 2017 (Gemgrow) 8,36 - - - 146 705
May 2017 (Gemgrow) - 2,30 - - 28 295
May 2017 (Gemgrow) - 1,65 - - 25 043
June 2017 (Gemgrow) - - - Minus 1,5 234 990
August 2017 - - - Minus 1,5 200 000
September 2017 (Gemgrow) - - - Minus 1,6 50 000
March 2018 - - - Minus 1,4 165 520
March 2018 - - 2,10 - 280 000
April 2018 - - - Minus 1,6 91 989
October 2018 (Gemgrow) - - - Minus 1,5 200 674
December 2018 - - 1,77 - 300 000
April 2019 - - 1,77 - 270 000
April 2019 - - 2,10 - 60 000
June 2019 - - - Minus 1,4 51 000
September 2019 (Indluplace) - - - Minus 1,3 159 000
September 2019 (Gemgrow) - - 2,35 - 139 000
September 2019 (Gemgrow) - - - Minus 1,1 59 000
November 2019 - - 1,75 - 610 000
March 2020 9,37 - - - -
March 2020 - - 2,08 - 480 000
August 2021 - - 2,10 - 276 679
October 2021 - - 2,10 - 159 183
December 2021 - - 2,10 - 112 450
Total exposure 4 189 528
ARROWHEAD INDLUPLACE GEMGROW TOTAL
Maturity Date Capital Amount (R'000) Capital Amount (R'000) Capital Amount (R'000) Capital Amount (R'000)
2017 200 000 - 575 033 775 033
2018 837 509 - 200 674 1 038 183
2019 991 000 159 000 198 000 1 348 000
2020 480 000 - - 480 000
2021 548 312 - - 548 312
3 056 821 159 000 973 707 4 189 528
The group has further entered into interest rate swaps to hedge its exposure to fluctuations in interest rates of its debt as follows:
ARROWHEAD PROPERTIES GEMGROW PROPERTIES INDLUPLACE PROPERTIES
Notional Amount (R) Maturity Date Notional Amount (R) Maturity Date Notional Amount (R) Maturity Date
140 000 000 2017/08/15 60 000 000 2017/06/01 150 000 000 2019/09/02
35 000 000 2017/08/15 50 000 000 2017/06/01 150 000 000
189 604 549 2018/03/31 50 000 000 2019/02/19
72 947 536 2018/05/31 40 000 000 2019/02/19
629 000 000 2019/03/31 40 000 000 2019/07/01
113 163 478 2019/06/17 40 000 000 2019/07/01
595 000 000 2019/09/02 80 000 000 2019/09/30
275 000 000 2021/08/25 50 000 000 2020/09/01
65 729 120 2021/10/19 410 000 000
41 681 461 2021/10/25
51 772 355 2021/10/27
112 450 223 2021/12/15
2 321 348 722
BUSINESS COMBINATION
The company acquired a 55,2% interest in Gemgrow, on 25 October 2016, in exchange for a 100% shareholding in Cumulative which
had investment property of R1,9 billion at the date of the transaction. The company was consolidated into the group's result from the effective
date, being 25 October 2016. Included in the group's results is revenue of R314,9 million and profit before tax of R148,4 million. If the transaction
was concluded on 1 October 2016 the revenue would have been R335,9 million and the profit R167,8 million.
The rationale of the transaction is to establish a high yield, high growth fund with a dual-class share capital structure which will present an exciting
proposition for income-focused property investors and it is expected to result in renewed interest in and tradability of both the "A" and "B" shares.
The goodwil arose as a result of R160 618 654 paid as consideration for Vukile Asset Management Proprietory Limited which had Rnil net asset
value at the date of the transaction, for the effective internalisation of Synergy's asset management function.
AMOUNTS
DESCRIPTION R'000
Investment property 4 344 736
Deferred capital expenditure 601
Trade and other receivables 40 512
Current tax asset 2 012
Derivative financial instruments 107
Cash and cash equivalents 23 738
Secured financial liabilities (936 900)
Derivative financial instruments (5 673)
Trade and other payables (84 340)
NET ASSETS ACQUIRED 3 384 793
Non-controlling interest (1 491 494)
Share issue cost 6 627
Consideration shares issued Arrowhead (1 899 927)
VAM shares issued (160 618)
GOODWILL RECOGNISED (160 619)
NET CASH ACQUIRED 23 738
CHANGE IN DIRECTORATE
As released on SENS on 19 December 2016, Gerald Leissner, Arrowhead co-founder and Chief Executive Officer, passed away on Friday, 16 December 2016.
On 16 January 2017, Mark Kaplan was appointed as the new Chief Executive Officer.
PROSPECTS
South Africa has experienced a protracted term of political uncertainty which has negatively impacted economic prospects and GDP growth. Over the
course of the last 18 months we have seen the effects of the higher cost of equity, cost of debt and a deterioration in the general economic sentiment.
This has had the effect of impacting on the ability to fill vacant space, renew leases and has heightened competition between property owners for
the existing pool of tenants.
The economic conditions have also impacted on the ability to implement acquisitions due to a misalignment of pricing expectation between vendors
and purchasers. In the current year we have seen the gap between vendors and purchasers narrowing and funding costs moving in the right direction.
This has resulted in a potential acquisition pipeline particularly in Indluplace and Gemgrow.
We have nonetheless been able to achieve a satisfactory performance from the portfolio. The company is on track to meet its dividend forecast
for the year ending 30 September 2017.
SUMMARY OF FINANCIAL PERFORMANCE
UNAUDITED FOR THE 6 MONTHS ENDED UNAUDITED FOR THE 6 MONTHS ENDED
31 MARCH 2017 31 MARCH 2016
Dividend per Arrowhead share (cents) 43,24 40,79
Arrowhead ordinary shares in issue^ 1 037 915 775 993 483 619
Net asset value per share at reporting date (cents) 1132,84 923,11
Loan to value ratio 27,8% 27,5%
^ Includes shares issued to the Arrowhead Charitable Trust.
* After the reporting period no additional shares were issued.
PAYMENT OF DIVIDEND FOR THE QUARTER ENDED 31 MARCH 2017
The board of directors ("Board") has approved a gross dividend (dividend number 22) of 21,83000 cents per share for the quarter ended 31 March 2017
in accordance with the timetable set out below:
2017
Last date to trade cum dividend Monday, 12 June
Shares trade ex dividend Tuesday, 13 June
Record date Thursday, 15 June
Payment date Monday, 19 June
Share certificates may not be dematerialised or rematerialised between Tuesday, 13 June 2017 and Thursday 15 June 2017, both days inclusive.
In accordance with Arrowhead'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 distributions on the 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 it is a dividend distributed by a REIT. The dividend is, however, exempt from dividend 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 ordinary dividends which is 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
was increased from 15% to 20% and accordingly, any dividends received by a non-resident from a REIT will be subject to dividend 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 17,46400 cents per share. A reduced dividend withholding rate in terms of the applicable DTA, may only be relied on if the
non-resident shareholder has provided the following forms to their CSDP or broker, as the case may be, in respect of uncertificated shares, or
the company, in respect of certificated shares:
a) a declaration that the dividend is subject to a reduced rate as a result of the application of a DTA; and
b) a written undertaking to inform their CSDP, broker or the 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.
Shareholders are encouraged to consult their professional advisors should they be in any doubt as to the appropriate action to take.
Shares in issue at the date of declaration of the dividend: 1 037 915 775
Arrowhead's income tax reference number: 9779/439/15/8
EVENTS AFTER REPORTING PERIOD
As released on SENS on 8 May 2017, Riaz Kader has been appointed as the new Chief Operating Officer of Arrowhead.
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.
LITIGATION STATEMENT
There are no legal or arbitration proceedings, including any proceedings that are pending or threatened, of which Arrowhead 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 interim consolidated results for the six months ended 31 March 2017 have not been reviewed or reported on by the groups' auditors, Grant Thornton.
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 Accounting Practices Committee, IAS 34: Interim Financial Reporting, the JSE Listings Requirements and
the requirements of the South African Companies Act, 2008. These results have been prepared under the supervision of I Suleman, CA (SA),
Arrowhead's Chief Financial Officer.
The accounting policies adopted are consistent with those applied in the preparation of the financial statements for the year ended 30 September 2016.
CONDENSED consolidated statement of comprehensive income
FOR THE PERIOD ENDED 31 MARCH 2017
Unaudited for 6 months ended Unaudited for 6 months ended Audited for year ended
R'000 31 March 2017 31 March 2016 30 September 2016
Rental income 959 324 743 681 1 531 560
Straight line rental income accrual 3 837 8 339 (13 665)
Listed securities income 95 893 20 097 71 770
Total revenue 1 059 054 772 117 1 589 665
Property expenses (360 780) (270 655) (567 968)
Administration and corporate costs (23 809) (15 333) (38 093)
Net operating profit 674 465 486 129 983 604
Changes in fair values 314 834 (84 220) 189 257
Profit from operations 989 299 401 909 1 172 861
Finance charges (193 283) (111 003) (237 292)
Finance income 39 940 27 337 53 360
Profit before taxation 835 956 318 243 988 929
Taxation - - -
Total comprehensive income for the period 835 956 318 243 988 929
Profit for the year attributable to:
Equity shareholders of Arrowhead 709 867 277 478 888 492
Non-controlling interest 126 089 40 765 100 437
835 956 318 243 988 929
CONDENSED consolidated statement of financial position
AT 31 MARCH 2017
Unaudited for 6 months ended Unaudited for 6 months ended Audited for year ended
R'000 31 March 2017 31 March 2016 30 September 2016
Assets
Non-current assets 15 560 960 11 253 554 12 172 867
Investment property 12 400 987 9 532 337 9 877 538
Fair value of property portfolio for accounting purposes 12 322 921 9 436 103 9 803 309
Straight line rental income accrual 78 066 96 234 74 229
Property, plant and equipment 925 233 985
Loans to participants of group share purchase and option schemes 652 576 542 914 540 557
Goodwill 337 449 176 830 176 830
Financial assets 2 164 138 970 163 1 570 696
Deferred taxation 2 011 - -
Derivative instruments 2 874 31 077 6 261
Current assets 302 154 80 040 159 282
Trade and other receivables 165 835 80 040 80 858
Cash and cash equivalents 136 319 - 78 424
Non-current assets held for sale - - 95 500
Total assets 15 863 114 11 333 594 12 427 649
Equity and liabilities
Shareholders' interest 8 648 659 7 741 194 8 202 208
Stated capital 6 676 586 6 142 446 6 142 446
Reserves 1 972 073 1 598 748 1 598 748
Non-controlling interest 2 758 108 966 420 981 753
Other non-current liabilities 3 428 213 2 429 961 2 900 739
Secured financial liabilities 3 409 159 2 419 313 2 890 639
Derivative instruments 19 054 10 648 10 100
Current liabilities 1 028 134 196 019 342 949
Trade and other payables 253 101 177 732 142 949
Bank overdraft - 18 287 -
Secured financial liabilities 775 033 - 200 000
Total equity and liabilities 15 863 114 11 333 594 12 427 649
CONDENSED consolidated statement of changes in equity
R'000 Stated capital Reserves Non-controlling interest Total
Balance at 30 September 2015 5 128 005 1 642 405 576 127 7 346 537
Issue of shares 1 299 759 - 398 377 1 698 136
Transfers between equity holders - 5 382 (5 382) -
Antecedent income (31 586) 31 586 - -
Dividends paid - (761 835) (87 806) (849 641)
Total comprehensive income for the period - 888 492 100 437 988 929
Balance at 30 September 2016 6 396 178 1 806 030 981 753 9 183 961
Issue of shares 280 408 - 15 735 296 143
Business combination - at acquisition reserves - - 1 773 568 1 773 568
Transfers between equity holders - (1 059) 1 059 -
Dividends paid - (542 765) (140 096) (682 861)
Total comprehensive income for the period - 709 867 126 089 835 956
Balance at 31 March 2017 6 676 586 1 972 073 2 758 108 11 406 767
CONDENSED consolidated statement of cash flows
Unaudited for 6 months ended Unaudited for 6 months ended Audited for year ended
R'000 31 March 2017 31 March 2016 30 September 2016
Net cash utilised from operating activities (131 214) 30 393 (33 168)
Cash generated from operations 609 097 490 091 928 634
Finance charges paid (193 283) (111 003) (237 292)
Interest received 39 940 27 337 53 360
Dividends received 95 893 20 097 71 770
Dividends paid - non-controlling interest (140 096) (43 370) (87 805)
Dividends paid (542 765) (352 760) (761 835)
Debenture interest paid - - -
Net cash utilised in investing activities (82 474) (1 018 069) (1 292 116)
Acquisition of investment property (62 081) (883 881) (904 296)
Proceeds from disposal of investment property 62 500 - 20 536
Business combinations 23 738 - -
Investment and loans to subsidiaries (271 833) (134 201) (409 852)
Acquisition of property, plant and equipment (161) (14) (887)
Repayment of loans by participants of group share purchase and option schemes 165 363 27 2 383
Net cash generated from financing activities 271 584 882 201 1 316 520
Net proceeds from issue of share capital (1 513) 473 794 149 660
Proceeds from issue of shares - non-controlling interest 18 200 398 377 488 354
Proceeds from financial liabilities 254 897 10 030 678 506
Net movement in cash and cash equivalents 57 896 (105 474) (8 764)
Cash and cash equivalents at the beginning of the year 78 423 87 188 87 188
Cash and cash equivalents at the end of the year 136 319 (18 286) 78 424
CONSOLIDATED condensed segmental analysis
GEOGRAPHICAL
The entity has three reportable segments based on the geographic split of the country which are the entity's strategic business segments. The entity's
executive directors review internal management reports on a monthly basis and all segments greater than 10% is considered strategic. 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.
31 March 2017 – R'000 Gauteng Western Cape Other Total
Contractual rental income 439 593 121 184 398 547 959 324
Straight line rental income 844 1 2 992 3 837
Listed securities income - - 95 893 95 893
Operating and administration costs (164 414) (41 760) (178 415) (384 589)
Net operating profit 276 023 79 425 319 017 674 465
Finance income 438 42 39 460 39 940
Finance charges (167) (83) (193 033) (193 283)
Net operating income 276 294 79 384 165 444 521 122
Changes in fair values - - 314 834 314 834
Reportable segmental profit before tax 276 294 79 384 480 278 835 956
Taxation - - - -
Reportable segmental profit after tax 276 294 79 384 480 278 835 956
Reportable segmental assets 6 985 001 1 764 094 7 114 019 15 863 114
Reportable segmental liabilities (110 750) (27 411) (4 318 186) (4 456 347)
6 874 251 1 736 683 2 795 833 11 406 767
31 March 2016 – R'000 Gauteng Western Cape Other Total
Contractual rental income 486 791 87 573 169 317 743 681
Straight line rental income - - 8 339 8 339
Listed securities income - - 20 097 20 097
Operating and administration costs (179 862) (28 899) (77 227) (285 988)
Net operating profit 306 929 58 674 120 526 486 129
Finance income 548 111 26 678 27 337
Finance charges (123) (2) (110 878) (111 003)
Net operating income 307 354 58 783 36 326 402 463
Changes in fair values - - (84 220) (84 220)
Reportable segmental profit before tax 307 354 58 783 (47 894) 318 243
Taxation - - - -
Reportable segmental profit after tax 307 354 58 783 (47 894) 318 243
Reportable segmental assets 5 068 257 1 248 316 5 017 021 11 333 594
Reportable segmental liabilities (79 587) (17 017) (2 529 376) (2 625 980)
4 988 670 1 231 299 2 487 645 8 707 614
30 September 2016 – R'000 Gauteng Western Cape Other Total
Contractual rental income 1 005 676 175 813 350 071 1 531 560
Straight line rental income (5 760) (7 405) (500) (13 665)
Listed securities income - - 71 770 71 770
Operating and administration costs (385 419) (53 430) (167 212) (606 061)
Net operating profit 614 497 114 978 254 129 983 604
Finance income 1 511 138 51 711 53 360
Finance charges (194) (8) (237 090) (237 292)
Net operating income 615 814 115 108 68 750 799 672
Changes in fair values 63 230 62 154 63 873 189 257
Reportable segmental profit before tax 679 044 177 262 132 623 988 929
Taxation - - - -
Reportable segmental profit after tax 679 044 177 262 132 623 988 929
Reportable segmental assets 5 306 558 1 379 593 5 741 498 12 427 649
Reportable segmental liabilities (127 784) (21 082) (3 094 822) (3 243 688)
5 178 774 1 358 511 2 646 676 9 183 961
SECTORAL
31 March 2017 – R'000 Office Residential Industrial Retail Overheads Total
Contractual rental income 351 025 194 992 139 582 268 874 4 851 959 324
Straight line rental income (2 577) - 2 235 4 179 - 3 837
Listed securities income - - - - 95 893 95 893
Operating and administration costs (125 218) (74 681) (57 241) (95 637) (31 812) (384 589)
Net operating profit 223 230 120 311 84 576 177 416 68 932 674 465
Finance income 263 11 358 106 275 27 938 39 940
Finance charges (237) (8 333) (10) - (184 703) (193 283)
Net operating income / (loss) 223 256 123 336 84 672 177 692 (87 834) 521 122
Changes in fair values - (18) - - 314 852 314 834
Reportable segmental profit before tax 223 256 123 318 84 672 177 692 227 018 835 956
Taxation - - - - - -
Reportable segmental profit after tax 223 256 123 318 84 672 177 692 227 018 835 956
Reportable segmental assets 4 665 584 2 155 907 1 815 481 3 715 658 3 510 484 15 863 114
Reportable segmental liabilities (72 247) (46 111) (23 218) (119 208) (4 195 563) (4 456 347)
4 593 337 2 109 796 1 792 263 3 596 450 (685 079) 11 406 767
30 September 2016 – R'000 Office Residential Industrial Retail Overheads Total
Contractual rental income 501 580 348 987 169 696 506 500 4 797 1 531 560
Straight line rental income (12 659) 2 052 1 333 (4 391) - (13 665)
Listed securities income - - - - 71 770 71 770
Operating and administration costs (174 320) (120 372) (76 954) (177 145) (57 270) (606 061)
Net operating profit 314 601 230 667 94 075 324 964 19 297 983 604
Finance income 809 403 224 469 51 455 53 360
Finance charges (79) (73) (49) (13) (237 078) (237 292)
Net operating income / (loss) 315 331 230 997 94 250 325 420 (166 326) 799 672
Changes in fair values 51 940 38 177 8 483 133 924 (43 267) 189 257
Reportable segmental profit / (loss) before tax 367 271 269 174 102 733 459 344 (209 593) 988 929
Taxation - - - - - -
Reportable segmental profit after tax 367 271 269 174 102 733 459 344 (209 593) 988 929
Reportable segmental assets 3 151 383 2 400 180 924 776 3 661 374 2 289 936 12 427 649
Reportable segmental liabilities (68 516) (28 474) (15 437) (79 110) (3 052 151) (3 243 688)
3 082 867 2 371 706 909 339 3 582 264 (762 215) 9 183 961
RECONCILIATION
RECONCILIATION OF EARNINGS TO HEADLINE EARNINGS
Unaudited for 6 months ended Unaudited for 6 months ended Audited for year ended
R'000 31 March 2017 31 March 2016 30 September 2016
Profit for the period attributable to Arrowhead shareholders 709 867 277 478 888 492
Earnings 709 867 277 478 888 492
Changes in fair value of investment property - - (232 524)
Changes in fair value of investment property - non-controlling interest - - 14 263
Profit on sale of property - - (2 336)
Headline profit attributable to shareholders 709 867 277 478 667 895
RECONCILIATION OF HEADLINE EARNINGS TO DISTRIBUTABLE EARNINGS
Unaudited for 6 months ended Unaudited for 6 months ended Audited for year ended
R'000 31 March 2017 31 March 2016 30 September 2016
Headline profit attributable to shareholders 709 867 277 478 667 895
Changes in fair values of listed securities and financial instruments (314 834) 84 220 45 603
Straight line rental income accrual (3 837) (8 339) 13 665
Straight line rental income accrual - non-controlling interest - - 819
Interest received on loan to the Arrowhead Charitable Trust
(eliminated on group level) 13 404 12 645 25 620
Income from listed securities distributed in prior period (95 893) (19 796) (19 795)
Accrued dividend on listed securities 120 926 32 220 67 646
Antecedent interest - 26 145 31 585
Pre-effective date dividend 19 162 - -
Antecedent interest - subsidiary - 2 316 2 316
Distributable earnings attributable to shareholders 448 795 406 889 835 354
Number of Arrowhead ordinary shares in issue 1 037 916 1 001 419 1 025 894
Weighted average number of Arrowhead shares in issue 1 033 332 902 020 970 994
Basic and diluted earnings per Arrowhead ordinary share (cents) 68,70 61,52 91,50
Headline and diluted headline earnings per Arrowhead ordinary shares (cents) 68,70 61,52 68,78
By order of the Board
24 May 2017
DIRECTORS: M Nell* (Chairperson), M Kaplan (CEO), I Suleman (CFO), R Kader (COO), T Adler*, S Noik*, E Stroebel*
* Independent non-executive
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.arrowheadproperties.co.za
Date: 24/05/2017 07:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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