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Provisional Summarised Audited Consolidated Financial Statements For The Year Ended 28 February 2018
SPEAR REIT LIMITED
Incorporated in the Republic of South Africa
Registration number 2015/407237/06
JSE share code: SEA
ISIN: ZAE000228995
(Approved as a REIT by the JSE)
("Spear" or "the group" or "the company")
Provisional Summarised Audited Consolidated Financial Statements
for the year ended 28 February 2018
Highlights
Distribution exceeded revised forecast by 1.95%
Total distribution of 78.50 cents per share
Only regionally specialised REIT on the JSE
Asset value increased by R1.69 billion up 117%
Portfolio fair value increased to R3.13 billion as at 28 February 2018
Tangible net asset value per share inceased by 15.4% to R11.57
Loan to value at 38.48%
Nature of the Business
Spear REIT Limited listed as a Real
Estate Investment Trust ("REIT") on
the AltX of the Johannesburg Stock
Exchange ("JSE") on 11 November 2016
and moved to the main board of the
JSE on 22 May 2017. Its main business
is investing in high-quality income-
generating real estate across all sectors
within the Western Cape, predominantly
in the Cape Town region.
The company conducts its business
directly and through a number of
subsidiaries, collectively referred to as
the group.
The group's property and asset
management functions are internally
and directly managed by the Spear
executive management team.
Consolidated Statement of Financial Position
Group Group
Audited Audited
Year 4 months
ended ended
28 February 28 February
2018 2017
R'000 R'000
ASSETS
Non-current assets
Investment property (Including straight-line accrual) 2 912 417 1 445 715
Property, plant and equipment 1 785 128
Financial assets 55 810 -
Deferred taxation 5 838 6 533
2 975 850 1 452 376
Current assets
Non-current assets held for sale 221 492 -
Financial assets 6 466 1 714
Trade and other receivables 13 132 8 092
Cash and cash equivalents 10 220 12 632
Taxation receivable - 11
Insurance claim receivable 178 18 687
251 488 41 136
TOTAL ASSETS 3 227 338 1 493 512
EQUITY AND LIABILITIES
Shareholders' interest
Share capital 1 547 407 917 538
Share-based payment reserve 4 394 3 939
Accumulated income 365 517 65 331
Total attributable to owners 1 917 318 986 808
Non-controlling interest 54 155 -
1 971 473 986 808
Liabilities
Non-current liabilities
Financial liabilities 1 053 434 478 453
1 053 434 478 453
Current liabilities
Financial liabilities 152 536 -
Loans from related parties 8 411 3 881
Finance lease - 113
Trade and other payables 40 840 21 554
Deferred revenue 644 2 703
202 431 28 251
TOTAL LIABILITIES 1 255 865 506 704
TOTAL EQUITY AND LIABILITIES 3 227 338 1 493 512
Number of ordinary shares in issue 165 190 689 98 226 952
Treasury shares (1 424 139) (464 591)
Net ordinary shares in issue 163 766 550 97 762 361
Gearing ratio (%) 38.48 33.09
Net asset value per share (cents) 1 161 1 009
Tangible net asset value per share (cents) 1 157 1 003
Consolidated Statement of Comprehensive Income
Group Group
Audited Audited
Year 4 months
ended ended
28 February 28 February
2018 2017
R'000 R'000
Property revenue
- Contractual rental income 232 896 51 916
- Tenant recoveries 54 179 9 905
- Straight-line rental income accrual 16 980 (2 647)
304 055 59 174
Other income 12 540 2 088
Total revenue 316 595 61 262
Property operating and management expenses (87 422) (16 294)
Net property-related income 229 173 44 968
Administrative expenses (17 530) (4 558)
Net operating profit 211 643 40 410
Fair value adjustment - Investment properties 252 535 40 553
Depreciation and amortisation (441) (4)
Formation and listing cost (314) (1 873)
Share-based payment expense (455) (3 939)
Profit from operations 462 968 75 147
Net interest (76 044) (16 662)
- Finance costs (82 297) (20 487)
- Finance income 6 253 3 825
Profit before taxation 386 924 58 485
Taxation (695) 6 846
Profit for the year 386 229 65 331
Other comprehensive income - -
Total comprehensive income for the year 386 229 65 331
Attributable to:
Equity owners of the parent 383 186 65 331
Non-controlling interest 3 043 -
Total comprehensive income for the year 386 229 65 331
Basic earnings per share (cents) 271.60 254.83
Diluted earnings per share (cents) 271.60 254.83
Distribution per share (cents) 78.50 23.51
Interest cover ratio (times) 2.56 2.58
Consolidated Statement of Changes in Equity
Accu- Total Non-
Share mulated Equity attributable controlling Total
capital profit reserve to parent interest equity
Group R'000 R'000 R'000 R'000 R'000 R'000
Balance as at
1 November 2016 0.1 - - 0.1 - 0.1
Changes in equity:
Profit for the
period - 65 331 - 65 331 - 65 331
Shares
repurchased from
founders (0.1) - - (0.1) - (0.1)
Issue of shares 921 888 - - 921 888 - 921 888
Acquisition of
treasury shares (4 350) - - (4 350) - (4 350)
Share-based
payment expense - - 3 939 3 939 - 3 939
Balance as at
28 February 2017 917 538 65 331 3 939 986 808 - 986 808
Balance as at
28 February 2017 917 538 65 331 3 939 986 808 - 986 808
Changes in equity:
Sale of investment
in subsidiary - - - - 54 155 54 155
Profit for the
period - 383 186 - 383 186 3 043 386 229
Distribution
to minority
shareholder - - - - (3 043) (3 043)
Issue of shares 638 926 - - 638 926 - 638 926
Acquisition of
treasury shares (9 057) - - (9 057) - (9 057)
Distributions to
shareholders - (83 000) - (83 000) - (83 000)
Share-based
payment expense - - 455 455 - 455
Total changes 1 547 407 365 517 4 394 1 917 318 54 155 1 971 473
Balance as at
28 February 2018 1 547 407 365 517 4 394 1 917 318 54 155 1 971 473
Consolidated Statement of Cash Flows
Group Group
Audited Audited
Year 4 months
ended ended
28 February 28 February
2018 2017
R'000 R'000
Cash generated from operations
Profit before tax 386 924 58 485
Adjusted for:
Straight-line rental income accrual (16 980) 2 647
Fair value adjustments - Investment property (252 535) (40 553)
Depreciation and amortisation 441 4
Finance income (6 253) (3 825)
Finance cost 82 297 20 487
Formation and listing cost - 1 873
Rental loss credits (2 059) (1 101)
Share-based payment reserve 454 3 939
Reclassification of trade receivable (4 752) -
Changes in working capital
Trade and other receivables (5 040) (8 092)
Trade and other payables 19 288 21 554
Cash generated from operating activities 201 785 55 418
Finance cost (82 297) (20 487)
Finance income 1 602 3 825
Distribution paid (83 000) -
Taxation received/(paid) 11 (11)
Net cash generated from operation activities 38 101 38 745
Cash flows from investing activities
Acquisition of investment property (1 278 255) (20 459)
Proceeds on sale of investment property 15 968 -
Investment property cost capitalised - (1 009)
Acquisition of property, plant and equipment (1 734) (132)
Proceeds from insurance receivable 18 508 10 000
Advances to financial asset - (1 714)
Net cash used in investing activities (1 245 513) (13 314)
Cash flow from financing activities
Proceeds from share issue 482 168 354 350
Proceeds from financial liabilities 761 214 -
Repayment of financial liabilities (33 696) (366 531)
Loan advanced to minority shareholder (48) -
Loan to related party - (4 758)
Loan from related party 4 530 8 639
Repayment of finance lease (112) (148)
Purchase of treasury shares (16 669) (5 310)
Proceeds from sale of treasury shares 7 613 959
Net cash generated from/(used in) financing activities 1 205 000 (12 799)
Total cash movement for the period (2 412) 12 632
Cash at the beginning of the period 12 632 -
Cash at the end of the period 10 220 12 632
Summarised Operating Segment Information
Year ended 28 February 2018
Operating Total
Revenue profit assets
R'000 R'000 R'000
Industrial 70 326 108 277 798 265
Commercial 111 986 196 226 1 075 407
Retail 67 868 109 764 571 548
Hospitality 36 935 33 514 643 537
Residential 7 205 9 163 82 373
Non-property 5 295 (10 956) 41 838
Straight-lining of leases 16 980 16 980 14 370
Total 316 595 462 968 3 227 338
Selected Explanatory Notes to the Results
1. Earnings per share
This note provides the obligatory information for the group in terms of IAS 33 Earnings Per
Share, and SAICA Circular 2/2015 and should be read in conjunction with note 2, where
earnings are reconciled to distributable earnings. Distributable earnings determine the
distribution declared to shareholders, which is a meaningful metric for a stakeholder in a REIT.
1.1 Basic earnings per share
Audited Audited
Year 4 months
ended ended
28 February 28 February
2018 2017
Number of Number of
Shares in issue shares shares
Number of shares in issue at year-end net of
treasury shares 163 766 550 98 226 952
Weighted average number of shares in issue 141 084 847 25 636 517
Diluted weighted average number of shares
in issues 141 084 847 25 636 517
Basic earnings per share
Earnings (profit attributable to owners of
the parent) (R'000) 383 186 65 331
Basic earnings per share (cents) 271.60 254.83
Diluted earnings per share (cents) 271.60 254.83
1.2 Headline earnings per share
Reconciliation between basic earnings and
headline earnings
Earnings (profit attributable to owners of
the parent) (R'000) 383 186 65 331
Adjusted for:
Fair value adjustments to investment
properties: (252 535) (40 553)
Gross (R'000) - -
Tax (R'000) - -
Headline earnings (R'000) 130 651 24 778
Headline earnings per share
Headline earnings per share (cents) 92.60 96.65
Diluted headline earnings per share (cents) 92.60 96.65
2. Reconciliation between earnings and distributable earnings
2.1 Distributable earnings
Audited Audited
Year 4 months
ended ended
28 February 28 February
2018 2017
R'000 R'000
Earnings (profit attributable to owners of the parent) 383 186 65 331
Adjusted for:
Fair value adjustments to investment properties (252 535) (40 553)
Straight-lining of leases adjustment (16 980) 2 647
Depreciation - 4
Formation and listing costs - 1 873
Equity-settled share-based payment reserve 455 3 939
Deferred tax realisation 695 (6 846)
Less: Profit not distributed (2 483) (5 970)
Antecedent dividend* 16 348 2 562
Distributable profit 128 686 22 987
* In the determination of distributable earnings, the group elects to make an adjustment for the antecedent
distribution arising as a result of the capital raise on 12 June 2017 and 7 July 2017, respectively, as well as
the private placement in the acquisition of Mega Park and MWEB Head Office during the period for which
the company did not have full access to the cash flow from such issues.
Number of
shares
Number of shares issued at year-end 165 190 689
Less: Treasury shares (1 424 139)
Number of shares in issue net of treasury shares 163 766 550
Distribution declared and distribution per share
Distributable earnings (cents per share) FY2018 FY2017
Distribution 1 - Declared 17 May 2017 - 23.51
Distribution 2 - Interim distribution declared
19 October 2017 36.95 -
Distribution 3 - Final distribution declared 17 May 2018 41.55 -
Total distribution for year-ended 28 February 2018 78.50
Property portfolio
Spear's current property portfolio consists of 31 high-quality Western Cape assets with an
average value per asset of R93.95 million.
The portfolio's income stream is underpinned by average contractual escalations of 8.38%.
Portfolio vacancies remain at levels well below national averages for commercial, industrial,
retail, residential and hospitality assets.
Top 10 properties by value
Gross Percentage
lettable of total
Value area value Valuation
Property R'000 Sector m2 % R/m2
Mega Park Industrial Estate,
Bellville 426 000 Industrial 86 091 13.59 4 948
2 Long Street, Cape Town
CBD 418 400 Commercial 24 822 13.35 16 856
Sable Square, Milnerton 358 300 Retail 30 934 11.43 11 583
15 on Orange, Cape Town 305 914 Hospitality 16 727 9.76 18 289
DoubleTree by Hilton,
UES Hotel, Woodstock 218 163 Hospitality 11 339 6.96 19 240
142 Bree Street,
Cape Town CBD 148 522 Commercial 3 025 4.74 49 098
MWEB Head Office, Bellville 148 263 Commercial 11 196 4.73 13 243
Distell DC, Parow 87 632 Industrial 16 170 2.80 5 419
Blackheath DC, Blackheath 86 055 Industrial 22 315 2.75 3 856
UES commercial, retail and
residential, Woodstock 84 135 Commercial 7 182 2.68 11 715
2 281 384 229 801 73.00
Value Gross
including lettable Vacant
Number of lease asset area area Vacancy
Vacancy profile properties R'000 m2 m2 %
Industrial 6 725 222 152 514 - -
Commercial 15 1 222 114 97 060 6 334 6.53
Retail 7 580 902 38 606 - -
Hospitality 2 524 077 28 065 - -
Residential 1 81 246 8 000 - -
31 3 133 561 324 245 6 334 1.95
Sectoral performance
Industrial
The industrial portfolio offers a diversified collection of assets situated in well-established
industrial nodes consisting of mini, mid-size and large industrial units with an added value
proposition being the competitive asking rate per square metre. A combination of the
above-mentioned has ensured high occupancy rates and strong performance in line with
management's expectations during the reporting period with no major tenant movements
or lease expiries. The industrial portfolio (152 514m2) occupancy was at 100% at year-end.
Commercial
The commercial sector performed to management's expectations and vacancies have
remained at low levels of 6.53% during the reporting period, translating to 6 334m2 of gross
lettable area ("GLA"). Office sector lease renewals continue to be concluded with positive
rental reversions achieved in the vast majority of renewals concluded during the reporting
period.
The lion's share of commercial vacancies is attributable to the additional office space
developed at Sable Square in the region of 2 300m2 and 2 Long Street in the region of 2 000m2.
Progress on the letting of the office additions at Sable Square and the office vacancies at
2 Long Street has been positive with a number of post-year-end lets being concluded on
both properties.
The commercial portfolio (97 060m2) occupancy was at 93.5% at year-end.
Retail
The retail portfolio consists of three convenience retail buildings that offer an ultra-convenience
retail experience with ample parking. Spear's retail assets are located in high-growth nodes
servicing the Century City and Northern Suburbs markets. During the reporting period 43.59%
(16 830m2) of retail GLA (38 606m2) was occupied by national retail tenants. Management has
been gratified at the positive performance of its retail assets amid tough trading conditions
during the reporting period with key retail tenants showing positive growth in store revenue
and footfall.
Spear's retail assets will remain attractive locations for retailers to trade from given their
high-quality tenant mix geared towards a convenience retail offering, ample shopper parking,
ease of access and egress along with plum geographical locations offering easy access to
all main arterial transportation routes. Management will remain focused on the acquisition
of convenience retail assets given their defensive nature in showing constant footfall and
turnover during good and tough trading conditions in the market.
The retail portfolio (38 606m2) occupancy was at 100% at year-end.
Residential
Spear's residential portfolio for the reporting period continued to perform to the satisfaction
of management with 100% occupancy rates. Currently only 2.46% of GLA is exposed to the
residential sector, however, management has stated its intention to increase Spear's residential
holdings closer to 15% of GLA and 12% of portfolio value in the medium term through the
development of approximately 200 residential units at Sable Square and 200 residential units
in Paarden Eiland as part of its mixed-use development plans for the two assets.
The residential portfolio (8 000m2) occupancy was at 100% at year-end.
Hospitality
The current performance of the domestic economy continues to present challenges to the
hospitality sector as both transient and group business has become more cost-conscious.
The hospitality sector over the reporting period has operated under less than optimal
conditions due to a contracting economy and the severe drought that has plagued the
Western Cape over the past three years.
The hospitality portfolio (28 066m2) occupancy was at 100% at year-end.
Tenant profile
Gross Gross
lettable lettable Number of
area area Number of tenants
m2 % tenants %
A - Large nationals, large listed and
government tenants 149 977 46.25 116 29
B - Smaller international and
national tenants 121 153 37.31 192 49
C - Other local tenants and sole
proprietors 35 536 10.96 87 22
Storage 11 245 3.47 - -
Vacant 6 334 1.95 - -
324 245 100.00 395 100
Lease expiry profile
Lease expiry profile
based on gross Industrial Commercial Retail Hospitality Residential Total
lettable area % % % % % %
Vacant - 6 - - - 2
Monthly 7 - 2 - - 3
Expiries for 03/2018
- 02/2019 33 22 16 1 - 23
Expiries for 03/2019
- 02/2020 13 19 10 1 - 12
Expiries for 03/2020
- 02/2021 37 33 18 1 - 28
Expiries for 03/2021
- 02/2022 2 7 12 1 100 8
Expiries for 03/2022
and onwards 8 13 42 96 - 23
100 100 100 100 100 100
Lease expiry profile Industrial Commercial Retail Hospitality Residential Total
based on revenue % % % % % %
Monthly 4 1 1 - - 2
Expiries for 03/2018
- 02/2019 31 20 12 4 - 20
Expiries for 03/2019
- 02/2020 16 23 8 7 - 16
Expiries for 03/2020
- 02/2021 40 37 16 6 - 30
Expiries for 03/2021
- 02/2022 2 8 13 - 100 10
Expiries for 03/2022
and onwards 7 11 50 83 - 22
100 100 100 100 100 100
Weighted average rental escalations and yields
Yield
Escalation FY2018
% %
Industrial 9.27 10.3
Commercial 8.28 9.1
Retail 7.96 8.0
Hospitality Note 1 8.8
Residential 8.00 8.6
Average 8.38 8.9
Note 1
- DoubleTree by Hilton is operated by a third-party operator and the lease is based on a
fixed (60% of budgeted EBITDA) and variable (95% of actual EBITDA less fixed rental) rate
which is agreed annually.
- 15 on Orange Hotel is operated by a third-party operator and the rental is based on a
blended rate of 18% on all revenue generated by the hotel.
Commentary
Nature of the business
Spear REIT Limited listed as a Real Estate Investment Trust ("REIT") on the AltX of the
Johannesburg Stock Exchange ("JSE") on 11 November 2016 and moved to the main board
of the JSE on 22 May 2017. Its main business is investing in high-quality income-generating
real estate across all sectors within the Western Cape, predominantly in the Cape Town region.
The company conducts its business directly and through a number of subsidiaries, collectively
referred to as the group.
The group's property and asset management functions are internally and directly managed
by the Spear executive management team.
Spear is the only South African REIT with a regionally-focused investment strategy.
The current portfolio comprises 31 properties based in the Western Cape with a total gross
lettable area ("GLA") of 324 245m2 valued at R3.133 billion (February 2017: R1.44 billion).
Spear's primary focus is to consistently grow its distribution per share by acquiring yield
enhancing assets and focusing its energy on hands-on asset, financial and property
management. Management's proximity to assets remain excellent and its acute understanding
of the Western Cape real estate market truly makes Spear a regional specialist with access to
excellent investment pipelines and development opportunities to further enhance an already
high-quality real estate portfolio.
The 2018 financial year has been a period of exceptional asset growth for Spear with new
acquisitions in excess of R1.69 billion in the Western Cape from various vendors. The effects
of the above transactions resulted in the significant increase in Spear's asset base and market
capitalisation from R942 million (February 2017) to R1.586 billion at the end of February 2018.
Spear's focus over the year has been to incorporate the newly acquired assets into the
property and asset management platforms with assets transferring as late as 18 January
2018. Management worked diligently to ensure the seamless integration of the newly acquired
assets into the synchronised property management system and are managed to the same
standard as the underlying portfolio.
Growing cash flows and continual distribution growth will remain Spear's primary objective,
which management believes clearly displays management and shareholder alignment.
Financial results
The board of directors is pleased to announce a final distribution (number 3) of 41.55 cents
per share.
Full-year distribution for the year ended 28 February 2018 is 78.50 cents per share with an
interim distribution of 36.95 cents per share declared on 19 October 2017.
Spear's results exceed revised guidance as disclosed in the interim results for the period ended
31 August 2017 and is testament to Spear's focus, active asset and property management
along with prudent financial management of the going concern.
All new acquisitions closed after the 2018 financial year-end are performing to the satisfaction
of management and in line with budget.
Property portfolio revenue for the year contributed 98.23% of total revenue, while other income
from development management services represented 1.77%.
Acquisitions
The group acquired the following properties during the period ended 28 February 2018:
Acquisition Debt Acquisition
Transfer value funding yield
date R'000 R'000 %
142 Edward Street,
Tyger Valley 1 Mar 2017 41 200 23 200 9.70
Selective House,
Tyger Valley 14 Mar 2017 13 200 13 200 9.92
15 on Orange, Cape Town 12 Jun 2017 298 000 175 000 9.55
2 Long Street, Cape Town 22 Jun 2017 389 000 220 000 9.32
Mega Park Industrial Estate,
Bellville 28 Jul 2017 379 157 224 000 9.30
Virgin Active George, George 8 Aug 2017 22 000 12 000 9.22
Tyger Manor, Tyger Valley 11 Oct 2017 59 600 26 800 9.31
MWEB Head Office, Bellville 18 Jan 2018 145 000 65 250 9.60
1 347 157 759 450 9.49
Capital expenditure and redevelopment
Sable Square
Sable Square is well located in the Century City node of Cape Town. Sable Square offers an
excellent mix of convenience retail, well-placed commercial office space and self-storage
facilities, all in one easy-to-find location. Sable Square offers a high-quality tenant mix
consisting among others of Pick n Pay, Clicks, Tekkie Town, Adidas, Baby City, Spur, Zone
Fitness, Storesmart and many more. Parking at Sable Square is in abundance and the centre
is easy to access off Ratanga Road and Bosmansdam Road. Sable Square is situated on the
MyCiti bus route, with a bus station situated directly opposite the entrance to Sable Square.
Spear has concluded a capital expenditure programme at Sable Square to unlock the
approved and undeveloped bulk of 27 000m2. The first phase of the project (4 200m2) included
the development of 2 900m2 of new GLA consisting of a 1 600m2 Zone Fitness Gym, 1 300m2
of new A-grade office space and the redevelopment of an existing 1 300m2 into A-grade office
space. Phase One is progressing in line with both the delivery timelines and project budget
with 70% of the new additions already pre-let at asking rentals. Capital costs associated
with Phase One had a value of R50 million and Spear's development yield on this phase will
exceed 9.8% in year one.
Footfall and turnover growth in the centre have been constantly increasing as management
continues to improve both the tenant mix and the customer experience at Sable Square. In
a bid to further enhance the quality of the asset, Spear has commenced with the planning
of Phase Two of the capital expenditure programme that would see the introduction of a
residential component to Sable Square comprising approximately 200 units on a rental only
basis, transforming the asset into a true mixed-use precinct offering a live, work and play
lifestyle in a secure location. Capital costs associated with Phase Two will be in the region
of R400 million and is expected to commence once local authority approvals have been
obtained and a feasible scheme has been approved by the investment committee.
Recycling capital and capital allocation
Two assets (one residential and one office) with a GLA of 9 939m2 have been identified as
assets that management wishes to dispose. The residential asset is the only asset that Spear
owns outside of the Western Cape situated in Melrose, Johannesburg.
Management will on an ongoing basis identify assets within the portfolio that no longer
fit management's growth and portfolio strategy and will be disposed of with the proceeds
recycled into larger Cape-based assets.
Management has set a target to increase the average asset value to above R100 million and
will therefore prudently recycle assets that fall outside this target in the medium term at the
right disposal value and yield.
Distributable earnings
The board approved and declared distribution number 3 of 41.55 cents per share on
17 May 2018.
The distribution declared is an increase of 3.27% over the revised final forecast distribution of
40.23 cents per share for the six months ending 28 February 2018. The total distribution for
the year ended 28 February 2018 is 78.50 cents per share, being an increase of 1.95% over
the revised full-year forecast of 77 cents per share and an increase of 6.08% over the 2018
forecast per the pre-listing statement ("PLS").
28 February 28 February
2018 2018
Distribution per share Rands Rands
Distribution 1 - Declared 17 May 2017 - 23.51
Distribution 2 - Interim distribution declared 19 October 2017 36.95
Distribution 3 - Final distribution declared 17 May 2018 41.55
Total distribution per share for the year ended
28 February 2018 78.50
Tangible net asset value
The tangible net asset value per share increased by 15.40% from R10.03 per share to
R11.57 per share.
Growth
Tangible net asset value per share Rands %
PLS - 21 October 2016 9.37
28 February 2017 10.03 7.01
31 August 2017 10.49 4.61
28 February 2018 11.57 10.31
Borrowings and funding
The group obtained funding for property acquisitions through two capital raises and increasing
bank borrowings as disclosed under acquisitions.
Number of shares Price per share Value
Capital raise date Million Rands R'000
12 June 2017 29.4 9.50 279 000
7 July 2017 19.2 9.50 182 000
The group's gearing level at 28 February 2018 was 38.48%, an increase of 16.28% from 33.09%
as at 28 February 2017, and had fixed borrowings of 57.58% of total borrowings at an average
fixed rate of 9.45% and group total cost of borrowings of 9.25%.
Amount
R'000
Variable borrowings 511 567
Fixed borrowings 694 403
Total borrowings 1 205 970
Percentage fixed (%) 57.58
Management successfully refinanced borrowings of R691 million and agreed new terms at
year-end with an expiry in February 2021 at a rate of prime less 1.30%.
Debt expiry
R'000 %
FY2019 152 536 13
FY2020 100 000 8
FY2021 953 434 79
FY2023 - -
1 205 970 100
Prospects and guidance
The Western Cape property sector has for the most part continued to outperform the rest
of South Africa and management's continued focus on regional investment has provided
a level of insulation from the tougher trading conditions experienced in regions outside of
the Western Cape. Spear continues to have a healthy pipeline of greenfield and brownfield
development opportunities within the portfolio, which will unlock further value for the group
in time.
Management remains confident that demand for its high-quality rental properties across the
various sectors within the Western Cape will continue given its tenant-centric approach and
hands-on asset management skills. In light of the recent acquisitions, improved cost of debt
and other operational efficiencies created within the company, management advises that
distribution per share for the year ending 28 February 2019 is anticipated to be 9-11% higher
than the total distribution for the year ended 28 February 2018. The latter revision is premised
upon the following assumptions:
- That a relatively stable macroeconomic environment will prevail
- That lease renewals are concluded as per the company forecast
- That no major tenant failures will take place and improved hospitality trading conditions
- That tenants will successfully absorb rising costs associated with utility consumption
charges and municipal rates
- That the Western Cape experiences a wet winter that breaks the current drought.
The information and opinions contained above are recorded and expressed in good faith and
are based upon reliable information provided to management. No representation, warranty,
undertaking or guarantee of whatsoever nature is made or given with regard to the accuracy
and/or completeness of such information and/or the correctness of such opinions.
The forecast in distribution per share for the financial year ending 28 February 2019 has not
been reviewed or reported on by the company's auditors.
Subsequent events
The directors are not aware of any events, other than those listed below, which have occurred
since the end of the financial period and have a material impact on the results and disclosures
in the provisional summarised audited consolidated financial results for the year ended
28 February 2018
The group took transfer of the following properties after period end:
Acquisition Debt Acquisition
Transfer value funding yield
date R'000 R'000 %
Island Business Park, Paarden Eiland 8 Mar 2018 24 000 - 9.31
Blackheath Park, Blackheath 12 Apr 2018 110 500 49 725 10.43
134 500 49 725
Agreements to acquire property
The group entered into an agreement to acquire 34 Marine Drive, Paarden Eiland. The property
was acquired to incorporate into the redevelopment of Spear's Marine Drive portfolio. The
acquisition was done on an asset-for-share swap basis through a transaction in terms of
section 42 of the Income Tax Act of 1962.
Basis of preparation
The provisional summarised consolidated annual financial statements were prepared in
accordance with the JSE Listings Requirements for provisional reports and the requirements
of the Companies Act of South Africa. The JSE Listings Requirements require provisional
reports to be prepared in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards ("IFRS"), the SAICA
Financial Reporting Guides as issued by the Accounting Practices Committee and Financial
Reporting 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.
Except for the adoption of revised and new standards that became effective during the
year, all accounting policies applied in the preparation of these provisional summarised
consolidated financial statements are in terms of IFRS and are consistent with those applied
in the previous consolidated financial statements. There was no material impact on the annual
financial statements as a result of the adoption of these standards.
The auditors, BDO Cape Inc., have issued their opinion on the group's consolidated and
separate financial statements for the year ended 28 February 2018. The audit was conducted
in accordance with International Standards on Auditing. They have issued an unmodified
audit opinion. The provisional summarised consolidated annual financial statements have
been extracted from the group annual financial statements and are consistent, in all material
respects, with the group annual financial statements. The directors take full responsibility for
the preparation of the provisional summarised consolidated annual financial statements and
for ensuring that the financial information has been correctly extracted from the underlying
audited annual financial statements. This provisional report has been audited by BDO Cape Inc.
and an unmodified audit opinion has been issued. The auditor's report does not necessarily
report on all of the information contained in this announcement. 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 that report together with the accompanying financial information
from Spear's registered office.
Christiaan Barnard CA(SA), in his capacity as Financial Director, was responsible for the
preparation of the provisional summarised consolidated annual financial statements.
Final distribution for the year ended 28 February 2018
Notice is hereby given of the declaration of a final distribution (number 3) of 41.54992 cents
per share for the year ended 28 February 2018 from income reserves.
As Spear is a REIT, the distribution meets the definition of a "qualifying distribution" for the
purposes of section 25BB of the Income Tax Act, No. 58 of 1962 ("Income Tax Act"). Qualifying
distributions received by South African tax residents will form part of their gross income
in terms of section 10(1)(k)(i)(aa) of the Income Tax Act. Consequently, these distributions
are treated as income in the hands of the shareholder and are not subject to dividend
withholding tax. The exemption from dividend withholding tax is not applicable to non-
resident shareholders, but they may qualify for relief under a tax treaty.
South African tax residents
The dividend received by or accrued to South African tax residents must be included in the
gross income of such shareholders and will not be exempt from income tax (in terms of the
exclusion to the general dividend exception, contained in paragraph (aa) of section 10(1)(k)(i) of
the Income Tax Act) because it is a dividend distributed by a REIT. The dividend is exempt from
dividend withholding tax in the hands of South African tax resident shareholders, provided
that the South African resident tax shareholders provide the following forms to their Central
Securities Depository Participants ("CSDP") or broker in respect of uncertificated shares, or to
the company, in respect of certificated shares:
a) a declaration that the dividend is exempt from dividend withholding tax; and
b) a written undertaking to inform the CSDP, broker or the company, should the circumstances
affecting the exemption change or the beneficial owner cease to be the beneficial owner,
both in the form prescribed by the Commissioner for the South African Revenue Service.
Shareholders are advised to contact their CSDP, broker or the company to arrange for the
above-mentioned documents to be submitted prior to payment of the dividend, if such
documents have not already been submitted.
Non-residents shareholders
Dividends received by non-resident shareholders will not be taxable as income and instead
will be treated as an ordinary dividend which is exempt from income tax in terms of the
general dividend exemption in section 10(1)(k)(i) of the Income Tax Act. It should be noted that
up to 31 December 2013, dividends received by non-residents from a REIT were not subject
to dividend withholding tax. Since 1 January 2014, any dividend received by a non-resident
from a REIT will be subject to dividend withholding tax at 20%, unless the rate is reduced
in terms of any applicable agreement for the avoidance of double taxation ("DTA") between
South Africa and the country of residence of the shareholder concerned. Assuming dividend
withholding tax will be withheld at a rate of 20%, the net dividend amount due to non-resident
shareholders is 33.23993 cents per share. A reduced dividend withholding tax rate in terms of
the applicable DTA may only be relied on if the non-resident shareholder has provided the
following form to their CSDP or broker in respect of uncertificated shares, or the company, in
respect of certificated shares:
a) a declaration that the dividend is subject to a reduced rate as a result of the application
of DTA; and
b) a written undertaking to inform their CSDP, broker or the company, should the circumstances
affecting the reduced rate change or the beneficial owner cease to be the beneficial
owner, both in the form prescribed by the Commissioner for the South African Revenue
Service.
Non-resident shareholders are advised to contact their CSDP, broker or the company to
arrange for the above-mentioned documents to be submitted prior to payment of the
dividend, if such documents have not already been submitted.
The company's tax reference number is 9068437236.
At the date of declaration 165 190 689 ordinary shares were in issue.
Holders of uncertificated shares have to ensure that they have verified their residence
status with their CSDP or broker. Holders of certificated shares will be asked to complete a
declaration to the company. The distribution is payable to shareholders in accordance with
the following timetable:
Distribution timetable 2018
Declaration date Thursday, 17 May
Last day to trade cum-dividend Tuesday, 5 June
Shares trade ex-dividend Wednesday, 6 June
Record date Friday, 8 June
Payment date Monday, 11 June
Share certificates may not be dematerialised or rematerialised between Wednesday,
6 June 2018 and Friday, 8 June 2018, both days inclusive.
In respect of dematerialised shareholders, the distributions will be transferred to the CSDP
account/broker accounts on Monday, 11 June 2018. Certificated shareholders' distribution
payments will be paid to certificated shareholders' bank accounts on Monday, 11 June 2018.
On behalf of the board
Spear REIT Limited
Cape Town
17 May 2018
Mike Flax Quintin Rossi Christiaan Barnard
Chief Executive Officer Managing Director Financial Director
Abu Varachhia
Chairman
Directorate and Administration
SPEAR REIT LIMITED
Incorporated in the Republic of South Africa
Registration number 2015/407237/06
JSE share code: SEA
ISIN: ZAE000228995
(Approved as a REIT by the JSE)
("Spear" or "the group" or "the company")
Directors
Abubaker Varachhia*
(Non-executive Chairman)
Michael Naftali Flax
(Chief Executive Officer)
Quintin Michael Rossi
(Managing Director)
Christiaan Barnard
(Financial Director)
Brian Leon Goldberg*^
Jalaloodien Ebrahim Allie*^
(Lead Independent Director)
Niclas Kjellstrom-Matseke*^
Cormack Sean McCarthy*
* Non-executive
^ Independent
Registered office
5th Floor, Upper Eastside
31 Brickfield Road
Woodstock
Cape Town, 8010
(PO Box 50, Observatory, 7935)
Contact details
info@spearprop.co.za
www.spearprop.co.za
Company Secretary
Rene Cheryl Stober
Transfer Secretaries
Computershare Investor Services
Proprietary Limited
Rosebank Towers, 15 Biermann Avenue,
Rosebank, 2196
(PO Box 61051, Marshalltown, 2107)
Independent Reporting Accountants
and Auditors
BDO Cape Inc.
6th Floor, 123 Hertzog Boulevard
Foreshore, Cape Town, 8001
(PO Box 2275, Cape Town, 8000)
Sponsor
PSG Capital Proprietary Limited
1st Floor, Ou Kollege Building
35 Kerk Street, Stellenbosch, 7600
(PO Box 7403, Stellenbosch, 7599)
Legal advisor
Cliffe Dekker Hofmeyr
11 Buitengracht Street, Cape Town, 8001
(PO Box 695, Cape Town, 8000)
Bankers
Nedbank Limited
Investec Limited
Standard Bank Limited
Date: 17/05/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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