Wrap Text
Unaudited condensed consolidated interim results for the six months ended 31 March 2018
Arrowhead Properties Limited
(Incorporated in the Republic of South Africa)
(Registration number 2011/000308/06)
JSE share code: AWA ISIN: ZAE000203105
(Approved as a REIT by the JSE)
("Arrowhead" or "the company" or "the group")
Arrowhead Properties Interim Results 2018
SUMMARISED
Unaudited condensed consolidated interim results
for the six months ended 31 March 2018
Implemented sustainable dividend strategy
On track to meet full year guidance
Solid operational performance reducing vacancies in tough environment, setting base for property growth in 2019
Nature of business
Arrowhead is a Real Estate Investment Trust ("REIT") holding a diverse portfolio of retail, office and industrial (collectively "commercial")
properties valued at R5.6 billion, held directly and through a wholly-owned subsidiary. In addition, as at 31 March 2018, Arrowhead held a
60.1% interest (2017: 66.2%) in its subsidiary, Indluplace Properties Limited ("Indluplace"), which owns a portfolio of residential properties.
As at 31 March 2018 Arrowhead also owned 62.0% (2017: 61.7%) of the B-ordinary shares in Gemgrow Properties Limited ("Gemgrow"), equivalent to
55.5% (2017: 55.2%) of Gemgrow, which owns a diverse portfolio of commercial properties.
In addition, Arrowhead held an interest of 18.6% (2017: 19.5%) in Rebosis Property Fund Limited ("Rebosis") as well as a 10.6% interest
(2017: 10.8%) in Dipula Income Fund Limited ("Dipula") at 31 March 2018.
The company's main focus is on paying growing income returns to its investors. This is achieved through escalating rentals in terms of
leases with tenants, satisfactory renewal of leases with existing tenants, renting of vacant space within the property portfolio, managing and
reducing, where possible, costs associated with the property portfolio and by acquiring revenue enhancing properties and investments
in other REITS.
Condensed consolidated financial results
For the six months ended 31 March 2018
R'000 2018 2017
Revenue (excluding straight line rental income) 1 112 580 959 324
Listed securities income 109 980 95 893
Property expenses (408 359) (360 780)
Administration and corporate costs (28 319) (23 809)
Finance charges (273 936) (193 283)
Finance income 47 336 39 940
Pre-effective date dividend# - 19 162
Non-controlling interest profits elimination (net of antecedent income) (146 348) (126 089)
Distributable income 412 934 410 358
Accrued dividend on listed securities 107 749 120 926
Listed securities income recognised in previous reporting period (109 980) (95 893)
Total dividends 410 703 435 391
Dividend to the Arrowhead Charitable Trust and corporate fees* 13 793 13 404
Total dividend after effects of Arrowhead Charitable Trust 424 496 448 795
#Pre-effective date dividend is in respect of the dividend declared by Gemgrow as regards the income
earned by Gemgrow on the Cumulative Properties Limited ("Cumulative") portfolio prior to the accounting effective date.
*Dividend to the Arrowhead Charitable Trust and corporate fees is added back as it is eliminated on consolidation.
Corporate fees are in respect of administration costs recouped from Indluplace and Gemgrow.
Property expenses as a percentage of revenue – gross 38% 38%
Property expenses as a percentage of revenue – net 16.1% 16.0%
Dividend for the quarter ended 31 December** - 222 218
Dividend for the 6 months/quarter ended 31 March^ 424 496 226 577
Total dividend (cents) 424 496 448 795
Dividend per share for the quarter ended 31 December** - 21.41
Dividend per share for the 6 months/quarter ended 31 March^ 40.43 21.83
Total dividend (cents) 40.43 43.24
Net asset value per share (cents) - including non-controlling interest 1123.68 1132.84
Net asset value per share (cents) - excluding non-controlling interest 823.83 858.93
** As announced on SENS on 22 January 2018, dividends are declared bi-annually, compared to quarterly as in the prior financial year.
^ The dividend was declared on 23 May 2018
Commentary
Arrowhead is pleased to report that it has had a positive 6 month period and is on track to meet guidance for the full year, in what
remains a difficult environment. The property performance has been particularly pleasing, with letting activity exceeding expectations
(and vacancies reducing from 12.10% to 10.63%). We have also been successful in selling a number of our non-core properties. These successes
are reflective of a strong focus on property and asset management; and a general improvement in tenant and investor sentiment since December.
Tenants remain under pressure and the letting market remains competitive, with larger tenant installations and commissions being incurred on
new lettings as a result, the benefits of this period's letting activity are only expected to start reflecting in the 2019 financial year.
Considering the strength of the portfolio performance over the period, and the generally improving sentiment, Arrowhead believes it is well
positioned to achieve on its objective of delivering sustainable property growth into 2019 and beyond.
Revenue
Revenue includes rental income and expenditure that is recoverable from tenants.
At 31 March 2018 Arrowhead owned 50 commercial properties directly, 139 commercial properties indirectly through Gemgrow and 171 residential
properties comprising 9 662 units, indirectly through Indluplace. At 30 September 2017, Arrowhead owned 51 commercial properties directly,
129 commercial properties indirectly through Gemgrow and 125 residential properties indirectly through Indluplace.
The increase in revenue is mainly as a result of income derived from acquisitions implemented during the period by Gemgrow and Indluplace as
well as annual escalations to existing leases.
Arrowhead's direct property portfolio comprises 56.7% by value of retail properties, 35.4% of office buildings and 7.9% of industrial buildings.
The average gross monthly rental per m(2) per sector is R134 for retail, R107 for office and R45 for industrial. Escalations on expiry were 5%
positive overall, 4% for retail and 7% for office. There were no industrial lease expiries during the period under review. Average lease
escalation is 7.83% for retail, 8.18% for office and 8.14% for industrial. Average lease expiry is 3.87 years.
Notwithstanding the very challenging economic environment, Arrowhead has experienced increased letting activity, particularly in the last quarter.
Vacancies have decreased from 12.10% at 30 September 2017 to 10.63% at 31 March 2018 (retail 5%, office 21% and industrial 3%). The vacant
Hill Street building (13 347m(2)) in Randburg has also been sold to a student housing developer post period-end, for R60 million (inclusive of VAT),
which will further reduce vacancy rates. We anticipate realising the benefits of this increased letting activity in the 2019 financial year.
Some letting successes include the take up of 11 343m(2) of 13 350m(2) at the 1 Sturdee building in Rosebank and we are in negotiations pertaining to
the letting of additional space at this building. Kwela Logistics went completely vacant during the 2017 financial year and occupancy is now sitting
at 14 484m(2) of 15 450m(2), split amongst three tenants. We have also let 3 000m(2) in Owl Street and have interest in the remaining space.
Included in our lease expiry profile was exposure to two single tenanted buildings, the 7 143m(2) RCS building in Goodwood Cape Town in respect of
which the lease expires in June 2018 and the 23 000m(2) SARS building in Durban, expiring in October 2018. RCS has been renewed for three years
expiring in June 2021 and are in advanced discussions to conclude a four year extension on the SARS lease.
At period-end Edcon made up 2.64% by revenue and 3.16% by GLA. Post period-end this reduced to 2.16% by revenue and 2.70% by GLA as Edgars exited
Cleary Park shopping centre in Port Elizabeth. This space has been let to a national retailer. Edgars makes up 53% and Jet the other 47% of our
Edcon exposure.
6 month letting report
Total Let Vacant Let Vacant
(m(2)) (m(2)) (m(2)) (%) (%)
As at 1 October 2017 547 424 481 180 66 244 87.90 12.10
Disposals (7 517) (4 378) (3 139)
Net adjustments (814) (814)
Adjusted totals 539 093 476 802 62 291 88.45 11.55
Net gain/(loss) - 5 004 (5 004)
As at 31 March 2018 539 093 481 806 57 287 89.37 10.63
Listed securities income
Listed securities income comprises income received on shares held in Rebosis and Dipula. During the current financial period, Arrowhead's holding
in Rebosis decreased to 18.6% and Dipula to 10.6% due to additional shares having being issued by these companies in which Arrowhead did not
participate. Arrowhead has not disposed of any Rebosis or Dipula shares to date whilst still looking for opportunities to responsibly recycle its
shareholding in Dipula and to extract value from its Rebosis stake.
In this reporting period, Arrowhead has recognised the anticipated dividends received in respect of Dipula and Rebosis in the form of an adjustment
in the distributable earnings reconciliation.
Property expenses
31 MARCH % OF 31 MARCH % OF
R'000 2018 TOTAL 2017 TOTAL
Municipal expenses 252 727 62 212 968 59
Property management 28 963 7 30 713 9
Security 17 029 4 18 359 5
Repairs and maintenance 17 380 4 17 313 5
Letting commission 9 334 2 7 281 2
Cleaning 12 340 3 14 491 4
Insurance 4 347 1 2 163 1
Other 66 239 17 57 492 15
Total 408 359 100 360 780 100
Property expenses have increased in line with expectations mainly due to the large acquisitions implemented by Gemgrow and Indluplace during the
period. Cost cutting measures have been implemented throughout the portfolio. The gross expense to income ratio has remained stable at 38%. The net
expense to income ratio remained at 16% year-on-year.
Administration expenses and corporate costs
31 MARCH % OF 31 MARCH % OF
R'000 2018 TOTAL 2017 TOTAL
Salaries 13 512 47 13 465 57
Professional service fees 3 894 14 3 954 17
Other 10 913 39 6 390 26
Total 28 319 100 23 809 100
The salaries for the group increased slightly compared to the prior year.
Finance income
31 MARCH % OF 31 MARCH % OF
R'000 2018 TOTAL 2017 TOTAL
Interest on group share purchase and option schemes 37 476 79 35 664 89
Interest on cash balances and tenants 9 860 21 4 276 11
Total 47 336 100 39 940 100
Interest on the Group Share Purchase and Option Schemes is on outstanding balances of the loans granted to participants in the
Arrowhead Share Purchase and Option Scheme, the Indluplace Share Purchase and Option Scheme, and the Gemgrow group loans to executives
for the purpose of funding the purchase of B shares in Gemgrow, as well as the Gemgrow Share Purchase and Option Scheme.
The Arrowhead board is exploring the implementation of a new remuneration policy that would replace the Share Purchase and Option Scheme
and will engage with shareholders at the appropriate time.
Finance charges
31 MARCH % OF 31 MARCH % OF
R'000 2018 TOTAL 2017 TOTAL
Interest paid – secured financial liabilities 273 024 100 191 934 99
Amortisation of structuring fee and other interest paid 912 - 1 349 1
Total 273 936 100 193 283 100
Finance charges increased from R193.3 million to R273.9 million which is in line with increased facilities in accordance with the
growth of the Indluplace and Gemgrow portfolios.
Investment properties
Analysis of movement in investment property
PROPERTY PORTFOLIO RESIDENTIAL PORTFOLIO* TOTAL
NO. OF NO. OF NO. OF
BUILDINGS R'000 BUILDINGS R'000 BUILDINGS R'000
Balance at the beginning of the year 180 10 054 018 125 2 948 445 305 13 002 463
Acquisitions and additions 12 614 603 46 1 458 147 58 2 072 750
Disposals (3) (39 000) - - (3) (39 000)
Balance at the end of the period 189 10 629 621 171 4 406 592 360 15 036 213
* The residential portfolio is a separately listed fund on the JSE. Arrowhead's shareholding in Indluplace was 60.1% at 31 March 2018 (2017: 66.2%).
Investment property has increased from R13.0 billion at 30 September 2017 to R15.0 billion at 31 March 2018. The increase was attributable to
acquisitions and additions of R2.0 billion. The core portfolio represents all Arrowheads' properties, including properties held for sale.
The core portfolio declined by 8% and is in line with Arrowhead's forecast and expectations.
Arrowhead disposed of the following properties during the period:
Property disposals
PROPERTY NAME PROVINCE SECTOR SOLD R
Fidelity Centre Eastern Cape Commercial 14 November 2017 33 000 000
Town Talk Nelspruit Mpumalanga Retail 29 January 2018 6 000 000
39 000 000
Loans to participants of group share purchase and option schemes
This is in respect of loans to the participants of the Arrowhead, Indluplace and Gemgrow Share Purchase and Option Schemes and the loans to
the Gemgrow group executives for the purpose of funding the purchase of B shares in Gemgrow. The increase from R617.7 million to R736.8 million
is as a result of shares issued to participants of the Arrowhead and Indluplace Share Purchase Schemes and the shares to the Gemgrow group
executives to the value of R119.1 million. The loans bear interest either at the company's effective rate of borrowings (in respect of earlier
loans in Arrowhead) or bear interest at a rate equal to the dividend declared by the company (in respect of more recent loans in Arrowhead,
Indluplace and Gemgrow) and are secured by a pledge of the shares and by limited suretyship in respect of the most recent share issue.
Trade and other receivables
Trade receivables, deposits, other receivables and payments in advance increased from R206.1 million to R253.5 million mainly as a result of growth
in the portfolio. The provision for bad debts increased from R12.0 million to R19.0 million, the majority relates to Indluplace.
Secured financial liabilities
Group loans of R6.2 billion (2017: R4.7 billion), reduced by cash and cash equivalents, measured against investment and financial assets of
R16.6 billion (2017: R14.9 billion) represents a loan to value ("LTV") of 36.8% (2017: 31.5%) and company LTV of 31.3% (2017: 28.1%). The interest
rate swaps of R5.3 billion results in 80.4% of the total loans being fixed.
Excess funds are placed in an access facility to reduce the overall interest charge. The effective interest rate for the period ended 31 March 2018
was 9.40% (30 September 2017: 9.10%) for the group and 9.35% for the company (30 September 2017: 8.98%).
CAPITAL
3 MONTH JIBAR PRIME RATE 31 MARCH 2018
MATURITY MARGIN % MARGIN % R'000
April 2018 - Minus 1.45 200 000
November 2018 (Gemgrow) - Minus 1.50 200 674
December 2018 1.77 - 300 000
April 2019 1.77 - 60 000
April 2019 1.77 - 270 000
June 2019 - Minus 1.40 51 000
September 2019 (Indluplace) - Minus 1.30 150 000
September 2019 (Gemgrow) 2.3 - 139 000
November 2019 1.75 - 610 000
March 2020 - Minus 1.30 56 530
March 2020 2.08 - 480 000
October 2020 (Indluplace) 2.05 - 275 025
October 2020 (Indluplace) 2.05 - 28 485
October 2020 (Indluplace) 2.05 - 275 025
October 2020 (Indluplace) 2.05 - 28 485
October 2020 (Indluplace) - Minus 1.35 7 000
October 2020 (Indluplace) 2.05 - 78 694
August 2021 2.10 - 276 679
October 2021 2.10 - 65 729
October 2021 2.10 - 41 681
October 2021 2.10 - 51 772
December 2021 2.10 - 112 450
June 2022 2.10 - 201 140
July 2022 2.10 - 198 860
September 2022 (Gemgrow) - Minus 1.60 50 000
October 2022 (Gemgrow) 2.15 - 525 000
October 2022 (Indluplace) 2.20 - 144 979
October 2022 (Indluplace) 2.20 - 144 979
October 2022 (Indluplace) 2.2 - 163 275
November 2022 (Gemgrow) 2.50 - 548 842
November 2022 2.05 - 280 000
December 2022 - Minus 1.15 226 911
Total exposure 6 242 219
ARROWHEAD GEMGROW INDLUPLACE TOTAL
CAPITAL AMOUNT CAPITAL AMOUNT CAPITAL AMOUNT CAPITAL AMOUNT
MATURITY DATE (R'000) (R'000) (R'000) (R'000)
2019 500 000 200 674 - 700 674
2020 1 527 533 139 000 150 000 1 816 533
2021 - - 837 694 837 694
2022 548 312 - - 548 312
2023 906 911 1 123 841 308 254 2 339 006
3 482 756 1 463 515 1 295 948 6 242 219
ARROWHEAD PROPERTIES GEMGROW PROPERTIES INDLUPLACE PROPERTIES
NOTIONAL AMOUNT R MATURITY DATE NOTIONAL AMOUNT R MATURITY DATE NOTIONAL AMOUNT R MATURITY DATE
189 604 549 2018/03/31 50 000 000 2019/02/19 150 000 000 2019/09/01
72 947 536 2018/05/31 40 000 000 2019/02/19 550 050 042 2020/10/01
595 000 000 2019/09/02 40 000 000 2019/07/01 56 969 975 2020/10/01
275 000 000 2021/08/25 40 000 000 2019/07/01 289 958 763 2022/10/01
65 729 120 2021/10/20 80 000 000 2019/09/30 1 046 978 780
41 681 460 2021/10/25 50 000 000 2020/09/01
51 772 355 2021/10/27 525 000 000 2022/10/31
112 450 223 2021/12/15 600 000 000 2022/11/15
742 163 478 2021/12/31 1 425 000 000
200 000 000 2022/06/30
200 000 000 2022/07/04
2 546 348 721
Prospects
Arrowhead continues to focus only on the South African market and believes it is well positioned to benefit from a South African upswing in
the economy.
As highlighted earlier, Arrowhead has had a strong operational performance over the past six months. While the environment remains challenging
and the general market is under pressure, the positive political changes experienced have led to increased business confidence. This increased
optimism, together with a strong focus on property and asset management, have translated into strong letting over the period and the sale of a
number of non-core properties.
Vacancies have been reduced to 10.63% (from 12.10%) and Arrowhead expects it's vacancy to be under 9% by the end of the financial year.
Tenants remain under pressure and the letting market remains competitive, with larger tenant installations and commissions being incurred on
new lettings. As a result, the benefits of this period's letting activity are only expected to have an impact in the 2019 financial year.
We are confident that we have made the correct strategic decisions, in tough macro-economic circumstances, to position the company for sustainable
growth going forward, that we believe will create long term sustainable value for our shareholders.
Arrowhead remains on track to deliver its forecast communicated to the market in its annual results announcement released on Sens on
22 November 2017, and is well positioned for sustainable property growth into the 2019 financial year and beyond.
The forecast figures do not take into account letting of vacant space or acquisitions and these could present an upside. Forecast income is based
(in the case of Arrowhead's property portfolio) on contractual escalations and market-related renewals and in the case of the company's investments
in Dipula and Rebosis on their published forecasts. The forecast – which was not reviewed or reported on by the group's auditors - assumed that
there would be no further material deterioration in the prevailing macro-economic conditions, that no major corporate failures would occur
and that tenants would be able to absorb rising utility costs and rates recoveries.
Summary of financial performance
UNAUDITED FOR THE UNAUDITED FOR THE
SIX MONTHS ENDED SIX MONTHS ENDED
31 MARCH 2018 31 MARCH 2017
Dividend per Arrowhead share (cents) 40.43 43.24
Arrowhead ordinary shares in issue^* 1 049 953 742 1 037 915 775
Net asset value per share at reporting date (cents) - including non-controlling interest 1 123.68 1 132.84
Net asset value per share at reporting date (cents) - excluding non-controlling interest 823.83 858.93
Loan to value ratio - Group 36.8% 27.8%
Loan to value ratio - Company 31.3% 28.1%
^ Includes shares issued to the Arrowhead Charitable Trust.
* After the reporting period no additional shares were issued.
Payment of dividend for the six months ended 31 March 2018
The board of directors ("Board") has approved a gross dividend (dividend number 25) of 40.43000 cents per share for the six months ended
31 March 2018 in accordance with the timetable set out below:
2018
Last date to trade cum distribution Tuesday, 19 June
Shares trade ex distribution Wednesday, 20 June
Record date Friday, 22 June
Payment date Monday, 25 June
Share certificates may not be dematerialised or rematerialised between Wednesday, 20 June 2018 and Friday, 22 June 2018, both days inclusive.
Payment of the dividend will be made to shareholders on Monday, 25 June 2018. In respect of dematerialised shareholders, the dividend will
be transferred to the Central Securities Depositary Participant ("CSDP") accounts/broker accounts on Monday, 25 June 2018. Certificated shareholders'
dividend payments will be deposited on or about Monday, 25 June 2018.
In accordance with Arrowhead's status as a REIT, shareholders are advised that the dividend meets the requirements of a "qualifying distribution"
for the purposes of section 25BB of the Income Tax Act, No. 58 of 1962 ("Income Tax Act"). The distribution on the shares will be deemed to be
a dividend, for South African tax purposes, in terms of section 25BB of the Income Tax Act.
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 exemption, contained in paragraph (aa) of section 10(1)(k)(i) of the
Income Tax Act) because it is a dividend distributed by a REIT.
This dividend is, however, exempt from dividend withholding tax in the hands of South African tax resident shareholders, provided that the
South African resident shareholders provided the following forms to their Central Securities Depository Participant ("CSDP") or broker,
as the case may be, in respect of uncertificated shares, or the company, in respect of certificated shares:
a) a declaration that the dividend is exempt from dividends tax; and
b) 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 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, 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.
Dividends received by non-resident shareholders will not be taxable as income and instead will be treated as ordinary dividends which are
exempt from income tax in terms of the general dividend exemption in section 10(1)(k)(i) of the Income Tax Act. From 22 February 2017, 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 shareholders.
Assuming dividend withholding tax will be withheld at a rate of 20%, the net dividend amount due to non-resident shareholders is 32.34400
cents per share. A reduced dividend withholding rate in terms of the applicable DTA, may only be relied on if the non-resident shareholder
has provided the following forms to their CSDP or broker, as the case may be, 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 a DTA; and
b) a written undertaking to inform their CSDP, broker or the company, 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 Service. Non-resident shareholders are advised to contact their 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, if applicable.
Shareholders are encouraged to consult their professional advisors should they be in any doubt as to the appropriate action to take.
Shares in issue at the date of declaration of dividend: 1 049 953 742
Arrowhead's income tax reference number: 9779/439/15/8
Events after reporting period
The Hill Street building was disposed of for R60 million (inclusive of VAT) on 24 April 2018.
Dividend declaration after reporting date
In line with IAS 10 Events after the Reporting Period, the declaration of the dividend occurred after the end of the reporting period, resulting
in a non-adjusting event which is not recognised in the financial statements.
Litigation statement
There are no major legal or arbitration proceedings, including any proceedings that are pending or threatened, of which Arrowhead is aware,
that may have or have had in the recent past, being the previous 12 months, a material effect on the group's financial position.
Basis of preparation
The interim consolidated results for the six months ended 31 March 2018 have not been reviewed or reported on by the group's auditors,
Grant Thornton Johannesburg Partnership.
The financial statements have been prepared in accordance with the requirements of International Financial Reporting Standards, the
SAICA Financial Reporting Guides as issued by the Accounting Practices Committee, IAS 34: Interim Financial Reporting, the JSE Listings
Requirements and the requirements of the South African Companies Act, 2008. These results have been prepared under the supervision of I Suleman,
CA (SA), Arrowhead's Chief Financial Officer.
The accounting policies adopted are consistent with those applied in the preparation of the financial statements for the year ended
30 September 2017.
Summarised consolidated statement of comprehensive income
For the 6 months ended 31 March 2018
Unaudited for the Unaudited for the Audited for
6 months ended 6 months ended the year ended
R'000 31 March 2018 31 March 2017 30 September 2017
Rental income 1 112 580 959 324 1 936 179
Straight line rental income accrual 10 653 3 837 46 122
Listed securities income 109 980 95 893 191 832
Total revenue 1 233 213 1 059 054 2 174 133
Property expenses (408 359) (360 780) (735 966)
Administration and corporate costs (28 319) (23 809) (39 349)
Net operating profit 796 535 674 465 1 398 818
Changes in fair values (311 897) 314 834 31 901
Profit from operations 484 638 989 299 1 430 719
Finance charges (273 936) (193 283) (403 581)
Finance income 47 336 39 940 80 733
Profit before taxation 258 038 835 956 1 107 871
Taxation - - (61)
Total comprehensive income for the period 258 038 835 956 1 107 810
Profit for the year attributable to:
Equity shareholders of Arrowhead 117 471 709 867 812 730
Non-controlling interest 140 567 126 089 295 080
Total comprehensive income for the period 258 038 835 956 1 107 810
Summarised consolidated statement of financial position
At 31 March 2018
Unaudited for the Unaudited for the Audited for
6 months ended 6 months ended the year ended
R'000 31 March 2018 31 March 2017 30 September 2017
Assets
Non-current assets 17 698 905 15 560 960 15 741 164
Investment property 15 036 213 12 400 987 12 910 093
Fair value of property portfolio for accounting purposes 14 912 089 12 322 921 12 796 323
Straight line rental income accrual 124 124 78 066 113 770
Property, plant and equipment 1 486 925 1 573
Loans to participants of group share purchase and option schemes 736 874 652 576 617 719
Goodwill 337 449 337 449 337 449
Financial assets 1 584 800 2 164 138 1 871 464
Deferred taxation 2 011 2 011 2 011
Derivative instruments 72 2 874 855
Current assets 377 713 302 154 311 733
Trade and other receivables 253 539 165 835 206 145
Cash and cash equivalents 124 174 136 319 105 588
Non-current assets held for sale - - 92 370
Total assets 18 076 618 15 863 114 16 145 267
Equity and liabilities
Shareholders interest 8 394 444 8 648 659 8 372 540
Stated capital 6 572 398 6 676 586 6 497 483
Reserves 1 822 046 1 972 073 1 875 057
Non-controlling interest 3 055 312 2 758 108 2 742 921
Other non-current liabilities 5 602 954 3 428 213 3 303 907
Secured financial liabilities 5 532 120 3 409 159 3 257 524
Derivative instruments 70 834 19 054 46 383
Current liabilities 1 023 908 1 028 134 1 725 899
Trade and other payables 323 235 253 101 300 283
Secured financial liabilities 700 673 775 033 1 425 616
Total equity and liabilities 18 076 618 15 863 114 16 145 267
Summarised consolidated statement of changes in equity
For the period ended 31 March 2018
Non-controlling
R'000 Stated capital Reserves interest Total
Balance at 30 September 2016 6 396 178 1 806 030 981 753 9 183 961
Issue of shares 101 305 - 15 734 117 039
Transfers between equity holders - 121 131 (121 131) -
Business combination - at acquisition reserves - - 1 789 233 1 789 233
Dividends paid - (864 834) (217 748) (1 082 582)
Total comprehensive income for the period - 812 730 295 080 1 107 810
Balance at 30 September 2017 6 497 483 1 875 057 2 742 921 11 115 461
Issue of shares 74 915 - 322 711 397 626
Transfers between equity holders - 47 713 (47 713) -
Share buyback - - (8 726) (8 726)
Share based payments - - 19 972 19 972
Dividends paid - (218 195) (114 420) (332 615)
Total comprehensive income for the period - 117 471 140 567 258 038
Balance at 31 March 2018 6 572 398 1 822 046 3 055 312 11 449 756
Summarised consolidated statement of cash flows
For the period ended 31 March 2018
Unaudited for the Unaudited for the Audited for
6 months ended 6 months ended the year ended
R'000 31 March 2018 31 March 2017 30 September 2017
Net cash generated from / (utilised in) operating activities 215 965 (131 214) (68 964)
Cash generated from operations 665 200 609 097 1 171 825
Finance charges paid (273 936) (193 283) (403 581)
Interest received 47 336 39 940 80 733
Dividends received 109 980 95 893 191 833
Dividends paid – non-controlling interest (114 420) (140 096) (217 748)
Dividends paid (218 195) (542 765) (891 964)
Taxation paid - - (62)
Net cash utilised in investing activities (1 877 544) (82 474) (556 988)
Acquisition of investment property (1 904 329) (62 081) (599 776)
Proceeds from disposal of investment property 27 000 62 500 69 517
Investment and loans to subsidiaries - (271 833) -
Investment in listed securities - - (271 833)
Disposal of property, plant and equipment - - 490
Acquisition of property, plant and equipment (215) (161) (1 532)
Pre-effective date distribution - - 19 161
Repayment of loans by participants of group share purchase and option schemes - 165 363 203 246
Business combinations - 23 738 23 738
Net cash generated from financing activities 1 680 165 271 584 653 118
Net proceeds from issue of share capital (359) (1 513) -
Proceeds from issue of shares - non controlling interest 133 354 18 200 -
Proceeds from financial liabilities 1 547 170 254 897 653 118
Net movement in cash and cash equivalents 18 586 57 896 27 165
Cash and cash equivalents at the beginning of the year 105 588 78 423 78 423
Cash and cash equivalents at the end of the year 124 174 136 319 105 588
Reconciliation of
earnings to headline earnings
Unaudited for the Unaudited for the Audited for
6 months ended 6 months ended the year ended
R'000 31 March 2018 31 March 2017 30 September 2017
Profit for the period attributable to Arrowhead shareholders 117 471 709 867 812 730
Earnings 117 471 709 867 812 730
Changes in fair value of investment property - - (34 313)
Fair value on post acquisition letting commission and tenant installation - - 1 427
Changes in fair value of investment property - non-controlling interest - - 40 246
Profit on sale of property - - (6 203)
Headline profit attributable to shareholders 117 471 709 867 813 887
Summarised consolidated segmental analysis
The entity has five reportable segments based on the geographic split of the country which are the entity's strategic business segments.
The entity's executive directors review internal management reports on a monthly basis and all segments greater than 10% are considered strategic.
All segments are located in South Africa. There are no single major tenants. The following summary describes the operations in each of
the entity's reportable segments.
Geographical
31 March 2018 - R'000 Gauteng Western Cape KwaZulu-Natal Eastern Cape Other Total
Contractual rental income 406 084 125 875 91 708 72 357 416 556 1 112 580
Straight line rental income 6 687 1 001 783 425 1 757 10 653
Listed securities income - - - 109 980 109 980
Operating and administration costs (171 383) (41 108) (33 371) (25 675) (165 141) (436 678)
Net operating profit 241 388 85 768 59 120 47 107 363 152 796 535
Finance income 782 81 104 54 46 315 47 336
Finance charges (176) (8) (3) - (273 749) (273 936)
Net operating income 241 994 85 841 59 221 47 161 135 719 569 935
Changes in fair values - - - - (311 897) (311 897)
Reportable segment profit before tax 241 994 85 841 59 221 47 161 (176 178) 258 038
Taxation - - - - -
Reportable segment profit after tax 241 994 85 841 59 221 47 161 (176 178) 258 038
Reportable segment assets 9 120 962 1 888 558 1 171 132 963 142 4 932 824 18 076 618
Reportable segment liabilities (107 588) (26 370) (37 559) (18 899) (6 436 448) (6 626 862)
9 013 374 1 862 188 1 133 573 944 243 (1 503 624) 11 449 756
Sectoral
31 March 2018 - R'000 Office Retail Residential Industrial Overheads Total
Contractual rental income 322 512 304 857 334 720 147 299 3 192 1 112 580
Straight line rental income 6 150 2 794 - 1 709 - 10 653
Listed securities income - - - - 109 980 109 980
Operating and administration costs (119 175) (108 033) (137 192) (61 828) (10 450) (436 678)
Net operating profit 209 487 199 618 197 528 87 180 102 723 796 535
Finance income 519 295 14 605 286 31 631 47 336
Finance charges (43) (11) (57 906) (134) (215 842) (273 936)
Net operating income 209 963 199 902 154 227 87 332 (81 488) 569 935
Changes in fair values - - (10 827) - (301 070) (311 897)
Reportable segment profit before tax 209 963 199 902 143 400 87 332 (382 558) 258 038
Taxation - - - - - -
Reportable segment profit after tax 209 963 199 902 143 400 87 332 (382 558) 258 038
Reportable segment assets 4 592 141 4 466 102 4 754 009 1 869 064 2 395 302 18 076 618
Reportable segment liabilities (84 471) (100 557) (1 411 567) (28 221) (5 002 046) (6 626 862)
4 507 670 4 365 545 3 342 442 1 840 843 (2 606 744) 11 449 756
Geographical
31 March 2017 - R'000 Gauteng Western Cape Other Total
Contractual rental income 439 593 121 184 398 547 959 324
Straight line rental income 844 1 2 992 3 837
Listed securities income - - 95 893 95 893
Operating and administration costs (164 414) (41 760) (178 415) (384 589)
Net operating profit 276 023 79 425 319 017 674 465
Finance income 438 42 39 460 39 940
Finance charges (167) (83) (193 033) (193 283)
Net operating income 276 294 79 384 165 444 521 122
Changes in fair values - - 314 834 314 834
Reportable segment profit before tax 276 294 79 384 480 278 835 956
Taxation - - - -
Reportable segment profit after tax 276 294 79 384 480 278 835 956
Reportable segment assets 6 985 001 1 764 094 7 114 019 15 863 114
Reportable segment liabilities (110 750) (27 411) (4 318 186) (4 456 347)
6 874 251 1 736 683 2 795 833 11 406 767
Sectoral
31 March 2017 - R'000 Office Retail Residential Industrial Overheads Total
Contractual rental income 351 025 268 874 194 992 139 582 4 851 959 324
Straight line rental income (2 577) 4 179 - 2 235 - 3 837
Listed securities income - - - - 95 893 95 893
Operating and administration costs (125 218) (95 637) (74 681) (57 241) (31 812) (384 589)
Net operating profit 223 230 177 416 120 311 84 576 68 932 674 465
Finance income 263 275 11 358 106 27 938 39 940
Finance charges (237) - (8 333) (10) (184 703) (193 283)
Net operating income 223 256 177 692 123 336 84 672 (87 834) 521 122
Changes in fair values - - (18) - 314 852 314 834
Reportable segment profit before tax 223 256 177 692 123 318 84 672 227 018 835 956
Taxation - - - - - -
Reportable segment profit after tax 223 256 177 692 123 318 84 672 227 018 835 956
Reportable segment assets 4 665 584 3 715 658 2 155 907 1 815 481 3 510 484 15 863 114
Reportable segment liabilities (72 247) (119 208) (46 111) (23 218) (4 195 563) (4 456 347)
4 593 337 3 596 450 2 109 796 1 792 263 (685 079) 11 406 767
Geographical
30 September 2017 - R'000 Gauteng Western Cape Other Total
Contractual rental income 864 628 252 376 819 176 1 936 179
Straight line rental income 21 793 5 066 19 263 46 122
Listed securities income - - 191 832 191 832
Operating and administration costs (332 869) (84 128) (358 319) (775 315)
Net operating profit 553 552 173 314 671 952 1 398 818
Finance income 1 052 127 79 554 80 733
Finance charges (430) (253) (402 898) (403 581)
Net operating income 554 174 173 188 348 608 1 075 970
Changes in fair values (138 726) 95 330 75 296 31 901
Reportable segment profit before tax 415 448 268 518 423 905 1 107 871
Taxation - - (61) (61)
Reportable segment profit after tax 415 448 268 518 423 844 1 107 810
Reportable segment assets 7 421 151 1 884 039 6 840 079 16 145 267
Reportable segment liabilities (102 954) (24 043) (4 902 809) (5 029 806)
7 318 197 1 859 996 1 937 270 11 115 461
Sectoral
30 September 2017 - R'000 Office Retail Residential Industrial Overheads Total
Contractual rental income 668 196 562 917 409 377 295 690 - 1 936 180
Straight line rental income 20 096 14 403 513 11 111 - 46 122
Listed securities income - - - - 191 833 191 833
Operating and administration costs (263 324) (187 563) (166 691) (124 389) (33 349) (775 315)
Net operating profit 424 969 389 757 243 199 182 412 158 484 1 398 819
Finance income 508 576 31 391 461 47 797 80 733
Finance charges (506) (14) (26 007) (186) (376 867) (403 581)
Net operating income 424 970 390 319 248 583 182 686 (170 586) 1 075 970
Changes in fair values (145 382) 143 373 36 881 504 (3 475) 31 901
Reportable segment profit before tax 279 588 533 692 285 464 183 190 (174 061) 1 107 871
Taxation - - - - (61) (61)
Reportable segment profit after tax 279 588 533 692 285 464 183 190 (174 122) 1 107 810
Reportable segment assets 4 585 958 3 910 856 3 247 312 1 847 898 2 553 244 16 145 267
Reportable segment liabilities (85 381) (98 059) (268 520) (25 812) (4 552 035) (5 029 806)
4 500 577 3 812 797 2 978 792 1 822 086 (1 998 791) 11 115 461
Reconciliation of earnings to distributable earnings
Unaudited for the Unaudited for the Audited for
6 months ended 6 months ended the year ended
R'000 31 March 2018 31 March 2017 30 September 2017
Headline profit attributable to shareholders 117 471 709 867 813 887
Changes in fair values of listed securities and financial instruments 311 897 (314 834) 7 188
Straight line rental income accrual (10 653) (3 837) (46 122)
Straight line rental income accrual - non-controlling interest 4 565 - 16 102
Changes in fair values of listed securities and financial instruments - non-controlling interest (10 346) - -
Dividend to the Arrowhead Charitable Trust and corporate fees 13 793 13 404 28 931
Income from listed securities distributed in prior period (109 980) (95 893) (67 757)
Accrued distribution on listed securities 107 749 120 926 127 505
Pre-effective date dividend - 19 162 19 162
Underwriters fee - - 9 500
Distributable earnings attributable to shareholders 424 496 448 795 908 396
Number of Arrowhead ordinary shares in issue 1 049 954 1 037 916 1 037 916
Weighted average number of Arrowhead shares in issue 1 014 630 1 002 332 980 710
Basic and diluted earnings per Arrowhead ordinary share (cents) 11.58 68.70 82.87
Headline and diluted headline earnings per Arrowhead ordinary shares (cents) 11.58 68.70 82.99
By order of the Board - 23 May 2018
DIRECTORS: M Nell * (Chairperson), M Kaplan (CEO), I Suleman (CFO), R Kader (COO), T Adler*, S Noik*, E Stroebel*
* Independent non-executive
All directors are South African.
REGISTERED OFFICE: 3rd Floor, Upper building, 1 Sturdee Avenue, Rosebank, Johannesburg, 2196
PO Box 685, Melrose Arch, 2076
TRANSFER SECRETARIES: Computershare Investor Services Proprietary Limited
SPONSOR: Java Capital
COMPANY SECRETARY: CIS Company Secretaries Proprietary Limited
WEBSITE: www.arrowheadproperties.co.za
Thank you
Date: 23/05/2018 07:22:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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