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Reviewed provisional condensed consolidated financial results for the year ended 28 February 2017
Acsion Limited
Incorporated in the Republic of South Africa
(Registration Number 2014/182931/06)
ISIN: ZAE000198289
Share code: ACS
("Acsion" or "the Company" or "the Group")
Reviewed provisional condensed consolidated financial results for the year ended 28 February 2017
Provisional condensed consolidated Statement of financial position
Reviewed Audited
2017 2016
R'000 R'000
Assets
Non-current assets
Investment property 5 508 737 4 311 974
Plant and equipment 75 915 92 322
Operating lease assets 137 894 119 235
Goodwill 625 464 625 464
Prepayments 350 744 366 610
Investments in associates 1 150 917
Other financial assets 12 855 13 324
Deferred taxation 10 210 -
6 722 969 5 529 846
Current assets
Operating lease assets 2 128 5 315
Loans to group companies 963 1 661
Current taxation receivable 331 640
Other financial assets - 13
Trade and other receivables 24 814 14 724
Cash and cash equivalents 16 527 16 288
44 763 38 641
Non-current assets held for sale 66 639 87 931
Total assets 6 834 371 5 656 418
Equity and liabilities
Equity
Equity attributable to equity holders of parent
Share capital 3 973 725 3 975 482
Retained income 1 386 711 599 905
5 360 436 4 575 387
Non-controlling interest 36 015 10 446
5 396 451 4 585 833
Liabilities
Non-current liabilities
Deferred taxation 1 038 331 792 810
Other financial liabilities 287 599 190 073
1 325 930 982 883
Current liabilities
Trade and other payables 83 609 61 706
Other financial liabilities 13 451 16 729
Provisions 3 218 4 254
Current taxation payable 11 193 4 507
Loans from shareholders 506 506
Operating lease liability 13 -
111 990 87 702
Total liabilities 1 437 922 1 070 585
Total equity and liabilities 6 834 371 5 656 418
Provisional condensed consolidated statement of profit or loss and other comprehensive income
Reviewed Audited
2017 2016
R'000 R'000
Revenue 524 792 453 343
Other operating income 7 410 10 625
Other operating expenses (204 995) (210 509)
Operating profit 327 207 253 459
Investment income 2 729 1 974
Finance costs (23 026) (18 530)
Profit (loss) from associate 232 (219)
Profit on sale of non-current assets held for sale 1 180 4 963
Fair value adjustments 804 224 633 227
Profit before taxation 1 112 546 874 874
Taxation (300 171) (305 316)
Profit for the year 812 375 569 558
Other comprehensive income - -
Total comprehensive income for the year 812 375 569 558
Profit attributable to:
Owners of the parent 786 806 559 094
Non-controlling interest 25 569 10 464
812 375 569 558
Total comprehensive income attributable to:
Owners of the parent 786 806 559 094
Non-controlling interest 25 569 10 464
812 375 569 558
Basic and diluted earnings per share (cents) 199.5 141.6
Per share information
Headline earnings per share (cents) 47.0 45.9
Proposed dividend per share (cents) 12.5 -
Reconciliation of earnings per share to headline earnings per share
Basic earnings 786 806 559 094
Adjusted for:
Fair valuation adjustment, net of taxation (625 143) (491 384)
Non-controlling interest relating
to fair valuation adjustment 24 541 12 995
Impairment of investment property 84 -
Gain on non-current assets held for sale (916) (4 037)
Loss on sale of plant and equipment 4 40
Deferred taxation as result of rate change - 104 491
Headline earnings 185 376 181 199
NAV per share (cents) 1 359.7 1 160.1
NAV per share (cents) (excluding deferred taxation) 1 620.5 1 361.0
Provisional condensed consolidated statement of cash flows
Reviewed Audited
2017 2016
R'000 R'000
Cash generated from operations 346 000 342 521
Net finance costs (20 297) (16 556)
Taxation paid (57 868) (66 116)
Net cash from operating activities 267 835 259 849
Development costs relating to investment property (378 644) (244 054)
Proceeds on sale of non-current assets held for sale 30 324 -
Other cash flows from investing activities (12 464) (20 781)
Net cash from investing activities (360 784) (264 835)
Proceeds from other financial liabilities 94 123 8 490
Other cash flow from financing activities (935) (4 016)
Net cash from financing activities 93 188 4 474
Total cash movement for the year 239 (512)
Cash at the beginning of the year 16 288 16 800
Total cash at end of the year 16 527 16 288
Provisional condensed consolidated statement of changes in equity
Share capital Treasury Total Retained Total attributable Non-controlling Total
R'000 shares share income to equity holders interest equity
R'000 capital R'000 of the group R'000 R'000
R'000 R'000
Balance at 1 March 2015 3 979 956 - 3 979 956 40 811 4 020 767 (18) 4 020 749
Profit for the year - - - 559 094 559 094 10 464 569 558
Purchase of treasury shares - (4 474) (4 474) - (4 474) - (4 474)
Balance at 29 February 2016 3 979 956 (4 474) 3 975 482 599 905 4 575 387 10 446 4 585 833
Profit for the year - - - 786 806 786 806 25 569 812 375
Purchase of treasury shares - (1 757) (1 757) - (1 757) - (1 757)
Balance at 28 February 2017 3 979 956 (6 231) 3 973 725 1 386 711 5 360 436 36 015 5 396 451
Geographic and tenant profiles
The existing income generating investment properties consist of eight predominantly retail developments strategically located in Gauteng, Mpumalanga and Limpopo with an aggregate gross lettable
area ("GLA") of 237 800 m2 (2016: 204 454 m2). The tenant profile by GLA comprises 72% national tenants (2016: 70%), 13% semi-national (2016: 14%) and 15% line and other franchises (2016: 16%).
The tenant profile is separated into national and semi-national tenants to indicate the exposure Acsion has to direct head office leases and individual franchises. Exposure to national and semi-
national tenants as a percentage of GLA is at 85% (2016: 84%). Line shops and other franchises are carefully vetted by Acsion's leasing division to promote maximum dwelling time
and footfall in each centre, underpinning trading densities and the overall sustainability of tenants' lease terms.
Geographic profile by revenue
Gauteng - 75%
Limpopo - 12%
Mpumalanga - 13%
Geographic profile by revenue
Gauteng - 66%
Limpopo - 18%
Mpumalanga - 16%
Tenant profile by revenue
National - 60%
Semi national - 17%
Line and other franchises - 23%
Tenant profile by GLA
National - 72%
Semi national - 13%
Line and other franchises - 15%
Commentary
About Acsion
Acsion ("the Group" or "the Company") is a property manager, developer and owner which is listed on the Johannesburg Stock Exchange ("JSE"). Acsion is differentiated from Real Estate Investment
Trusts ("REITs") in the listed property sector as it focuses on the delivery of superior net asset value ("NAV") growth. NAV growth drivers include enhancing existing properties, completing the
communicated development pipeline and obtaining additional future development opportunities. To a lesser extent, the Group derives capital growth from selling completed developments and
purchasing existing properties.
The Group's development function and "value-engineering" approach to development, significantly enhances returns to shareholders. Value engineering focuses on optimising upfront feasibility
studies, planning, designing and constructing in an innovative and more cost-effective way, resulting in lower construction costs, without compromising on quality.
Operational update
During the year under review, Acsion completed two additional retail developments, Mall@Moutsiya (Walkraal, Limpopo) which was included in the pre-listing pipeline, and Mall@Mfula (Piet Retief,
Mpumalanga), which was not previously included in the pre-listing pipeline. The development of Mall@55 (Monavoni, Gauteng) is progressing well and the opening has been set down for the last
quarter of 2017. The Trade55 development (Monavoni, Gauteng) has been delayed in order to obtain better rentals for this prime development site. The Group will commence with development at
Trade55 in the near future. The Acsiopolis development (Benmore, Sandton) is progressing well. As at year end, five parking levels had been completed and the development now exceeds ground level.
Development planning on the extension of Mall@Lebo (Lebowakgomo, Limpopo) is also underway while a small extension is being planned at Mall@Carnival (Brakpan, Gauteng).
Financial results
Revenue for the Group for the year ended 2017 was R524.8 million (2016: R453.3 million). This increase was mainly due to the anticipated increases in rentals compounded by the opening of two
additional retail shopping centres developments. Other income supplemented rental revenue by R7.4 million (2016: R10.6 million).
Operating expenses were well contained and despite the opening of two additional shopping centres, the Group recorded an operating cost decrease of 2.6% measured year on year. The largest
contributor to this decrease was the impact of the solar plants installed at Mall@Reds (Centurion, Gauteng) and Mall@Carnival (Brakpan, Gauteng) which decreased the electricity consumption
supplied by the respective local authorities.
The increase in finance costs from R18.5 million in 2016 to R23.0 million in 2017 can mainly be attributed to the completion and opening of the two new developments referred to above, the cost of
the two solar plants installed and commissioned during the year, as well as the continued development of Acsiopolis and Mall@55. The Group continues to aggressively manage its cash resources.
Headline earning per share increased to 47.0 cents (2016: 45.9 cents).
The financial position of the Group remains very strong. Investment property (which includes elements of plant and equipment, and the operating lease asset) is carried at R5.695 billion (2016:
R4.529 billion). Non-current assets held for sale is carried at fair value of R66.6 million (2016: R87.9 million). Total property under control of the Group therefore increased by a respectable
24.8% during the year under review.
Prepayments consist of two developments acquired during the formation of Acsion, Acsiopolis and Mall@Maputo. The construction of Acsiopolis is continuing well and the opening is set for 2019. The
development of Mall@Maputo is currently on hold due to the weak economy in Mozambique however, this delay is welcomed by management as it is management's opinion that the Mozambican economy will
improve in line with the strengthening of the resources market. This development should then yield more acceptable returns to the Group.
Goodwill equates to R625.5 million and considering the extent of the development pipeline, no impairment was required.
Group liquidity is considered to be adequate. Due to the Group's cash management policy, mortgage bonds have been repaid in advance of the repayment dates by approximately R103.0 million (2016:
R162.0 million). These funds may be withdrawn as and when needed.
NAV per share increased from 1 160.1c to 1 359.7c, while NAV per share (excluding deferred taxation) for the year ended 28 February 2017 increased by 19.1% from 1 361.0c in 2016 to 1 620.5c in 2017.
Treasury share purchase
The Group repurchased 233 329 (2016: 492 870) shares during the 2017 financial year and currently holds these as treasury shares. The decision to repurchase shares was made as the share price was
trading significantly below the reported NAV of the Company. These shares were purchased at approximately 49% below the reported NAV per share as at 28 February 2017.
Vacancy levels and lease expiry profile
Strategic vacancies are maintained in order to accommodate potential tenant relocations and to support lease optimisation. The weighted vacancy (by GLA) for the portfolio as at year end was 5.43%
(2016: 4.43%) and the Group is focused on reducing this percentage to more acceptable levels. The weighted average lease expiry profile by GLA for the portfolio decreased to 3.6 years (2016: 4.1
years). The decline is mainly attributable to the lease renewal dates of Mall@Carnival phase 2 that are not evenly spread over the average lease term. The Group is however not concerned about
this decline and management is confident that tenants will be retained on lease renewal.
Developed investment property portfolio
The developed investment properties as at 28 February 2017 consisted of the eight properties detailed below:
Property name Directors/ GLA Value/m2 Percentage
independent m2 (excluding of total
valuation bulk, where portfolio
R'mil applicble) by value
R %
Mall@Carnival 2 375 87 750 27 066 46.5
Mall@Reds* 1 180 54 350 21 711 23.1
Mall@Emba 521 24 500 21 265 10.2
Mall@Lebo* 421 23 500 17 915 8.2
Mall@Mfula 244 18 700 13 048 4.8
Mall@Moutsiya 164 14 500 11 310 3.2
Moreleta Square* 163 8 500 19 176 3.2
Simarlo Rainbow* 37 6 000 6 200 0.7
Total developed investment properties 5 105 237 800 21 468 100.0
The above properties are trading at an average annualised net operating yield of approximately 7.2% (2016: 7.3%).
*Independently valued
DEVELOPMENTS UNDER CONSTRUCTION
Property name Directors/ GLA Value/m2 Antici-
independent m2 (excluding pated
valuation bulk, where opening
R'mil applicble)
R
Acsiopolis 388 67 000 5 794 Jan 2019
Mall@55* 108 15 000 7 180 Sep 2017
Trade55 123 10 000 12 325 Negotiating
Total developments under construction 619 92 000 6 730
*Independently valued
Acsiopolis, Benmore, has been designed as a twenty storey mixed use development, situated in the heart of Sandton. The site measures approximately one hectare and is well positioned on Benmore
Drive. Mixed use development rights totalling 70 000 m2 have been obtained. The current design however allows for a total development of 67 000 m2 of which the majority of the rights have been
earmarked for residential use which supports Acsion's strategy of sectoral diversification. Approximately 35 000 m2 will be available as executive apartments, 26 000 m2 is earmarked for short
term residential rental units, 5 000 m2 will be utilised for retail purposes and 1 000 m2 for office use. Acsiopolis will further offer six levels of parking equating to approximately 1 400
basement parking bays, some of which will be on-grade parking for the retail units which is expected to further enhance convenience for shoppers and residents alike. In addition to vehicular
access, Acsiopolis has been designed to take into consideration the evolving public transport systems in Sandton to accommodate the integration of pedestrian accessibility and bus routes.
Construction of the development is progressing as scheduled and as at financial year end, five levels of parking had been completed. This development is the largest single phase development the
Group has undertaken.
Mall@55 Phase I, consists of a 15 000 m2 convenience shopping centre in Monavoni, Gauteng. It is located on an extremely busy arterial route accessible from the N14 freeway and the R55 provincial
route. This development is ideal for a value/convenience/lifestyle centre, which is underrepresented in the Monavoni area. After initial delays in obtaining the required road infrastructure
development approvals, the construction is now progressing well and the completion date is scheduled for the last quarter of 2017.
Trade 55 Phase I, will comprise of a 10 000 m2 large ("big box") retail centre with special commercial rights, having already been obtained in Monavoni, Gauteng. This development is located on an
extremely busy arterial route accessible from the N14 freeway and the R55 provincial route and across from the Mall@55 site. Trade 55's value offering will be complementary to that of Mall@55.
It is anticipated that construction of this development will only commence in 2018.
PROPERTIES HELD FOR SALE
Hyde Park Terrace, a high end residential development of units ranging from 350 m2 to 540 m2 under roof, is situated in Hyde Park, Sandton, approximately 500 m from Hyde Park shopping centre.
The development is nearly sold out with eight (2016: nine) completed houses and twelve (2016: Nil) vacant stands still available for sale.
Future developments and development opportunities
Acsion continuously evaluates a consistent stream of new opportunities and is in advanced discussions on certain projects to further enhance capital growth in the coming five years. At the date
of this report, the following future development opportunities, amongst others, were being considered by Acsion:
Mall@Lebo, our highly successful development in Lebowakgomo, Limpopo is to be extended by approximately 5 000 m2. The Group is in the process of finalising certain applications whilst the leasing
of the proposed extension is finalised.
Mall@Carnival's extension of approximately 5 000 m2 is planned for this super regional shopping centre in Brakpan, Gauteng and should commence shortly.
Mamahlodi Gardens is an affordable housing development in Walkraal, Limpopo with a total land size of 40 hectares. Acsion has formed a partnership with local residents and the local municipality
to approach prospective buyers with access to housing subsidies from the Department of Human Settlements. Proclamation of the land is completed with all services (water, sewage and electricity)
already secured. Plans to construct up to 515 residential units for sale are supported by a shortage of affordable housing in the Walkraal area. The market price will range between R300 000 and
R350 000 per unit. The development will be demand driven and will be supplementary to the Mall@Moutsiya development. The Group is currently in negotiations with various parties to bring this
aspect of the development to fruition. The Group is also considering alternatives to the housing development to utilise the remaining extent of the land.
Mall@Frankfort was intended to comprise an 8 000 m2 shopping centre in Frankfort, Free State. Interest from a potential anchor tenant has not been secured to date and the Group has impaired the
insignificant carrying value of this potential development until sufficient interest has been secured.
The Mall@Maputo development will be located in northern Maputo and will be adjacent to the main Maputo ring road, with a total land size of 8.9 hectares. A memorandum of understanding was
originally signed with the Mozambican Ministry of Sport to develop a 50 000 m2 shopping centre. Subsequently, the Group decided to acquire an alternative land parcel adjacent to the existing
land parcels which now requires an additional agreement with the Ministry of Interior to be concluded. The Group have been in constant negotiations with the Ministry of Interior and a final draft
contract has been negotiated.
With Offices@Lusaka, Acsion aims to take advantage of Zambia's growing economy and limited available infrastructure for multinational companies. Negotiations with a local land owner to co-develop
up to 20 000 m2 of office space are currently underway. The site is located in close proximity to Manda Hill Shopping Mall and alongside to Stanbic's Lusaka offices.
Metropolis Mall@Larnaka is the Group's first exciting international retail development. The Group has signed a leasehold over land in Larnaka, Cyprus. The lease is a 33 year lease with two
options to renew of 33 years each. The Group intends to develop a 40 000 m2 retail centre. Local authorities are in the process of evaluating the traffic and environmental impact prior to the
necessary approvals being granted. The Group trusts that all approvals would have been obtained by the end of 2017 after which the construction will commence. The Group is very excited about its
first development project in Europe and this development promises to yield returns that meet or exceed the Group's investment criteria.
New initiatives
Acsion's first solar installation was installed at Mall@Emba and generates 1 MW of electricity. The plant was commissioned in October 2015. As a result of the success seen with this plant the
Group has also successfully installed solar plants at Mall@Reds and Mall@Carnival. These installations were commissioned in August 2016 and indications are that these malls will
significantly reduce their reliance on local councils for electricity in future. Total generating capacity is now at 7 MW for these three developments. The Group is pleased with the financial
results generated by these installations. The Group has decided that, subject to appropriate pricing of import items and ESKOM/council electricity tariff structures, that each sizeable
development will deploy a solar plant to aid in lowering the operating costs of the development. To this extent several other plants are planned for certain of the remaining developments.
Prospects
Acsion's Board remain confident that the Group's growth objectives can be achieved despite the challenging economic operating environment. The Group remains focused on the completion of its
secured development pipeline over the next three years.
Acsion will continue reinvesting in its existing portfolio and focus on its development expertise, or "value-engineering" approach, to ensure above average NAV growth. In addition, Acsion will
explore further development opportunities in high-growth markets in the rest of Africa and Europe.
PROPOSED DIVIDEND
It has always been the Groups' policy not to declare any dividends. The Board of Directors has however decided to propose a dividend of 12.5 cents per share, considering the low gearing of the
Group. This suggests a dividend yield of 1.53% based on the share price as at 28 February 2017. As this dividend is not approved as yet, there is no provision for this dividend in these results.
Should this dividend be paid, the Group's gearing will increase to 5.8%.
SEGMENTAL REPORTING
Due to the current investment property portfolio exposure being heavily weighted to retail, the chief operating decision maker considers the operations to be a single operating segment and as
such reviews financial information on this basis. Segment reporting as required in terms of IFRS 8: Operating segments is therefore not applicable to the Group at this stage.
EVENTS AFTER THE REPORTING PERIOD
The Directors are not aware of any material events requiring adjustment or disclosure in these reviewed provisional condensed consolidated financial statements, which occurred after the reporting
date and up to the date of this report which require adjustment or disclosure to interpret these financial statement adequately.
The Directors would however like to focus the reader's attention on the proposed dividend declaration as mentioned earlier in this report.
Basis of preparation and accounting policies
The reviewed provisional condensed consolidated financial statements are prepared in accordance with the requirements of the JSE Listings Requirements and the requirements of the Companies Act 71
of 2008 of South Africa. The provisional results has been prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting
Standards (IFRS), at a minimum, IAS 34: Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by
the Financial Reporting Standards Council.
The accounting policies applied in the preparation of the reviewed provisional condensed consolidated financial statements are consistent with those applied in the 2016 consolidated financial
statements.
These results have been prepared under the historical cost convention, except for investment properties, which are measured at fair value, and certain financial instruments, which are measured at
either fair value or amortised cost.
These reviewed provisional condensed consolidated financial statements were prepared under the supervision of Pieter Scholtz CA (SA), M.Com (Tax) in his capacity as Chief Financial Officer.
Deloitte & Touche has issued an unmodified review report on the provisional condensed consolidated financial statements for the year ended 28 February 2017. The review was concluded in accordance
with ISRE 2410: Review of Interim Financial Information performed by the independent auditor of the entity. A copy of their unmodified review report is available for inspection at Acsion's
registered office.
The auditor's report does not necessarily report on all of the information contained in this announcement. Any prospects detailed in this report have not been reviewed or reported on by Acsion's
independent external auditors. 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
review report together with the accompanying financial information from the issuers' registered office. The Directors take full responsibility for the preparation of these provisional condensed
consolidated financial results.
By order of the Board
Centurion, 26 May 2017
D Green K Anastasiadis
(Chairman) (Chief Executive Officer)
Directors: D Green (Chairman)*, K Anastasiadis (CEO), P Scholtz (CFO), S Griesel*, PD Sekete*, T Jali* (*Independent non-executive)
Registered office: Mall@Reds, 1st Floor, Corner of Rooihuiskraal and Hendrik Verwoerd Drives, Rooihuiskraal, Ext 15, Centurion
Postal address: PO Box 569, Wierda Park, 0149
Registration number: 2014/182931/06
Transfer secretaries: Computershare Investor Services Proprietary Limited, Rosebank Towers, 15 Bierman Avenue, Rosebank, 2192
Sponsor: Nedbank Corporate and Investment Banking Limited
Company secretary: CMA Incorporated
Date: 29/05/2017 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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