Wrap Text
Unaudited Interim Results 2018
Octodec Investments Limited
Incorporated in the Republic of South Africa
Registration number: 1956/002868/06
Share code: OCT
ISIN: ZAE000192258
REIT status approved
Octodec Investments Limited
UNAUDITED INTERIM RESULTS 2018
Creating value beyond financial return
Octodec Investments Limited (Octodec or the group or the company) is listed on the JSE Limited (JSE) as a real estate
investment trust (REIT) with a portfolio of 309 properties valued at R12.9 billion, which includes a 50% interest in
four joint ventures. The group invests in the retail, residential, shopping centre, industrial and office property
sectors and all of the properties are situated in Gauteng.
Octodec is well-positioned to continue taking advantage of opportunities in the Tshwane and Johannesburg CBDs.
The group's primary objective is to improve the existing properties in strategic investment nodes with the objective
of attracting new tenants and improving rental income.
Octodec has contracted City Property Administration Proprietary Limited (City Property), to perform its asset and
property management functions.
- 309 properties valued at R12.9bn
- 66.3% of our portfolio is in Tshwane
- 33.7% of our portfolio is in Johannesburg
Measuring performance
- 101.7 cents per share distributed for the six-month period (2017: 104.8 cents)
- R29.62 net asset value (NAV) per share
- 3.2% like-for-like growth in rental income for the six-month period
- 97.5% of exposure to interest rate risk is hedged
- 37.1% loan to investment value (LTV)
- 9.2% all-in annual weighted average cost of borrowings
- Sharon's Place development substantially completed
Rental income % by sector
- Retail
36.9% (FY2017: 37.1%)
10.6% shopping centres (FY2017: 10.0%)
26.3% retail - shops (FY2017: 27.1%)
- Residential
30.5% (FY2017: 29.5%)
- Offices
20.7% (FY2017: 21.1%)
- Industrial
7.5% (FY2017: 8.2%)
- Parking
4.4% (FY2017: 4.1%)
Geographical analysis of the rental income
% of Total
portfolio
Tshwane CBD 33.2%
Johannesburg CBD 21.2%
Tshwane Other 12.7%
Johannesburg and Surroundings 12.5%
Tshwane Hatfield 7.1%
Tshwane Arcadia 5.0%
Silverton and Surroundings 4.3%
Waverley, Gezina, Moot 4.0%
Review of results
During the period under review, the local operating environment was plagued by political and policy uncertainty which
weighed heavily on consumer confidence and local economic growth. With this in mind our approach was to increase our
focus on the core property fundamentals and position ourselves to continue to provide shareholders with sustainable value
creation. We increased our focus on the disposal of non-core and under-performing properties.
Octodec's board has declared a dividend of 101.7 cents per share for the six-month period ended 28 February 2018.
The dividend was impacted by pressure on rental income growth as a result of the sluggish performance of the local
economy, and the reduction in distributable income during the let-up phase of The Manhattan, One on Mutual and Sharon's
Place. Total revenue earned on a contractual basis increased by 3.5% (28 February 2017: 5.3%) and property operating
expenses increased by 2.2% compared to the prior comparative period. The gross operating cost ratio to contractual
revenue reduced to 44.2% (31 August 2017: 45.9%). Operating costs, net of assessment rates, utility recoveries and
other recoveries, were at 28.3% (31 August 2017: 30.9%) of contractual rental income. This was due to an increased
focus on cost reductions and improved efficiencies.
Salient features
6 months 6 months
% 28 February 28 February
Change 2018 2017
R'000 R'000
Revenue - earned on contractual basis 3.5 929 656 897 813
Net property income - earned on contractual basis 4.7 518 866 495 683
Investment property including joint ventures 1.9 12 904 343 12 664 048
Shareholders' funds 1.9 7 884 600 7 736 852
Interest bearing borrowings 2.1 4 832 687 4 734 847
Shares in issue (�000) 266 198 261 539
Net asset value (NAV) per share (cents) 0.1 2 962 2 958
Loan to investment value (LTV) ratio (%) 37.1% 37.2%
Distribution to shareholders (1.2) 270 779 274 137
Distribution per share (cents) (3.0) 101.7 104.8
The core portfolio, represented by those properties held for the previous comparable period with no major development
activity, reflected like-for-like rental income growth of 3.2%. Rental achieved from retail shopping centres and
parking showed the strongest growth, at 7.0% and 9.6% respectively. The residential portfolio showed lower growth
in like-for-like rental income of 1.4%.
This lower growth is mainly attributable to increased vacancies and lower escalations of rental rates during the
period, mainly in Hatfield and the Tshwane CBD. A number of new competitors entered the Hatfield market, resulting
in increased supply of residential accommodation. Marketing efforts and an enhancement of the tenant offering to
address the increased competition are bearing results with a reduction in residential vacancies achieved after
28 February 2018 to 3.7%.
Rental income from shopping centres increased by 7.0% compared to the same period in the prior year. However, we
do not anticipate a similar performance in the second six-months due to increased vacancies at the end of
February 2018.
Percentage increase in like-for-like rental income for the six-month period ended 28 February 2018
Parking 9.6%
Shopping centres 7.0%
Retail - shops 4.3%
Offices 2.5%
Residential 1.4%
Industrial 0.8%
Percentage increase in like-for-like rental income of 3.2%
Cost to income ratios
The cost to income ratios are as follows:
28 February 28 February 31 August
2018 2017 2017
% % %
Property costs
Gross basis 44.2 44.8 45.9
Net basis 28.3 29.6 30.9
Property and administration costs 49.4 49.0 50.2
Gross basis
Net basis 35.0 34.6 36.0
Property costs, both on a gross and net basis, have decreased compared to the prior period. This is largely due to
the reversal of an accrual for tenant installations which did not occur as well as accruals for electricity and water,
which estimate was revised in the current period, based on our experience with billings from the Councils.
Bad debt write-offs and provisions during the period remained unchanged at 1.2% of total tenant income (28 February
2017: 1.2%). Despite the sustained economic pressure, arrears and doubtful debt provisions remain at acceptable
levels as a result of tight credit risk management. No significant deterioration is anticipated in the near future.
The administrative costs increased by R14.6 million compared to the same period in 2017, mainly due to once-off costs
incurred with the negotiation and preparation of the asset and property management agreement, a provision for a VAT
liability relating to prior periods as well as an overall increase in administration expenses.
Finance costs for the period amounted to R213.9 million, an increase of 7.5% compared to the prior period. The
all-in weighted cost of borrowings remained at 9.2% per annum (31 August 2017: 9.2%). This is mainly due to increased
borrowings to fund developments and projects, as well as the cost of additional interest rate hedging contracts
entered into during the period.
Investing for growth
Developments
Sharon's Place, a large, well-located residential development consisting of 400 residential units, 5 660 m2 of ground
floor retail, anchored by Shoprite and Clicks, and 289 parking bays, is adjacent to the new Tshwane House municipal
development in the Tshwane CBD. The total cost of the project, excluding land costs, is R356.0 million. The initial
annual yield, excluding land costs, is expected to be 7.3% when fully let. The retail portion of the property was
completed in July 2017 and Block B of the residential section, which consists of three blocks, was complete as at
28 February 2018. Blocks A and C are expected to be completed in phases by June 2018. There has been a strong
demand for the residential units, with all units in Block B being let shortly after completion thereof.
The group has several smaller projects under way, in line with Octodec's strategy to upgrade, maintain and extract
value from its property portfolio. These include the upgrade of North City, an office block in Braamfontein and The
Tannery, a multi-tenanted industrial complex situated in Silverton, Tshwane. These projects will not only improve
the occupancy levels and enhance the value of the portfolio, but will also contribute to the upliftment of the areas
in which Octodec is predominantly invested.
Octodec is in the planning phase of a residential development, Reinsurance House, which is situated in a prime
location in the Johannesburg CBD. This development will only commence when a suitable yield of at least 8.5% is
achievable. The total development cost is expected to be approximately R110 million.
Disposals
In line with the decision to dispose of non-core or under-performing properties, the group disposed of a further ten
properties during the period, six of which have been transferred for a total consideration of R43.8 million. Transfer
of the remaining four properties for a total consideration of R44.8 million is expected to take place before the
2018 financial year-end.
Properties disposed of and transferred before 28 February 2018
Total Profit/(loss) Exit
consideration on disposal Transfer yield
PROPERTY LOCATION R'million R'million date %
Pretboy Tshwane Other 3.2 (0.4) February 2018 7.1
Pretwade Wadeville Johannesburg 10.5 - February 2018 3.6
Sharp Centre Tshwane CBD 5.7 - October 2017 10.0
Iskemp Isando, Johannesburg 18.0 1.1 February 2018 1.2
119 & 121 Albertina Sisulu Johannesburg CBD 5.6 0.2 December 2017 0.1
Grariv Units 24 and 42 Tshwane Other 0.8 0.1 December 2017 5.2
Total 43.8 1.0 7.1
Transfers expected to take place after 28 February 2018
Total Profit/(loss) Expected Exit
consideration on disposal transfer yield
PROPERTY LOCATION R'million R'million date %
Swemvoor Gezina, Tshwane 9.1 0.8 June 2018 5.0
Viskin Tshwane CBD 3.0 (0.3) May 2018 9.0
Tronap Tshwane North 6.7 - June 2018 10.0
Medical Towers Johannesburg CBD 26.0 0.9 June 2018 4.0
Total 44.8 1.4 5.5
Vacancies
Vacancies in the Octodec portfolio at 28 February 2018, including properties held for redevelopment, amounted to
18.5% (31 August 2017: 19.0%) of gross lettable area. The core vacancies, which exclude the gross lettable area
relating to properties held for development, those currently being redeveloped and those recently redeveloped,
amounted to 10.8% (31 August 2017: 10.7%).
Vacancies by sector as at 28 February 2018
Properties
Gross held for
lettable redevelopment
area Total or recently Core
(GLA) vacancies developed vacancies
m2 % % %
Offices 509 084 37.5 (22.2) 15.3
Retail - shops 390 556 9.2 - 9.2
Retail - shopping centres 92 198 6.2 - 6.2
Industrial 263 050 14.5 - 14.5
Residential 396 962 8.7 (3.3) 5.4
Total 1 651 850 18.5 (7.7) 10.8
31 August 2017
Offices* 509 848 36.7 (21.8) 14.9
Retail - shops* 398 105 10.8 (1.6) 9.2
Retail - shopping centres 91 867 4.6 - 4.6
Industrial 270 521 12.3 - 12.3
Residential 394 721 12.3 (5.1) 7.2
Total 1 665 062 19.0 (8.3) 10.7
* In order to provide a meaningful comparison, certain GLA was re-allocated from retail - shops to Offices
in 2017.
Residential total vacancies include units in Blocks A and C of Sharon's Place which are still under construction
as at February 2018. Office vacancies are expected to increase due to a large government tenant currently occupying
3 100 m2, who will be vacating in April 2018. As expected, a number of properties held for development, or those
which are currently under development, have vacancies.
In recent years, certain office properties such as Fedsure House, Reinsurance House, Van Riebeeck Medical Building
and Midtown were acquired with high vacancy levels. These office properties, with 112 869 m2 of mothballed space,
offer significant residential conversion, office redevelopment or disposal opportunities, the value of which will
be realised over time.
Lease expiry profile
Octodec's portfolio features a mix of short to long-term leases. The majority of the leases provide for a monthly
agreement at expiry of the lease. When this occurs an effort is made to conclude longer-term leases. This is
especially typical of the residential market and leases with small to medium-sized enterprises.
Lease expiry profile as at 28 February 2018
Gross Monthly
lettable area contractual
(GLA) rent
m2 % R'000 %
Residential (12 months and less) 362 573 21.9 36 175 29.4
Monthly commercial 204 960 12.4 17 200 14.0
to 28 February 2019 290 928 17.6 24 601 20.0
to 28 February 2020 190 874 11.6 15 300 12.5
to 28 February 2021 150 554 9.1 15 677 12.7
to 28 February 2022 67 789 4.1 5 904 4.8
Thereafter 79 175 4.8 8 128 6.6
Vacancies 304 997 18.5 - -
Total 1 651 850 100.0 122 985 100.0
Borrowings
Borrowings as at 28 February 2018
Weighted average
interest rate per
Amount annum
R'million %
Bank loans 3 705.5 9.2
Domestic medium term note programme (DMTN) 1 127.2 8.4
Total borrowings 4 832.7 9.0
Cost of swaps - 0.2
Total borrowings 4 832.7 9.2
The group's loan to value ratio (LTV) (value of interest bearing borrowings, net of cash divided by the fair
value of its investment portfolio) as at 28 February 2018 is 37.1% (31 August 2017: 37.1%).
Octodec has reduced its exposure to interest rate risk by entering into interest rate swap contracts in respect
of 97.5% (31 August 2017: 82.1%) of its borrowings.
The hedges in place are for a weighted average period of 1.6 years. The all-in average weighted interest rate
of all borrowings is 9.2% per annum (31 August 2017: 9.2%).
Loan expiry profile per financial year (Rm and %)
Rm %
2018 739 15%
2019 2 259 47%
2020 1 002 21%
2021 833 17%
Total value of loans R4.833 billion
Expiry profile of fixed rate loans and interest rate swap contracts per financial year (Rm and %)
Rm %
2018 1 101 23%
2019 1 361 29%
2020 500 11%
2021 1 750 37%
Total interest rate swaps and fixed rate loans R4.712 billion
Octodec participates in a DMTN programme through its subsidiary, Premium Properties Limited. As at 28 February 2018
the total issuance was at R1 127.2 million, or 23.3% of the group's borrowings. Global Credit Rating's long and
short-term national scale ratings of Premium Properties Limited are A-(ZA) and A1-(ZA) respectively.
Octodec had unutilised available banking facilities amounting to R838.5 million at 28 February 2018.
Changes in fair value
It is the group's policy to perform internal valuations of all the properties at the interim period and at year-end.
The valuations are based on the income capitalisation method, which is consistent with the basis used in prior years.
The property portfolio was internally valued at R12.7 billion after a net increase in valuation of R54.7 million or
0.4% for the six month period ended 28 February 2018.
The mark-to-market value of interest rate swaps contracts, which protect the group against adverse interest rate
movements, resulted in a fair value gain of R6.3 million for the period.
Renewal of asset and property management agreement with City Property
Octodec will, subject to shareholders' and other approvals, enter into a new asset and property management agreement
with City Property, effective from 1 July 2018, which agreement will replace the existing asset and property management
agreement between the parties.
A circular to shareholders of Octodec containing, inter alia, the salient features of the agreement, together with the
requisite Fairness Opinion, and containing a notice of general meeting, will be mailed to shareholders in due course.
Prospects
After a challenging environment characterised by political and economic uncertainty, the local operating environment
has started to show some signs of improvement, which should provide the stimulus for Octodec to continue to unlock
value and provide shareholders with a growing and sustainable distribution.
Octodec and its experienced management team combined with its diversified portfolio, large number of tenants, sound
operating fundamentals and prudent capital management, bears out Octodec's resilience during these challenging times.
Octodec responded to the increased competition and changing trends in the residential sector by adjusting the tenant
offering without compromising on recoverability of rentals or other standards. This has already contributed to the
improved occupation levels in the residential sector with vacancies having decreased from 7.2% at 31 August 2017 to
5.4% at 28 February 2018.
This, together with prudent cost management across the group, should sustain the performance of the group for the
remainder of the financial year.
The disposal of non-core or under-performing properties will remain a key focus area for the foreseeable future.
The forecast distribution for the second six-month period ending 31 August 2018 is expected to be similar to the
distribution for the six-month period ended 28 February 2018. Therefore no growth in distribution per share for
the full financial year is anticipated.
This guidance is based on the following:
- forecasted investment property income is calculated using contractual rentals and assumed market-related renewals
- allowance for vacancies has been established using assumptions and historical experience
- no major corporate and tenant failures are assumed
- no further deterioration in the economic and social environments
- the phased take-up of rental space in greenfield developments is based on historical experience adjusted for the
current economic environment.
This forecast has been neither reviewed nor reported on by the group's auditors.
Declaration of cash dividend
The board of directors of Octodec declared an interim cash dividend of 101.7 cents per share, for the six months
ended 28 February 2018, out of the company's distributable income.
Salient dates and times
The salient dates and times for the cash dividend are as set out below:
2018
Last day to trade cum dividend Tuesday, 15 May
Shares trade ex-dividend Wednesday, 16 May
Record date to receive cash dividend Friday, 18 May
Electronic transfer into personal bank account of
certificated shareholders2 Monday, 21 May
Accounts credited by CSDP or broker to dematerialised shareholders
with the cash dividend payment Monday, 21 May
Notes:
1. Shares may not be dematerialised or rematerialised between Wednesday, 16 May 2018 and Friday,
18 May 2018, both days inclusive. The above dates and times are subject to change. Any changes will be announced
on SENS.
2. Where the transfer secretaries do not have the banking details of any certificated shareholders, the cash dividend
will be held by the company pending receipt of the relevant certificated shareholder's banking details, whereafter
the cash dividend will be paid via electronic transfer into the personal bank accounts of certificated shareholders.
Tax implications for non-resident shareholders
Dividends received by non-resident shareholders from a REIT will not be taxable as income and will be exempt from
income tax in terms of the exemption in section 10(1)(k)(i) of the Income Tax Act. Any dividend received by a
non-resident from a REIT is subject to dividend tax at 20%, unless the rate is reduced in terms of any applicable
agreement for the avoidance of double taxation agreements (DTA) between South Africa and the country of residence
of the non-resident shareholders. Assuming dividend tax will be withheld at a current rate of 20% the net dividend
amount due to non-resident shareholders is 81.36 cents per share.
A reduced dividend tax in terms of the applicable DTA may only be relied on if the non-resident shareholder has
submitted the following forms to his/her CSDP or broker, as the case may be, in respect of uncertificated shares,
or the transfer secretaries, in respect of certificated shares:
- A declaration that the dividend is subject to a reduced rate as a result of the application of the DTA; and
- A written undertaking to inform the CSDP, broker or the transfer secretaries, 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 Services (SARS).
If applicable, non-resident shareholders are advised to contact the CSDP, broker or the company, as the case may be,
to arrange for the above-mentioned documents to be submitted prior to payment of the dividend, if such documents have
not already been submitted.
Tax implications for South African resident shareholders
Dividends received by or accrued to South African tax residents must be included in the gross income of such
shareholders. They are not exempt from income tax in terms of the exclusion to the general dividend exemption contained
in section 10(1)(k)(i)(aa) of the Income Tax Act because they are dividends distributed by a REIT. These dividends are,
however, exempt from dividend withholding tax (dividend tax) in the hands of South African resident shareholders,
provided that the South African resident shareholders have made submissions to the CSDP or broker, as the case may
be, in respect of uncertificated shares, or the company in respect of certificated shares, a DTD (EX) (Dividend Tax:
declaration that the dividend is exempt from dividends tax and 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
ceases to be the beneficial owner, both in the form prescribed by the Commissioner for the South African Revenue
Services (SARS).
If resident shareholders have not submitted the above-mentioned documentation to confirm their status as a South
African resident they are advised to contact their CSDP or broker, as the case may be, to arrange for the documents
to be submitted prior to payment of the cash dividend.
Shareholders are encouraged to consult with their professional advisors should they be in any doubt as to the
appropriate action to take.
The number of shares in issue at the date of this declaration is 266 197 535 and Octodec's tax reference number
is 9925/033/71/5.
By order of the board
S Wapnick JP Wapnick
Chairman Managing director
20 April 2018
Notes to the condensed consolidated interim financial statements
Basis of preparation
The condensed consolidated interim financial statements are prepared in accordance with the JSE Listings Requirements
and the requirements of the Companies Act, 71 of 2008 of South Africa. The interim report has been prepared in
accordance with 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 condensed consolidated interim financial statements are in accordance with
International Financial Reporting Standards (IFRS) and are consistent with those applied in the preparation of the
previous 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 condensed consolidated interim financial statements were prepared under the supervision of Mr AK Stein CA (SA),
in his capacity as group financial director and have not been reviewed or reported on by the company's auditors.
Fair value measurement
The fair value of investment properties is arrived at on the basis of a valuation technique using the net income
capitalisation method carried out on 28 February 2018, by taking into account prevailing market rentals, occupation
levels and capitalisation rates. The other key input used in the valuation calculation is the expected long-term net
operating income margin, of which the expense ratio and long range vacancy factor is the significant unobservable
input. There have been no changes in judgements or estimates of amounts or valuation techniques as reported in previous
reporting periods. The directors value the entire property portfolio bi-annually. The effect of the fair value
measurement on investment properties resulted in an increase in profit of R54.7 million in the statement of profit
and loss and other comprehensive income. In terms of the JSE Listings Requirements, all the properties are valued at
least once over a rolling three-year period by external independent valuation experts.
Financial instruments measured at fair value include derivatives. The fair values of the interest rate swaps are
determined on a mark-to-market valuation calculated by the various financial institutions with whom the swaps are held,
by discounting the estimated future cash flows based on the terms and maturity of each contract and using the market
interest rate indicated on the SA swap curve.
Fair value hierarchy
The fair value hierarchy reflects the significance of the inputs used in making fair value measurements. The level
within which the fair value measurement is categorised in its entirety is determined on the basis of the lowest
level input that is significant to the fair value measurement in its entirety.
The different levels have been defined as:
- Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities
- Level 2: Input other than quoted prices included within Level 1 that are observable for the asset or liability,
either directly (i.e. as prices) or indirectly (i.e. derived from prices)
- Level 3: Input for the asset or liability that is not based on observable market data (unobservable input).
Investment properties and derivative financial instruments have been categorised as Level 3 and Level 2, respectively,
and there have been no significant transfers made between Levels 1, 2 and 3 during the period. There have been no
material changes in judgements or estimates of amounts or valuation techniques as reported in previous reporting
periods.
Fair value measurements using significant unobservable inputs
Investment property,
plant and equipment
R'000
Balance as at 31 August 2017 12 598 899
Total fair value changes for the period included in profit and loss 54 733
Straight-line rental income accrual 1 268
Depreciation and amortisation (8 214)
Acquisitions, disposals and other movements:
- Developments and subsequent expenditure 125 670
- Disposals (41 450)
Balance as at 28 February 2018 12 730 906
Included in profit and loss for the period:
Changes in fair value of investment property 54 733
Relationship of unobservable inputs to fair value
The significant unobservable inputs used in the fair value measurement of the group's investment properties are
the capitalisation rates, the expense to income ratios as well as the long range vacancy factor. Significant
increases/(decreases) in any of these inputs in isolation would result in a significantly lower/(higher) fair
value measurement.
An increase of 1% in the capitalisation rate, while all other variables remain constant, would result in a
decrease in the carrying amount of investment property of R1.3 billion. A decrease of 1% in the capitalisation
rate, while all other variables remain constant, would result in an increase in the carrying amount of investment
property of R1.6 billion.
An increase/(decrease) of 1% in the weighted average expense ratio used to calculate the long-term net operating
income margin, while all other variables remain constant, would result in an increase/(decrease) in the carrying
amount of investment property of R170.7 million.
The third key input used in the valuation calculation is the long range vacancy factor. The expected long range
vacancy factor takes into account historic and future expected vacancy trends. The long range vacancy factor
indicates the expected vacancy to be applied over the long term that best approximates the actual experience.
The range of long range vacancy factors used was from 0.0% to 30.0%.
Stated capital, basic and diluted earnings per share
During the period, the company repurchased 666 784 shares in the open market for a total consideration of
R11.3 million or R17.01 per share. The shares were de-listed from the JSE on 23 February 2018.
28 February 2018 31 August 2017
Shares in issue (�000) 266 198 266 864
Weighted shares in issue (�000) 266 586 261 207
Basic and diluted earnings per share (cents) 123.8 263.3
Events after the reporting date
There have been no material subsequent events that require reporting.
Commitments
The group has approved capital commitments in the amount of R56.4 million, relating to various redevelopments,
upgrades of properties and committed tenant installations. These will be funded out of existing unused banking
facilities.
Related party transactions
Octodec and City Property are related parties in that Jeffrey Wapnick and Sharon Wapnick are directors of Octodec
and City Property, and the Wapnick family are shareholders of both companies.
Total payments made to City Property amount to R70.7 million. This included fees for collections, leasing, property
management, asset management, commission on acquisitions and disposals as well as upgrades and developments.
At 28 February 2018, an amount of R1.1 million was owing to City Property.
Financial statements
Condensed consolidated statement of financial position
Unaudited Reviewed Audited
28 February 28 February 31 August
2018 2017 2017
R'000 R'000 R'000
ASSETS
Non-current assets 12 739 824 12 605 157 12 568 875
Investment property 12 331 263 12 169 639 12 153 834
Plant and equipment 4 530 6 140 5 300
Straight-line rental income accrual 111 998 115 353 110 864
Tenant installation and lease costs 40 315 50 962 44 550
Other financial assets 75 000 69 275 75 000
Derivative financial instruments 3 281 18 024 1 847
Investment in joint ventures 173 437 175 764 177 480
Current assets 457 949 332 559 560 397
Trade and other receivables 134 827 144 076 143 342
Derivative financial instruments 708 42 293 1 736
Other financial assets 1 491 - 213
Bank and cash 78 123 - 130 756
215 149 186 369 276 047
Non-current assets held for sale 242 800 146 190 284 350
TOTAL ASSETS 13 197 773 12 937 716 13 129 272
EQUITY AND LIABILITIES
Equity 7 884 600 7 736 852 7 828 229
Stated capital 4 210 134 4 101 286 4 221 477
Non-distributable reserve 3 327 048 3 281 786 3 269 053
Retained earnings 347 418 353 780 337 699
Non-current liabilities 4 218 706 4 278 762 3 381 370
Interest bearing borrowings 4 093 637 4 170 344 3 253 517
Derivative financial instruments 44 591 27 955 47 421
Deferred taxation 80 478 80 463 80 432
Current liabilities 1 094 467 922 102 1 919 673
Interest bearing borrowings 739 050 564 503 1 572 817
Non-interest bearing borrowings 354 215 331 526 342 548
Bank overdraft - 24 715 -
Derivative financial instruments 1 202 1 358 4 308
TOTAL EQUITY AND LIABILITIES 13 197 773 12 937 716 13 129 272
Condensed consolidated statement of comprehensive income
Unaudited Reviewed Audited
6 months 6 months 12 months
28 February 28 February 31 August
% 2018 2017 2017
Change R'000 R'000 R'000
Revenue 930 924 897 190 1 831 346
earned on contractual basis 3.5 929 656 897 813 1 836 251
straight-line rental income accrual 1 268 (623) (4 905)
Property operating costs 2.2 (410 790) (402 130) (843 636)
Net rental income from properties 5.1 520 134 495 060 987 710
Administrative costs 38.7 (52 238) (37 660) (77 813)
Operating profit 2.3 467 896 457 400 909 897
Fair value changes 61 075 170 853 158 096
investment property 54 733 211 003 235 106
interest rate derivatives 6 342 (40 150) (77 010)
Profit on sale of investment property 1 051 2 566 2 943
Interest income 9 498 8 404 18 094
Finance costs 7.5 (213 869) (198 901) (408 702)
interest paid (223 035) (217 647) (439 201)
interest capitalised 9 166 18 746 30 499
Share of income from joint ventures 4 437 9 567 14 810
share of after tax profit 4 026 1 969 1 582
fair value changes - investment property (4 085) 2 956 2 572
interest and management fees 4 496 4 642 10 656
Profit before taxation (26.6) 330 088 449 889 695 138
Taxation charge - deferred (46) (7 474) (7 443)
Profit for the period (25.4) 330 042 442 415 687 695
Other comprehensive income for the period - - -
items that will not be reclassified to
profit and loss - - -
Total comprehensive income for the period
attributable to equity holders (25.4) 330 042 442 415 687 695
Basic and diluted earnings per share (cents) (27.8) 123.8 171.5 263.3
Condensed consolidated statement of changes in equity
Non-
Stated distributable Retained
capital reserve earnings Total
R'000 R'000 R'000 R'000
Balance at 31 August 2016 (audited) 3 958 207 3 112 885 342 708 7 413 800
Total comprehensive income for the period - - 442 415 442 415
Issue of new shares 143 079 - - 143 079
Dividends paid - - (262 442) (262 442)
Transfer to non-distributable reserve
Profit on sale of investment property - 2 566 (2 566) -
Deferred tax - (7 539) 7 539 -
Fair value changes
investment property - 211 003 (211 003) -
joint ventures - 2 956 (2 956) -
interest rate derivatives (net of deferred tax) - (40 085) 40 085 -
Balance at 28 February 2017 (reviewed) 4 101 286 3 281 786 353 780 7 736 852
Total comprehensive income for the period - - 245 280 245 280
Issue of new shares 120 191 - - 120 191
Dividends paid - - (274 094) (274 094)
Transfer to non-distributable reserve
Profit on sale of investment property - 377 (377) -
Deferred tax - 96 (96) -
Fair value changes
investment property - 24 103 (24 103) -
investment property - joint ventures - (384) 384 -
interest rate derivatives (net of deferred tax) - (36 925) 36 925 -
Balance at 31 August 2017 (audited) 4 221 477 3 269 053 337 699 7 828 229
Total comprehensive income for the period - - 330 042 330 042
Issue of new shares - - - -
Shares repurchased (11 343) - - (11 343)
Dividends paid - - (262 328) (262 328)
Transfer to non-distributable reserve
Profit on sale of investment property - 1 051 (1 051) -
Fair value changes
investment property - 54 733 (54 733) -
investment property - joint ventures - (4 085) 4 085 -
interest rate derivatives (net of deferred tax) - 6 296 (6 296) -
Balance at 28 February 2018 (unaudited) 4 210 134 3 327 048 347 418 7 884 600
Condensed consolidated statement of cash flows
Unaudited Reviewed Audited
6 months 6 months 12 months
28 February 28 February 31 August
2018 2017 2017
R'000 R'000 R'000
Cash flow from operating activities
Net rental income from properties 467 896 457 400 909 897
Adjusted for:
straight-line rental income accrual (1 268) 623 4 905
depreciation and amortisation 8 214 11 341 20 536
working capital changes 20 182 1 185 12 987
Cash generated from operations 495 024 470 549 948 325
Interest income 9 498 8 404 18 094
Finance costs (223 035) (217 647) (439 201)
Payment of distribution to equity holders (262 328) (262 396) (536 536)
Net cash inflow/(outflow) from
operating activities 19 159 (1 090) (9 318)
Cash flow from investing activities
Investing activities (109 293) (199 938) (316 812)
Proceeds from disposal of investment property 42 491 50 598 77 200
Net cash outflow used in investing activities (66 802) (149 340) (239 612)
Cash flow from financing activities
Shares repurchased (11 343) - -
Buy back/issue of new shares - 143 079 263 270
Proceeds from interest bearing borrowings 1 037 471 597 798 3 488 910
Repayment of interest bearing borrowings (1 031 118) (641 978) (3 441 603)
Net cash (utilised)/generated from
financing activities (4 990) 98 899 310 577
Net (decrease)/increase in bank and cash balance (52 633) (51 531) 61 647
Bank and cash balance at beginning of period 130 756 69 109 69 109
Bank and cash balance at end of period 78 123 17 578 130 756
Reconciliation of comprehensive income to headline earnings
Unaudited Reviewed Audited
6 months 6 months 12 months
28 February 28 February 31 August
2018 2017 2017
R'000 R'000 R'000
Total comprehensive income attributable
to equity holders 330 042 442 415 687 695
Headline earnings adjustments
Profit on sale of investment properties (1 051) (2 566) (2 943)
Fair value changes
investment property (54 733) (211 003) (235 106)
investment property - joint ventures 4 085 (2 956) (2 572)
Headline earnings attributable to equity holders 278 343 225 890 447 074
Headline earnings per share (cents) 104.4 87.6 171.2
Condensed consolidated segmental information
The group earns revenue in the form of property rentals. On a primary basis the group is organised into
six major operating segments:
Unaudited Reviewed
6 months 6 months
28 February 28 February
2018 2017
Rental income by sector R'000 % R'000 %
Offices 152 069 21.0 148 141 21.1
Retail - shops 194 257 26.8 189 975 27.1
Shopping centres 74 569 10.3 69 838 10.0
Industrial 56 388 7.8 57 560 8.2
Parking 32 186 4.4 28 982 4.1
Residential 214 450 29.7 206 023 29.5
Total rental income 723 919 100.0 700 519 100.0
Recoveries and other income 207 005 196 671
Revenue 930 924 897 190
Further segment results cannot be allocated on a reasonable basis due to the "mixed use" of certain of the properties.
It is the company's philosophy to invest predominantly in properties situated in the Gauteng area, and therefore the
company has not reported on a geographical basis.
Reconciliation of earnings to distributable earnings
Unaudited Reviewed Audited
6 months 6 months 12 months
28 February 28 February 31 August
2018 2017 2017
% R'000 R'000 R'000
Total comprehensive income
attributable to equity holders 330 042 442 415 687 695
Profit on sale of investment properties (1 051) (2 566) (2 943)
Fair value changes
investment property (54 733) (211 003) (235 106)
investment property - joint ventures 4 085 (2 956) (2 572)
Straight-line rental income accrual (1 268) 623 4 905
Fair value changes of interest rate derivatives (6 342) 40 085 77 010
Deferred tax 46 7 539 7 443
Distributable earnings attributable to
equity holders 270 779 274 137 536 432
Represented by:
Revenue
earned on contractual basis 3.5 929 656 897 813 1 836 251
Property operating costs 2.2 (410 790) (402 130) (843 636)
Net rental income from properties 4.7 518 866 495 683 992 615
Administrative costs 38.7 (52 238) (37 660) (77 813)
Operating profit 1.9 466 628 458 023 914 802
Interest income 9 498 8 404 18 094
Share of income from joint ventures 8 522 6 611 12 238
Distributable profit before finance costs 484 648 473 038 945 134
Finance costs 7.5 (213 869) (198 901) (408 702)
Distributable income before taxation (1.2) 270 779 274 137 536 432
Taxation - - -
Equity holders distributable earnings (1.2) 270 779 274 137 536 432
Octodec Investments Limited
Incorporated in the Republic of South Africa
Registration number: 1956/002868/06
Share code: OCT
ISIN: ZAE000192258 REIT status approved
Registered address
CPA House, 101 Du Toit Street, Tshwane 0002
Tel: 012 319 8781, Fax: 012 319 8812, E-mail: info@octodec.co.za
Directors
S Wapnick (Chairman)1, JP Wapnick (Managing director)2,
AK Stein (Financial director)2, DP Cohen3, GH Kemp4, AA Koranteng4,
MZ Pollack1, PJ Strydom4
1 Non-executive director
2 Executive director
3 Lead independent director
4 Independent non-executive director
Company secretary
City Property Administration Proprietary Limited
Contact person: Elize Greeff
CPA House, 101 Du Toit Street Tshwane 0002
Tel: 012 357 1564, Email: elizeg@octodec.co.za
Sponsor
Java Capital Proprietary Limited
Contact person: Tanya de Mendonca
6A Sandown Valley Crescent, Sandown, Sandton 2196
PO Box 522606, Saxonwold 2132
Tel: 011 722 3059, Email: sponsor@javacapital.co.za
Transfer secretaries
Computershare Investor Services Proprietary Limited
Contact person: Leon Naidoo
Rosebank Towers, 15 Biermann Avenue, Rosebank 2196
PO Box 61051, Marshalltown 2107
Tel: 011 370 5000, Email: leon.naidoo@computershare.co.za
Investor relations
Instinctif Partners
Contact person: Frederic Cornet
The Firs, 302 3rd Floor, Cnr Cradock and Biermann Road, Rosebank 2196
Tel: 011 447 3030, E-mail: investorrelations@octodec.co.za
http://www.octodec.co.za
23 April 2018
Date: 23/04/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
