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ORION REAL ESTATE LIMITED - Summarised provisional audited consolidated results for the Group for the year ended 30 June 2017

Release Date: 07/12/2017 14:00
Code(s): ORE     PDF:  
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Summarised provisional audited consolidated results for the Group for the year ended 30 June 2017

ORION REAL ESTATE LIMITED
Approved as a REIT by the JSE
(Incorporated in the Republic of South Africa)
(Registration number: 1997/021085/06)
Share Code: ORE ISIN: ZAE000201695
("Orion Real Estate" or “the Company” or “the Group”)

SUMMARISED PROVISIONAL AUDITED CONSOLIDATED RESULTS FOR THE GROUP
FOR THE YEAR ENDED 30 JUNE 2017


Consolidated Statement of Financial Position as at 30 June 2017

                                                                                    Group
 Figures in Rand                                                              2017              2016
                                                                           Audited          Audited
 ASSETS
 Investment property                                                   733 984 000      802 883 351
   Fair value of property portfolio                                    728 882 366      797 701 052
   Straight-line lease income adjustment                                 5 101 634        5 182 299
 Property, plant and equipment                                           5 466 434        5 394 586
 Deferred tax asset                                                        651 151                -
 Total Non-current assets                                              740 101 585      808 277 937
 Loans to related parties                                                1 147 195       12 271 910
 Loans to shareholders                                                  35 204 377       10 147 464
 Stock on hand                                                             101 949          102 035
 Trade and other receivables                                            29 432 459       60 271 664
 Cash and cash equivalents                                               2 729 166       10 684 674
 Total Current Assets                                                   68 615 146       93 477 747
 Investment property held for sale                                       8 400 000        4 500 000
 Total Assets                                                          817 116 731      906 255 684

 EQUITY AND LIABILITIES
 Capital and reserves
 Share capital and share premium                                       114 336 674      114 336,674
 Retained earnings                                                     479 224 908      506 466 861
 Total equity attributable to owners of the parent                     593 561 582      620 803 535
 Non-controlling interest                                                 (291 068)        (287 431)
 Total equity                                                          593 270 514      620 516 104
 Borrowings                                                            133 337 025      151 148 521
 Deferred tax liabilities                                                        -        1 006 350
 Total Non-current liabilities                                         133 337 025      152 154 871
 Current income tax liabilities                                         12 486 566        8 269 251
 Loans from directors                                                       18 508          403 529
 Loans from related parties                                                 20 096           21 264
 Tenant deposits                                                         6 984 889        6 994 110
 Trade and other payables                                               54 440 417      100 101 583
 Borrowings                                                             14 559 450       14 764 174
 Bank overdraft                                                          1 999 266        3 030 798
 Current Liabilities                                                    90 509 192      133 584 709
 Total Liabilities                                                     223 846 217      285 739 580
 Total Equity and Liabilities                                          817 116 731      906 255 684
Consolidated Statement of Comprehensive Income

                                                                                  Group
Figures in Rand                                                             2017             2016
                                                                         Audited     Re-presented

 Revenue                                                              90 311 864       81 995 484
      Property revenue                                                90 379 208       86 234 799
      Straight-line lease income accrual                                 (67 344)      (4 239 315)
 Other income                                                          6 952 559        2 472 052
 Other direct property operating costs                               (43 380 174)     (54 876 728)
 Administrative and management expenses                              (26 951 020)     (26 414 768)
 Repairs and maintenance                                              (8 135 014)      (5 144 079)
 Fair value adjustment                                                19 626 092       22 944 906
      Gross change in fair value of investment property               19 558 748       18 705 591
      Straight-line lease adjustment                                      67 344        4 239 315
   Loss of control of subsidiary                                     (30 424 170)               -
 Operating profit before interest                                      8 000 137       20 976 867
 Finance income                                                        7 082 805        5 973 367
 Finance costs                                                       (19 014 512)     (25 192 635)
 (Loss)/profit before taxation                                        (3 931 570)       1 757 599
 Taxation                                                             (3 146 407)         316 450
 (Loss)/profit for the year                                           (7 077 977)       2 074 049
 Other comprehensive income                                                    -                -
 Total comprehensive (loss)/income for the year                       (7 077 977)       2 074 049

 Total comprehensive (loss)/income for the year attributable to:
 Shareholders                                                         (7 074 340        2 074 547
 Non-controlling interest                                                 (3 637)            (498)
                                                                      (7 077 977)       2 074 049

 Per share information:
 Basic and diluted (loss)/earnings per share                               (1.13)            0.33
Consolidated Statement of Cash Flows

                                                                               Group
 Figures in Rand                                                        2017              2016
                                                                     Audited           Audited

 Cash inflow from operating activities                            12 208 624        17 356 379
      Cash generated by operations                                45 369 628        38 334 464
      Interest received                                            7 082 805         5 973 367
      Interest paid                                              (19 014 512)     (25 192 635)
      Taxation paid                                               (1 061 684)      (1 758 817)
      Dividends paid                                             (20 167 613)               -
 Cash outflow from investing activities                             (730 191)     (22 941 573)
      Loans repaid by related parties                             11 124 715        7 651 596
      Loans advanced by shareholders                             (25 056 913)     (10 147 464)
      Additions to investment property                                     -      (22 870 911)
      Proceeds on sale of investment property                     14 000 000        3 500 000
      Purchases of property, plant and equipment                    (797 993)      (1 074 794)
 Cash inflow (outflow)/from to financing activities              (18 402 409)      13 186 271
     Loans (repaid) / advanced by related parties                     (1 168)             252
     Loans (repaid) / advanced by to directors                      (385 021)         385 281
     (Repayment of) / Increase in interest bearing borrowings    (18 016 220)      12 800 738
 (Decrease)/increase in net cash, cash equivalents and bank
 overdrafts                                                       (6 923 976)       7 601 077
 Cash, cash equivalents and bank overdrafts
 at the beginning of the year                                      7 653 876           52 799
 Cash, cash equivalents and bank overdrafts
 at the end of the year                                             (729 900)       7 653 876
Consolidated Statements of Changes in Equity

                                          Share      Retained                      Controlling          Total
Figures in Rand                         Capital      Earnings             Total       Interest         Equity

 Balance at 30 June 2015            114 336 67    504 392 314       618 728 988       (286 933)   618 442 055
 Total comprehensive income for
 the year                                    -      2 074 547         2 074 547           (498)     2 074 049
 Balance at 30 June 2016           114 336 674    506 466 861       620 803 535       (287 431)   620 516 104
 Total comprehensive income for
 the year                                    -     (7 084 340)       (7 074 340)        (7 637)    (7 077 977)
 Dividends paid                              -    (20 167 613)      (20 167 613)             -    (20 167 613)
 Balance at 30 June 2017           114 336 674    479 224 908       593 561 582       (291 068)   593 270 514

Headline earnings reconciliation and distribution information

                                                                                       Group 
 Figures in Rand                                                                2017                    2016
 (Loss) profit attributable to ordinary equity holders                    (7 074 340)              2 074 547
 Adjusted for:
    Change in fair value of investment properties net of non-            (19 558 748)            (18 705 591)
    controlling interests
    Loss of control of subsidiary                                         30 424 170                       -
    Profit/(loss) on sale of investment property                            (500 000)               (791 238)
 Headline earnings/(loss)                                                  3 291 082             (17 422 282)

 Taxable dividend declared on 13 October 2016 in relation to the          14 734 731                       -
 year ended 30 June 2015
 Taxable dividend declared on 16 November 2016 in relation to
                                                                           5 643 088                       -
 the year ended 30 June 2016

 Net asset value                                                         593 561 582             620 803 535

 Per share information
 Basic (loss) / earnings per share (cents)                                     (1.13)                   0.33
 Headline and diluted headline earnings /(loss) per share (cents)               0.52                   (2.78)
 Distribution per share:
     Year ended 30 June 2015 (paid on 7 November 2016)                          2.35                       -
     Year ended 30 June 2016 (paid on 19 December 2016)                         0.90                       -
     Year ended 30 June 2017                                                       -                       -
 Net asset value per share (cents)                                             94.67                   99.01

 Notes:
 Weighted average number of shares in issue                              630 698 688             630 698 688
 Number of shares in issue at period end (including treasury             630 698 688             630 698 688
 shares)
 Number of shares in issue at period end (excluding treasury             627 009 822             627 009 822
 shares)
Segment Report

                                                               2017                2016
                                                                  R     %             R     %
Revenue (excluding recoveries)
Commercial                                               26 981 791    41    27 572 704    43
Industrial                                                8 495 645    13     8 642 694    14
Retail                                                   27 699 850    41    24 323 583    38
Hospitality                                               2 521 948     4     2 651 430     4
Residential                                                 299 288     1       657 225     1
                                                         65 998 522   100    63 847 636   100
Profit before taxation
Commercial                                               15 733 124    41       722 676    41
Industrial                                                8 107 833    22       209 679    12
Retail                                                    6 019 035    16       524 608    30
Hospitality                                               7 848 036    21       280 229    16
Residential                                                       -     0        20 407     1
                                                         37 708 028   100     1 757 599   100
Property values (including properties held for
sale, before adjustment for straight-lining of
leases)
Commercial                                              348 369 404   44    411 854 098    51
Industrial                                               82 044 512   11     82 229 907    10
Retail                                                  205 680 677   26    162 247 997    20
Hospitality                                              96 289 407   12     90 876 169    11
Residential                                                       -    0     10 275 180     1
Land                                                     10 000 000    2     53 400 000     7
                                                        742 384 000   95    810 883 351   100
Borrowings (excluding instalment sales and
loans)
Commercial                                               71 501 949    48   122 760 804    81
Industrial                                               21 915 772    15    21 499 139    14
Retail                                                   34 128 593    24     3 660 387     2
Hospitality                                              19 176 388    13     2 878 314     2
Residential                                             146 722 702   100   150 798 644   100
                                                         71 501 949    48   122 760 804    81
Rating of tenants (rental income)
Commercial                                       A        7 408 340    11     6 287 511    12
                                                 B          858 496     1       460 289     1
                                                 C       18 714 956    28    14 784 890    28
Industrial                                       A          265 669     0             -     -
                                                 B        3 866 145     6     4 075 103     8
                                                 C        4 363 831     7     3 882 776     7
Retail                                           A       11 507 203    17     7 124 772    14
                                                 B        1 999 296     3       985 550     2
                                                 C       14 193 351    22    11 788 702    23
Hospitality                                      B        2 521 948     4     2 321 709     4
Residential                                      C          299 288     0       655 836     1
                                                         65 998 521   100    52 367 137   100
A: Represents major listed companies
B: Represents smaller listed companies and big unlisted companies
C: Represents smaller unlisted companies and private businesses

COMMENTARY

1.   Operating performance
     Other than the once off loss arising from a required write off due to the loss of control of a subsidiary
     (being Elma Park and the associated land holding), the results of the group have shown a solid
     turnaround. The Group revenue increased from R82 million as at June 2016 to R90.3 million at June
     2017. This represents an increase of 10.1% and arose as a result of the normal lease escalations as well
     as a marginally better occupancy rate within the properties.

     Other direct, operating and management costs were a focus area and were well controlled, reducing
     from R86.4 million in 2016 to R78.5 million in 2017. This represents a reduction of 9.2%.

     The operating profit decreased by 61.9% from R20.9 million to R8.0 million but this included a once off
     cost of R30.4m, which if excluded would have reflected an improvement in operating profit to R22.4m.
     The total comprehensive loss for the period moved from R2.0 million profit to a loss of R7.0 million, similarly
     due to the loss of control in subsidiary of R30.4 million.

     Headline earnings improved to a positive 0.52 cents per share, from a loss per share of 2.78 in 2016. The
     net asset value has reduced from 99.01 cents per share to 94.67 cents per share in 2017. This was also
     due to the loss of control in a subsidiary.

2.   Basis of preparation
     The summarised provisional audited consolidated results have been prepared in accordance with the
     Listings Requirements of the JSE Limited (“Listings Requirements”) and the requirements of the
     Companies Act. The Listings Requirements require provisional reports to be prepared in accordance
     with the framework concepts and the measurement and recognition requirements of the International
     Financial Reporting Standards (“IFRS”) and the SAICA Financial Reporting Guides as issued by the
     Accounting Practices Committee 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 financial statements,
     from which the summary financial statements were derived, are in terms of IFRS and are consistent with
     those applied in the annual financial statements for the year ended 30 June 2016.

     These summarised results have been extracted from audited information, but is not itself audited. The
     annual financial statements for the period ended 30 June 2017 have been audited by BDO South Africa
     who expressed an unmodified opinion thereon. The audited financial statements and the auditors’
     report thereon are available for inspection at the Company’s registered office. The summarised
     financial statements were prepared by the Chief Financial Officer, Deran Dabideen BCom (Hons)
     Accounting. The directors take full responsibility for the preparation of the summarised provisional report
     and that the financial information has been correctly extracted from the underlying audited annual
     financial statements.

     Any reference to future financial performance included in these results has not been reviewed by or
     reported on by the Company's auditors.

3.   Investment property disposed
     During the year under review the Company has disposed of the property situated at 67 7th Street,
     Linden, Johannesburg and also of Score - Macassar, Cnr Phala and Tutu Street, Khayalitsha, Western
     Cape. A capital gain of R500 000 was made on these transactions.

4.   Re-presentation of the Statement of Comprehensive Income
     The Statement of Comprehensive Income for the year ended 30 June 2016 contains a reclassification
     as follows:

      Figures in Rand                                   Prior Year 2016      Prior Year 2016            Difference
                                                           (as restated)        (as reported)
      Other direct property operating costs                  54 876 728           82 984 066           (28 107 338)
      Administrative and management expenses                 26 414 768              454 923            25 959 845
      Repairs and maintenance                                 5 144 079            2 996 586             2 147 493
                                                             86 435 575           86 435 575                     -
     
      This had no impact on earnings or headline earnings per share information.

5.   Related party transactions
     Related party transactions similar to those disclosed in the Group's annual financial statements for the
     year ended 30 June 2016 took place during the financial year and separate disclosure thereof is not
     considered material to the interpretation of these results.

6.   Subsequent events
     There are no subsequent events.

7.   Distributions
     The board has considered the requirements for a distribution and advise that no distribution will be
     declared for the year ended 30 June 2017 (30 June 2016: 0.9 cents).

8.   Future prospects
     While trading conditions remained tight during the reporting period, the future prospects have
     improved from the prior period, with an increase in revenue over the prior period due to increase
     in occupancy and improved controls being implemented. This is set to continue in the new
     financial year.

     A number of initiatives are underway, which are intended to both increase the properties held by
     the group, the results of operations as well as increasing shareholder spread.

By order of the board

Johannesburg
7 December 2017

Directors:
RS Wilkinson* DK Mthembu* AC Gmeiner** F Gmeiner (CEO)# D Dabideen*** TFJ Oosthuizen**
Independent non-executive ** Non-executive # Executive ***Executive, D Dabideen.  

Company secretary and registered office                                                          Transfer office
Corporate Governance Facilitators CC                         Computershare Investor Services Proprietary Limited

Registered office                                                                                        Sponsor
Registered office and business address                                Arbor Capital Sponsors Proprietary Limited
16th Floor, Orion House
49 Jorissen Street
Braamfontein
Johannesburg, 2017

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