ORION REAL ESTATE LIMITED - Condensed results for the group for the six months ended 31 December 2017

Release Date: 27/03/2018 16:08
Code(s): ORE
 
Wrap Text
Condensed results for the group for the six months ended 31 December 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: ZAE000075651
("Orion Real Estate" or “the Company”)

CONSOLDIATED RESULTS FOR THE GROUP FOR THE SIX MONTHS ENDED 31 DECEMBER 2017


CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                      Unaudited        Unaudited
                                                       6 months         6 months          Audited
                                                          ended            Ended         Year end
                                                    31 December      31 December          30 June
Figures in Rand                                            2017             2016             2017
ASSETS
Investment property                                 733,984,000      802,883,351      733,984,000
Fair value of property portfolio                    728,882,366      797,701,052      728,882,366
Straight-line rental income adjustment                5,101,634        5,182,299        5,101,634
Property, plant and equipment                         5,148,233        5,707,100        5,466,434
Deferred tax asset                                      651,152                -          651,151
Total non-current assets                            739,783,385      808,590,451      740,101,585
Loans to related parties                              1,906,611       18,178,337        1,147,195
Loans to shareholders                                44,686,474                -       35,204,377
Stock on hand                                            94,890          149,488          101,949
Trade and other receivables                          19,839,985       58,314,305       29,432,459
Cash and cash equivalents                               890,147           21,000        2,729,166
                                                     67,418,106       76,663,130       68,615,146
Investment properties held for sale                   8,400,000                -        8,400,000
Total current assets                                 75,818,106       76,663,130       77,015,146
Total assets                                        815,601,491      885,253,581      817,116,731
EQUITY AND LIABILITIES
Capital and reserves
Share capital and share premium                     114,336,674      114,336,674      114,336,674
Retained earnings                                   487,324,779      488,732,918      479,224,908
Total equity attributable to owners of the
parent                                              601,661,453      603,069,592      593,561,582
Non-controlling interest                               (291,068)        (283,175)        (291,068)
Total equity                                        601,370,385      602,786,417      593,270,514
Borrowings                                          127,725,818      143,099,409      133,337,025
Deferred tax liabilities                                      -        1,006,350                -
Total non-current liabilities                       127,725,818      144,105,759      133,337,025
Current income tax liabilities                       12,328,016        8,902,296       12,486,566
Loans from directors                                     17,508        2,015,561           18,508
Loans from related parties                            4,705,029          522,010           20,096
Loans from group companies                                    -              103                -
Loans from shareholders                                       -        6,126,864                -
Tenant deposits                                       7,609,168        6,848,762        6,984,889
Trade and other payables                             45,264,337       96,190,017       54,440,417
Borrowings                                           14,559,450       14,764,174       14,559,450
Bank overdraft                                        2,021,780        2,991,618        1,999,266
Current liabilities                                  86,505,287      138,361,405       90,509,192
Total liabilities                                   214,231,106      282,467,164      223,846,217
Total equity and liabilities                        815,601,491      885,253,581      817,116,731

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

                                                  Unaudited       Unaudited
                                                   6 months        6 months        Audited
                                                      ended           Ended       Year end
                                                31 December     31 December        30 June
Figures in Rand                                        2017            2016           2017
Revenue                                          44,848,701      47,679,767     90,311,864
Property revenue                                 44,848,701      47,679,767     90,379,208
Straight-line rental income accrual                       -               -        (67,344)
Other income                                        108,568         190,248      6,952,559
Other direct property operating costs           (16,265,296)    (27,287,500)   (43,380,174)
Administrative and management expenses           (9,931,661)     (8,988,726)   (26,951,020)
Repairs and maintenance                          (4,203,676)     (1,174,137)    (8,135,014)
Fair value adjustment                                     -               -     19,626,092
Gross change in fair value of investment
property                                                  -               -     19,558,748
Straight-line lease adjustment                            -               -         67,344
Loss of control of subsidiary                             -               -    (30,424,170)
Operating profit before interest                 14,556,636      10,419,652      8,000,137
Finance income                                    2,145,863       5,520,421      7,082,805
Finance costs                                    (8,602,628)    (12,454,525)   (19,014,512)
Profit / (Loss) before taxation                   8,099,871       3,485,548     (3,931,570)
Taxation                                                  -       (837,416)     (3,146,407)
Profit / (Loss) after taxation                    8,099,871       2,648,132     (7,077,977)
Total comprehensive income /(loss) for the
year                                              8,099,871       2,648,132     (7,077,977)


Owners of the parent                              8,099,871       2,648,132     (7,074,340)
Non-controlling interest                                  -               -         (3,637)
                                                  8,099,871       2,648,132     (7,077,977)
Earnings per share
Basic and diluted earnings per share (cents)           1.29            0.42          (1.13)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                                                  Unaudited       Unaudited
                                                   6 months        6 months        Audited
                                                      ended           Ended       Year end
                                                31 December     31 December        30 June
Figures in Rand                                        2017            2016           2017
Cash inflow from operating activities             9,344,446     (19,000,475)    12,208,624
Cash generated by operations                     16,384,697       8,672,029     45,369,628
Interest received                                 2,145,863       5,520,421      7,082,805
Interest paid                                    (8,602,628)    (12,454,525)   (19,014,512)
Taxation paid                                      (583,466)       (360,581)    (1,061,684)
Dividends paid                                            -     (20,377,819)   (20,167,613)


Cash outflows from investing activities         (10,278,725)     19,998,201       (703,191)
Loans repaid / (advanced) by related
parties                                            (759,416)      5,906,427    (11,124,715)
Loans repaid / (advanced) to shareholder         (9,482,097)     10,147,464    (25,056,913)
Proceeds on sale of investment property                   -       4,500,000     14,000,000
Purchases of property, plant and
equipment                                           (37,212)       (555,690)      (797,993)

Cash (outflows) / inflow from financing
activities                                         (927,273)     (5,936,333)   (18,402,409)
Loans (repaid) / raised from related parties      4,684,933         500,746         (1,168)
Loans (repaid) / raised from directors               (1,000)      1,612,032       (385,021)
(Repayment of) / Increase in interest
bearing borrowings                               (5,611,206)     (8,049,112)   (18,016,220)
Net increase in cash, cash equivalents and
bank overdrafts                                  (1,861,533)     (4,938,608)    (6,923,976)
Cash, cash equivalents and bank
overdrafts at the beginning of the year             729,900       7,653,876      7,653,876

Cash, cash equivalents and bank
overdrafts at the end of the year                (1,131,632)      2,715,268        729,900
CONDENSED STATEMENTS OF CHANGES IN EQUITY

                                                 Share      Retained                    Non-controlling         Total
Figures in Rands                                Capital     Earnings            Total          Interest        equity
Balance at 30 June 2016                     114,336,674   506,466,861    620,803,535          (287,431)   620,516,104
Total comprehensive loss for the year                 -    (7,074,340)    (7,074,340)           (3,637)    (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
Total comprehensive income for the year               -     8,099,871      8,099,871                  -     8,099,871

Balance at 31 December 2017                 114,336,674   487,324,779    601,661,453          (291,068)   601,370,385
CALCULATION OF HEADLINE EARNINGS AND DISTRIBUTABLE EARNINGS

                                                    Unaudited       Unaudited
                                                     6 months        6 months        Audited
                                                        ended           Ended       Year end
                                                  31 December     31 December        30 June
Figures in Rand                                          2017            2016           2017
Shares in issue                                   630,698,688     630,698,688    630,698,688
Number of shares for basic earnings               630,698,688     630,698,688    630,698,688
Less: treasury shares                              (3,688,866)     (3,688,866)    (3,688,866)
Number of shares for net asset and diluted
earnings per share                                627,009,822     627,009,822    627,009,822
Number of shares for diluted earnings per
share                                             627,009,822     627,009,822    627,009,822
Weighted average number of shares in
issue                                             627,009,822     627,009,822    627,009,822
Headline earnings reconciliation:
Basic earnings / (loss)                             8,099,871       2,648,132     (7,074,340)
Fair value adjustment to investment
properties                                                  -               -    (19,558,748)
Loss of control of subsidiary                               -               -     30,424,170
Net profit on disposal of investment
properties                                                  -               -       (500,000)
Headline earnings                                   8,099,871       2,648,132      3,291,082
Reconciliation of net asset value:
Total equity attributable to equity holders of
the parent                                        601,661,453     603,069,592    593,561,582
Total net asset value                             601,661,453     603,069,592    593,561,582
Earnings per share (cents)
Basic and diluted earnings / (loss) per share            1.29            0.42          (1.13)
Headline earnings per share (cents)
Headline and diluted headline earnings per
share                                                    1.29            0.42           0.52
Net asset value per share
Net asset value per share at year-end
(cents)                                                 95.96           96.18          94.67
SEGMENT REPORT

                                                   31 December          31 December
                                                          2017                 2016
                                                             R    %               R    %
 Revenue (excluding recoveries)
 Commercial                                         11,376,854   38      13,542,341   38
 Industrial                                          4,853,407   16       4,202,728   12
 Retail                                             12,228,967   42      16,185,160   45
 Hospitality                                         1,228,811    4       1,348,968    4
 Residential                                                 -    -        243,671     1
                                                    29,688,039   100     35,522,868   100

The Group does not have any inter-segment revenue.

 Profit before taxation
 Commercial                                          3,103,979   38       1,669,577   48
 Industrial                                          1,324,169   16        599,514    17
 Retail                                              3,336,463   42        742,422    21
 Hospitality                                           335,260    4        456,607    13
 Residential                                                 -    -          20,913    1
                                                     8,099,871   100      3,489,033   100
 Property values (including properties held for
 sale, before adjustment for straight-lining of
 leases)
 Commercial                                        348,369,404   47     417,343,659   52
 Industrial                                         82,044,512   11      82,229,907   10
 Retail                                            205,680,677   28     158,183,376   19
 Hospitality                                        96,289,407   13      90,876,169   11
 Residential                                                 -    -       4,350,240    1
 Land                                               10,000,000    1      53,400,000    7
                                                   742,384,000   100    806,383,351   100
 Borrowings (excluding instalment sales and loans)
 Commercial                                         59,985,012    4     126,319,879   80
 Industrial                                         21,501,595    1      22,285,317   14
 Retail                                             34,996,839    2       6,530,380    4
 Hospitality                                        24,628,049    17      2,606,293    2
                                                   141,111,494    10    157,741,869   100


 Rating of tenants (rental income)
 Commercial                                 A        2,832,929    10    A     3,868,362   11
                                            B          475,546     2    B       321,714    1
                                            C        8,068,379    27    C     9,352,265   26
 Industrial                                 A          390,670     1    A             -    -
                                            B        2,118,630     7    B     2,150,953    6
                                            C        2,344,107     8    C     2,051,775    6
 Retail                                     A        5,454,384    18    A     5,774,914   16
                                            B        1,131,541     4    B      552,056     2
                                            C        5,643,041    19    C     9,858,190   27
 Hospitality                                A                -     -    A             -    -
                                            B        1,228,811     4    B     1,348,968    4
 Residential                                C                -     -    C       243,671    1
                                                    29,688,038    100        35,522,868   100


A: Represents major listed companies
B: Represents smaller listed companies and big unlisted companies
C: Represents smaller unlisted companies and private businesses

1.   Commentary

     The Group revenue reduced from R47.7 million in December 2016 to R44.8 million in
     December 2017.

     This is as a result of the liquidation of the Erf 195 Elma Park building as previously
     announced as well as the sale of 67 Seventh Street Linden building.

     Other direct, operating and management costs reduced from R36.3 million to R26.2
     million. This represents a reduction of 27.8%. The majority of the reduction in the Other
     direct, operating and management costs is as a result of a reduction in utilities of R4.6
     million where previously logged disputes with council have resulted in some credit notes
     being passed while other disputes remain pending. Further to this there was a reduction
     in levies of R3.7 million.

     Repairs and Maintenance increased from R1.2 million to R4.2 million. This is due to a drive
     to improve the state of buildings within the property portfolio.

     The reduction in the finance income relates to a reduction in the balance of long
     outstanding debtors.

     The reduction in the finance cost is as a result of a number of the bonds maturing to a
     level such that the repayments now consist of a higher capital portion as opposed to
     interest, as well as a reduction in the interest rate of 0.25% at the beginning of the current
     period.

     The operating profit improved by 132.4% from R3.5 million to R8.1 million. The total
     comprehensive income for the period improved from R2.6 million in December 2016 to
     R8.1 million in December 2017 constituting an improvement of 205.9%.

2    Basis of preparation

     The condensed unaudited consolidated results have been prepared in accordance with
     the framework concepts and the measurement and recognition requirements of the
     International Financial Reporting Standards, containing information required by the
     IAS 34 Interim Financial Reporting, the AC 500 standards as issued by the Accounting
     Practices Board and in the manner required by the Companies Act and the JSE Listing
     Requirements. The accounting policies applied, are consistent with those applied in the
     annual financial statements for the year ended 30 June 2017.

     These results were prepared by D. Dabideen BCom (Hons) Accounting.

3.   Investment property disposed

     There was a disposal of a building owned by Orion Property Holding Trust for the value of
     R8.25 million.

4.   Related party transactions
     Related party transactions similar to those disclosed in the Group's annual financial
     statements for the year ended 30 June 2017 took place during the financial year and
     separate disclosure thereof is not considered material to the interpretation of these
     results.

5.   Subsequent events

     There has been an acquisition of eight properties as detailed in two SENS
     announcements dated the 20 March 2018 with reference numbers ORE 201803200004A
     and ORE 201803200003A.
     
     Shareholders are asked to please refer to these SENS announcements for the details of
     the acquisitions made and to take note that these acquisitions are subject to conditions
     as stipulated in the SENS announcements.

6.   Dividends

     No dividends have been declared for the six months ended 31 December 2017.

7.   Future prospects

     While trading conditions remained tight during the reporting period, the future prospects
     has improved due to the benefit of cost savings and tighter controls coming through as
     well as the probable acquisition of ten properties subsequent to year end which will result
     in an improved revenue going forward.

Orion Real Estate is a JSE main board listed Real Estate Investment Trust (REIT) listed under the
diversified

REIT’s sector. Its primary focus is on long-term investment in quality, rental generating properties
situated in strategic nodes.

By Order of the Board
27 March 2018

Directors
RS Wilkinson*, MDK Mthembu*, AC Gmeiner+, F Gmeiner (MD)~, D Dabideen (Financial
Director)~
*Independent non-executive
+Non-executive
~Executive

Company secretary and registered office
Corporate Governance Facilitators CC

Registered office
Registered office and business address
16th Floor, Orion House
49 Jorissen Street
Braamfontein
Johannesburg, 2017

Sponsor
Arbor Capital Sponsors Proprietary Limited

Transfer office
Computershare Investor Services Proprietary Limited

Date: 27/03/2018 04:08:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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