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The abridged consolidated financial statements for the year ended 31 March 2018 and notice of annual general meeting
Safari Investments RSA Limited
Registration number: 2000/015002/06
Approved as a REIT by the JSE Limited
JSE share code: SAR
ISIN: ZAE000188280
Republic of South Africa
("Safari" or the "company" or the "group")
The abridged consolidated financial statements for the year
ended 31 March 2018 and notice of annual general meeting
The preparation of the abridged consolidated financial results for the year
ended 31 March 2018 was prepared under the supervision of the financial
director, WL Venter (CA (SA)).
2018 Performance Overview
- Income producing properties: 7
- 2% vacancy rate
- R142/m2 monthly weighted average gross rental/m2 for retail sector
- R161/m2 monthly weighted average base rental/m2 for health care sector
- R75/m2 monthly weighted average base rental/m2 for living sector
- R151/m2 monthly weighted average base rental/m2 for office sector
- 91% retail sector; 1% health care sector & 8% residential sector; <1%
office sector
- 88% (GLA) national tenants
- 186 017m2 total built m2 of property portfolio
- R2,81 billion property portfolio value.
Property portfolio
for the year ended 31 March 2018
Property
Name Location type
Shopping centres
Atteridgeville Cnr Khoza and Mankopane Streets, Retail
Atteridgeville
Atteridgeville Maunde Street, Atteridgeville Retail
Mamelodi Cnr Stormvoel and Maphalla Roads, Retail
Mamelodi
Sebokeng Moshoeshoe Street, Sebokeng Unit 10, Retail
Ext 1, Sebokeng
Heidelberg Cnr Voortrekker and Jordaan Streets, Retail
Heidelberg
Swakopmund Swakopmund, Namibia (cnr Albatros Retail
and Tsavorite Streets)
Private day hospital
Soweto Healthcare
Stands for development
Sebokeng Erf 95 and 86 Moshoeshoe Street,
Sebokeng
Lynnwood Cnr Lynnwood Road and Roderick -
Sussex and Roderick, Lynnwood
Property in process of development
Atteridgeville Cnr Lengau, Thlou, Lepogo and
Church Streets
Swakopmund Albatros Street, Swakopmund, Apartments
Namibia
Market
value as
attributed
by
independent Gross
valuer lettable Vacancy
Name Region R'000 area/m2 %
Shopping centres
Atteridgeville Gauteng 527 200 31 210 2
Atteridgeville Gauteng 107 300 8 715 0
Mamelodi Gauteng 788 800 34 344 1
Sebokeng Gauteng 495 597 34 403 1
Heidelberg Gauteng 166 200 11 676 2
Swakopmund Erongo 331 142 22 598 5
Private day hospital
Soweto Gauteng 35 506 1 379 0
Stands for development
Sebokeng Gauteng 2 003 n/a
Lynnwood Gauteng 39 400 n/a
Property in process of development
Atteridgeville Gauteng 188 479 n/a
Swakopmund Namibia 169 649 n/a
Total 2 851 276 144 325
Approximate
Weighted age of
average Freehold/ building
Name rental/m2 Zoning leasehold years
Shopping centres
Atteridgeville 135,9 Special Freehold 10
- various
Atteridgeville 119,1 Special Freehold 2
- various
Mamelodi 178,3 Special Freehold 13
- various
Sebokeng 134,5 Special Freehold 9
- various
Heidelberg 131,6 Special Freehold 18
- various
Swakopmund 117,7 Special Freehold 2
- various
Private day hospital
Soweto 161,4 Special Freehold 1,5
- various
Stands for development
Sebokeng n/a Special Freehold n/a
- various
Lynnwood n/a Special Freehold n/a
- various
Property in process of development
Atteridgeville n/a Special Freehold n/a
- various
Swakopmund n/a Special
- various
Nature of business
Safari invests in quality income-generating property mainly focused on the
retail sector. There was no material change in the nature of the business
during the financial year.
Events during and subsequent to the reporting period
Events during the financial period
Phase 2 of the Platz am Meer development, being the residential apartments,
has been completed in the 2018 financial year. The units are currently
being marketed by Seeff with whom Safari entered into a mandate agreement
during April 2018.
Construction of the Nkomo Village Shopping Centre is in process and the
project is set for completion during quarter 4 of 2018. The centre will
be anchored by Pick n Pay and Boxer and bringing other national tenants
such as McDonalds and Builders Warehouse to the Atteridgeville community
for the first time.
Mr WL Venter was appointed by the board as financial director with effect
from 1 April 2017. Mr Venter is a qualified chartered accountant and was
the property portfolio manager for Safari over the last seven years.
The board accepted the resignation of Mr SJ Kruger as an alternate
non-executive director with effect from 30 November 2017.
During July 2017 Safari entered into a subscription agreement with
SA Corporate Real Estate Limited ("SA Corporate") whereby the company
has issued 20 million ordinary shares at R7,60 per share to SA Corporate
for a total cash amount of R152 million in terms of the company's
general authority to issue shares for cash.
During August 2017 Safari entered into the following subscription
agreements raising a total of R757 million:
- Southern Palace Capital Proprietary Limited: 66 million ordinary
shares at R7,60 per share;
- Safarihold Proprietary Limited: 657 895 ordinary shares at
R7,60 per share;
- Stanlib Asset Managers: 5 263 158 ordinary shares at R7,60 per share;
- Bridgefund Asset Managers: 21 052 632 ordinary shares at R7,60
per share; and
- WDB Investment Holdings Limited ("WDBIH"): 6 578 948 ordinary shares
at R7,60 per share.
Safari provided financial assistance by issuing a capital and interest
guarantee to Sanlam for 91% of the transaction value of the Southern
Palace transaction. Financial assistance was also provided to WDBIH
by way of vendor financing.
The following appointments to the board were made with effect from
1 March 2018:
- Ms Lulu Letlape as independent non-executive director. Ms Letlape
obtained her master's degree from the University of Johannesburg in
Public and Development Management. She has extensive experience in
corporate communication, community development and stakeholder management
in both the parastatal and private sector sphere and worked at senior
levels of management for companies such as Telkom, Mercedes-Benz,
Sanlam and BHP Billiton;
- Mr Chris Roberts as independent non-executive director. Mr Roberts is
a commercial property developer who has been involved in shopping centre,
office and residential developments for the past 30 years and has
extensive experience in identifying development opportunities, property
finance, leasing and general property management; and
- Mr Dirk Engelbrecht as executive director. Mr Engelbrecht obtained
his BCom LLB from the University of Pretoria and after completing his
articles at Weavind & Weavind remained there as professional assistant
until 2011 when he joined G4S Secure Solutions as national legal manager.
Mr Engelbrecht joined Safari in 2014 as group company secretary and
legal advisor. He was appointed as executive director: legal services.
Financial results and activities
The group recorded an operating profit, before investment revenue, fair
value adjustments and finance costs for the year ended 31 March 2018,
of R183 500 000 (2017: R144 561 000). This represents an increase of
27% year on year and is mainly due to the inclusion of Platz am Meer
Shopping Centre where rental income was generated for twelve months
during the 2018 financial year compared to six months for the 2017
financial year.
The group's revenue increased by 21% to R248 649 000 compared with
the previous year's R204 973 000. A weighted average escalation on
lease agreements of 8% was achieved for South African assets and a
7% weighted average escalation for the entire property portfolio for
the 2018 financial year. Operating costs as a percentage of revenue
was 29% (2017: 30%).
Safari group's gearing (debt to equity) ratio decreased from 57% to 13%,
as a direct result of the capital raising which was concluded during July
and August 2017 - refer to the section on "Events during the financial
period" above for more information regarding the capital raising.
The fair value of the group's investment property increased by 9% to
R2 681 628 000. The increase of R224 638 000 resulted from the expansions
and additions of R201 802 000 as well as a fair value adjustment of
R22 836 000 for the total property portfolio. The income-generating
properties were valued on the discounted cash flow method and are supported
by Safari's 2% vacancy profile, the 88% national tenants' occupation level,
a positive lease expiry profile and 7% average rental escalation achieved
through the 2018 financial year. The net asset value per share decreased
by 5% to 824 cents for the year, from 870 cents in the prior year.
Dividends
In terms of REIT legislation at least 75% of the distributable earnings
must be distributed in every financial year. The distribution consisted
of an interim cash dividend of 35 cents in December 2017 and a final cash
dividend of 33 cents per share - the details of which were released on
SENS on 26 June 2018. To determine distributable earnings per share for
the distribution period 1 April 2017 to 31 March 2018 with the final
distribution declared for distribution in July 2018, antecedent dividends
resulting from the new share issue in July and August 2017 were included
in distributable earnings and the weighted number of shares in issue was
used to determine the distribution per share.
Going concern
The directors are of the opinion that the group has adequate financial
resources to continue its operations for the foreseeable future and,
accordingly, the consolidated annual financial statements have been
prepared on a going-concern basis.
The group is in a sound financial position and has access to sufficient
borrowing facilities to meet its foreseeable cash requirements for operational
activities and current capital commitments. The directors are not aware of
any material changes that may have an adverse impact on the company, nor of
any material non-compliance with statutory or regulatory requirements nor of
any pending changes to legislation which may affect the group.
Litigation statement
In terms of section 7.D.11 of the JSE Listings Requirements, the directors
are not aware of any legal or arbitration procedures that are pending or
threatening, that might have had, in the previous 12 months, a material
effect on the group's financial position.
Auditors
Deloitte & Touche was appointed as auditors for the group from 2 September
2015 and also performed the interim review during September 2017.
During the financial year Bester Greyling was the designated audit partner
for the Safari group.
Abridged consolidated statement of financial position
as at 31 March 2018
2018 2017
R'000 R'000
Assets
Non-current assets
Investment property 2 638 538 2 421 550
Fair value of investment property 2 681 628 2 456 990
Operating lease asset (43 090) (35 440)
Loans to shareholders 45 166 -
Operating lease asset 42 350 33 349
Deferred tax 16 908 -
2 742 962 2 454 899
Current assets
Inventories 169 649 175 003
Loans to shareholders 8 149 -
Trade and other receivables 15 331 14 139
Operating lease asset 740 2 091
Current tax receivable - 1 638
Cash and cash equivalents 2 948 2 931
196 817 195 802
Total assets 2 939 779 2 650 701
Equity and liabilities
Equity
Stated capital 2 087 928 1 187 088
Share-based payment reserve 49 800 -
Retained income 427 053 476 453
2 564 781 1 663 541
Liabilities
Non-current liabilities
Interest-bearing borrowings 335 245 898 433
Deferred tax 18 535 23 105
353 780 921 538
Current liabilities
Trade and other payables 20 655 15 792
Interest-bearing borrowings 563 5 576
Bank overdraft - 44 254
21 218 65 622
Total liabilities 374 998 987 160
Total equity and liabilities 2 939 779 2 650 701
Abridged consolidated statement of profit or loss and other
comprehensive income for the year ended 31 March 2018
2018 2017
R'000 R'000
Revenue 248 649 204 973
Property revenue 240 999 203 427
Operating lease 7 650 1 546
Other income 5 743 4 477
Operating expenses (70 892) (64 889)
Operating profit 183 500 144 561
Investment income 3 446 182
Fair value adjustments 15 186 74 822
Gross fair value adjustments 22 836 76 368
Operating lease (7 650) (1 546)
Finance costs (37 431) (59 012)
Impairment of inventory (5 035) -
Share-based payment expense (49 800) -
Profit before taxation 109 866 160 553
Taxation 21 477 (4 627)
Profit for the year 131 343 155 926
Other comprehensive income - -
Total comprehensive income for the year 131 343 155 926
Basic earnings per share (cents) 57 83
Diluted earnings per share (cents) 50 83
Abridged consolidated statement of changes in equity for the year
ended 31 March 2018
Share-
based
Stated payment Retained Total
capital reserve income equity
R'000 R'000 R'000 R'000
Balance at
1 April 2016 1 116 566 - 439 466 1 556 032
Profit for the year - - 155 926 155 926
Other comprehensive
income - - - -
Total comprehensive
income for the year - - 155 926 155 926
Shares issued through
capitalisation dividend 5 928 - - 5 928
Shares issued through
capitalisation dividend 13 341 - - 13 341
Private placement 31 578 - - 31 578
Private placement 20 000 - - 20 000
Capital raising fee on
shares paid for and
issued in the current
period (325) - - (325)
Reit distribution paid - - (118 939) (118 939)
Total contributions by
and distributions to
owners of company
recognised directly
in equity 70 522 - (118 939) (48 417)
Balance at
1 April 2017 1 187 088 - 476 453 1 663 541
Profit for the year - - 131 343 131 343
Other comprehensive
income - - - -
Total comprehensive
income for the year - - 131 343 131 343
Shares issued through
capitalisation
dividend 2 853 - - 2 853
Private placement 152 000 - - 152 000
Private placement 756 600 - - 756 600
Capital raising fee
on shares paid for
and issued in the
current period (10 613) - - (10 613)
Share-based payment - 49 800 - 49 800
Total share-based
payments for the year - 49 800 - 49 800
Reit distribution
paid - - (180 743) (180 743)
Total contributions by
and distributions
to owners of company
recognised directly in
equity 900 840 49 800 (180 743) 769 897
Balance at
31 March 2018 2 087 928 49 800 427 053 2 564 781
Abridged consolidated statement of cash flows for the year
ended 31 March 2018
2018 2017
R'000 R'000
Net cash used in operating activities
Cash generated from operations 179 844 84 313
Investment income 3 445 182
Finance costs (37 434) (59 012)
Reit distribution paid (177 891) (99 668)
Tax received 1 638 -
Net cash used in operating activities (30 398) (74 185)
Net cash used in investing activities
Purchase and development of investment
property (201 802) (292 037)
Net cash used in investing activities (201 802) (292 037)
Net cash from financing activities
Proceeds on share issue 897 988 51 254
Proceeds from interest-bearing borrowings 447 970 677 330
Repayment of interest-bearing borrowings (1 016 171) (407 083)
Proceeds from bank overdraft 72 900 71 142
Repayment of bank overdraft (96 357) (47 685)
Advance on shareholders' loan (53 316) -
Net cash from financing activities 253 014 344 958
Total cash movement for the year 20 814 (21 264)
Cash and cash equivalents at the
beginning of the year (17 866) 3 398
Total cash and cash equivalents at
the end of the year 2 948 (17 866)
Segmental reporting
The group classifies the following main segments, which is consistent with
the way in which the group reports internally:
- Atteridgeville
- Mamelodi
- Sebokeng
- Heidelberg
- Namibia
Abridged segment results, net assets, include items directly attributable
to a segment as well as those that can be allocated on a reasonable
basis.
Atteridge-
ville Mamelodi Sebokeng
R'000 R'000 R'000
31 March 2018
Turnover (external) 67 367 72 519 51 290
Reportable segment profit before
investment revenue, fair
value adjustments and
finance costs 54 291 61 481 33 035
Unallocated reportable segment
profit before investment revenue,
fair value adjustments and
finance costs - - -
Profit before investment
revenue, fair value
adjustments and finance costs - - -
Segment assets and liabilities
Segment assets 827 073 781 742 495 768
Unallocated assets - - -
Total assets 827 073 781 742 495 768
Segment liabilities 6 969 3 703 3 761
Unallocated liabilities - - -
Interest-bearing borrowings - - -
Total liabilities 6 969 3 703 3 761
Other segment items
Interest revenue (external) 15 10 15
Unallocated interest revenue - - -
Investment revenue 15 10 15
Fair value adjustments 46 418 95 866 (11 972)
Interest expense - - -
Unallocated interest expense - - -
Finance costs - - -
Recon-
Heidelberg Namibia ciliation Total
R'000 R'000 R'000 R'000
31 March 2018
Turnover (external) 20 726 32 346 - 248 649
Reportable segment
profit before investment
revenue, fair value
adjustments and finance
costs 15 278 24 418 - -
Unallocated reportable
segment profit before
investment revenue, fair
value adjustments and
finance costs - - 5 003 5 003
Profit before investment
revenue, fair value
adjustments and finance
costs - - - 183 500
Segment assets and
liabilities
Segment assets 169 361 510 146 - 2 784 089
Unallocated assets - - 155 689 155 689
Total assets 169 361 510 146 155 689 2 939 779
Segment liabilities 509 2 695 - 17 637
Unallocated liabilities - - 21 552 21 552
Interest-bearing borrowings - - 335 808 335 808
Total liabilities 509 2 695 357 360 374 998
Other segment items
Interest revenue
(external) - - - 39
Unallocated interest revenue - - 3 406 3 406
Investment revenue - - 3 406 3 445
Fair value adjustments 9 325 (118 501) 1 700 22 836
Interest expense - 2 953 - 2 953
Unallocated interest expense - - 34 480 34 480
Finance costs - 2 953 34 480 37 434
Atteridge-
ville Mamelodi Sebokeng
R'000 R'000 R'000
31 March 2017
Turnover (external) 58 404 61 364 47 874
Reportable segment profit
before investment revenue, fair
value adjustments and finance
costs 45 412 50 979 33 102
Unallocated reportable segment
profit before investment revenue,
fair value adjustments and
finance costs - - -
Profit before investment revenue,
fair value adjustments and finance
costs - - -
Segment assets and liabilities
Segment assets 674 639 694 485 490 212
Unallocated assets - - -
Total assets 674 639 694 485 490 212
Segment liabilities 3 873 3 366 3 684
Unallocated liabilities - - -
Interest-bearing borrowings - - -
Total liabilities 3 873 3 366 3 684
Other segment items
Interest revenue (external) 21 30 21
Unallocated interest revenue - - -
Investment revenue 21 30 21
Fair value adjustments 63 886 86 681 66 148
Interest expense - - -
Unallocated interest expense - - -
Finance costs - - -
Recon-
Heidelberg Namibia ciliation Total
R'000 R'000 R'000 R'000
31 March 2017
Turnover (external) 17 048 15 918 4 365 204 973
Reportable segment profit
before investment revenue,
fair value adjustments and
finance costs 11 437 10 228 - 151 158
Unallocated reportable segment
profit before investment
revenue, fair value
adjustments and finance costs - - (6 597) (6 597)
Profit before investment
revenue, fair value
adjustments and
finance costs - - - 144 561
Segment assets and
liabilities
Segment assets 154 688 560 745 - 2 574 769
Unallocated assets - - 75 932 75 932
Total assets 154 688 560 745 75 932 2 650 701
Segment liabilities 671 26 994 - 38 588
Unallocated liabilities - - 44 563 44 563
Interest-bearing borrowings - - 904 009 904 009
Total liabilities 671 26 994 948 572 987 160
Other segment items
Interest revenue (external) 3 - - 75
Unallocated interest revenue - - 107 107
Investment revenue 3 - 107 182
Fair value adjustments 3 345 (137 805) (5 887) 76 368
Interest expense - - - -
Unallocated interest expense - - 59 012 59 012
Finance costs - - 59 012 59 012
Earnings per share for the year ended 31 March 2018
2018 2017
R'000 R'000
Earnings used in the calculation of basic
earnings per share (profit after tax) 131 343 155 926
Ordinary shares in issue at year-end 251 975 191 257
Weighted average number of ordinary
shares 230 253 186 837
Headline earnings 108 507 79 558
Diluted weighted average number of shares 265 293 186 837
Basic earnings per share (cents) 57 83
Diluted earnings per share (cents) 50 83
Basic headline earnings per share (cents) 47 43
Diluted headline earnings per share (cents) 41 43
Headline earnings reconciliation
Profit after tax 131 343 155 926
Gains and losses from the adjustment to
the fair value of non-current assets (22 836) (76 368)
108 507 79 558
Net asset value per share for the year ended 31 March 2018
2018 2017
R'000 R'000
Total assets 2 939 779 2 650 701
Total liabilities (374 998) (987 160)
2 564 781 1 663 541
Ordinary shares in issue 311 186 191 257
Net asset value per share (cents) 824 870
Tangible net asset value (cents) 824 870
REIT distribution paid
2018 2017
R'000 R'000
Prior year final distribution (34 cents per
share) (2017: 32 cents per share) (68 975) (52 370)
Capitalisation of distribution
(R7,60 per share) (2017: R8,00 per share) (2 853) (5 928)
Interim distribution (35 cents per share)
(2017: 32 cents per share) (108 915) (47 300)
Capitalisation of distribution
(R0 per share) (2017: R7,60 per share) - (13 341)
Total distribution (180 743) (118 939)
To determine distributable earnings per share for the distribution period
1 April 2017 to 31 March 2018 with the final distribution for this
distribution period declared for distribution in July 2018, antecedent
dividends resulting from new share issues in July 2017 and August 2017
were included in distributable earnings and the weighted average number
of shares in issue was used to determine the distribution per share.
R177 890 822 (2017: R99 668 459) was paid in cash to shareholders, the
remaining balance of R2 852 561 (2017: R19 270 596) was settled by
means of a capitalisation dividend.
Basis of preparation
The abridged consolidated financial statements are prepared in accordance
with the requirements of the JSE Limited Listings Requirements for
abridged reports and the requirements of the Companies Act 71 of 2008 of
South Africa, as amended. The JSE Listings Requirements require abridged
reports to be prepared in accordance with the framework concepts and the
measurement and recognition requirements of International Financial
Reporting Standards (IFRS), the presentation and disclosure requirements
of IAS 34 - Interim Financial Reporting, the SAICA Financial Reporting
Guides as issued by the Accounting Practices Committee and Financial
Reporting Pronouncements as issued by Financial Reporting Standards
Council and the Companies Act 71 of 2008. The accounting policies applied
in the preparation of the abridged consolidated financial statements
are in terms of IFRS and are consistent with those applied in the previous
financial statements.
Explanatory notes to the abridged consolidated statement of financial
position and abridged consolidated statement of comprehensive income
for the year ended 31 March 2018:
1. It is the Group's policy to have the investment property portfolio
valued on an annual basis by an independent valuator. The valuation
of investment property (except for the property valuations based on the
direct comparable method as detailed below) totalling R2 441 606 190
(2017: R2 319 400 000) was based on the discounted cash flow method.
The valuation of investment property (Erven 9043, 9044, 9045
Atteridgeville Ext 5 and Erf 68 of the subsidiary's property and the
Lynnwood property), totalling R239 869 622 (2017: R137 589 936) was based
on the direct comparable method, plus development cost. This method was
used as the erven identified above are stands purchased during 2013,
which are not yet income generating (not yet generating cash flow).
These valuations are considered to be Level 3 on the fair value hierarchy
as per IFRS 13 Fair Value Measurement. There have been no movements of
inputs between fair value hierarchy levels nor have there been any
changes in the methods of valuation as mentioned above. If the valuer
were to increase both the capitalisation and discount rates by 0,50%,
the total valuation would decrease by R122 600 000. If the valuer were
to decrease both the capitalisation and discount rates by 0,50%, the
total valuation would increase by R137 300 000.
If the valuer were to increase the long-term vacancy provision by 1,00%,
the total valuation would decrease by R20 400 000. If the valuer were to
decrease the long-term vacancy provision by 1,00% the total valuation
would increase by R20 300 000.The ongoing construction of the Nkomo Village
property in Atteridgeville together with a positive fair value adjustment
resulted in a 9% increase in the value of investment property since
31 March 2017. The construction costs are financed by interest-bearing
borrowings and capital raised by share issues.
2. Most of Safari's current lease agreements are in the first half of
the lease term. The average annualised property yield for the
income-generating property portfolio based on market values as at
31 March 2018 is 7,3% for the 2018 financial year. Included in revenue
is gross rent, solar income and turnover rent for all income-generating
properties and all property expenses have been deducted. The average
weighted forward yield for the portfolio is 8,2%.
3. The 36 luxury upmarket apartments are available for sale in the
ordinary course of business. In the current year the group finalised
the construction on the apartments in Namibia. In the previous year the
group accounted for inventory at 30% of the total construction cost,
based on the quantity surveyor's estimate. This was his best estimate,
taking available information into account. After final accounts were
settled, the actual cost to construct the apartments was calculated to
be 25,25% of the total construction cost for the Platz am Meer development.
This resulted in a change in estimate.
4. Safari raised in total R2,9 million (375 337 ordinary Safari shares)
through the dividend reinvestment process during July 2017. Shareholders
had the option to reinvest their distribution in ordinary shares at a
price of R7,60 per share. The capital raised through the dividend
reinvestment process was utilised to settle part of the facility used
to finance the construction of current projects.
During July 2017 Safari entered into a subscription agreement with
SA Corporate Real Estate Limited ("SA Corporate") whereby the company has
issued 20 million ordinary shares at R7,60 per share to SA Corporate for
a total cash amount of R152 million in terms of the company's general
authority to issue shares for cash.
During August 2017 Safari entered into the following subscription
agreements raising a total of R757 million:
a. Southern Palace Capital Proprietary Limited: 66 million ordinary
shares at R7,60 per share (refer to note 5 below)
b. Safarihold Proprietary Limited: 657 895 ordinary shares at
R7,60 per share
c. Stanlib Asset Managers: 5 263 158 ordinary shares at R7,60
per share
d. Bridgefund Asset Managers: 21 052 632 ordinary shares at
R7,60 per share
e. WDB Investment Holdings Limited (“WDBIH”): 6 578 948 ordinary
shares at R7,60 per share
Safari provided financial assistance by issuing a capital and interest
guarantee to Sanlam for 91% of the transaction value of the Southern
Palace transaction. Financial assistance was also provided to WDBIH by way
of vendor financing.
In the 2018 financial year Safari will distribute a minimum of 75% of its
taxable earnings to the shareholders as per the REIT requirements, and
the shareholders will be liable for the tax on the profit distributed.
5. Safari was approached by Southern Palace Capital Proprietary Limited
("Southern Palace"), a subsidiary of Southern Palace Group of Companies
Proprietary Limited (the "Southern Palace Group") to subscribe for shares in
Safari. After taking into account the Southern Palace Group’s potential value
add as a strategic BEE investor given their focus on infrastructure development
and real estate and their know-how, Safari decided to enter into negotiations
with Southern Palace.
On 7 July 2017 shareholders approved the issue of 66 million new Safari shares
(the "subscription shares") to Southern Palace for a total consideration of
R501,6 million. Shareholders also approved financial assistance by Safari to
Southern Palace for this subscription. The structure of the financial assistance
provided by Safari is explained in more detail below.
Accounting treatment of the Southern Palace Capital Proprietary Limited
transaction.
The transaction with Southern Palace consist of two elements, which are
accounted for as follows:
5.1 The cash funded specific issue, being the subscription by Southern
Palace of 6 789 474 subscription shares for a cash consideration of
R51,6 million. This part of the subscription is funded by Southern Palace
using third party funding and/or own cash reserves. Consequently, the
cash proceeds, net of transaction costs, increases share capital and the
number of Safari shares in issue.
5.2 The balance of the subscription of 66 million shares
(59 210 526 shares) is funded by Sanlam Life Insurance Limited (Acting
through its Sanlam Capital Markets Division) ("Sanlam"). Safari issued an
interest- and capital guarantee to the amount of R455 million for the
loan facilities provided to Southern Palace. The funding is secured by a
pledge and cession in favour of Sanlam over the 66 million shares. Safari
entered into an “Acknowledgement of Claim and Reversionary Pledge and Cession
Agreement" with Southern Palace whereby Southern Palace irrevocably and
unconditionally agrees to indemnify Safari for the full amount paid by Safari
on account of the borrower's obligations under the guarantees issued as set
out above.
On initial recognition, being 28 August 2017, the date on which the funded
shares of 59 210 526 subscription shares were issued, a once-off IFRS 2 charge
of R49,8 million and corresponding share-based payment reserve was recognised.
Consequently, the subscription shares issued to Southern Palace in terms of
the Sanlam funded specific issue have not been treated as issued for
accounting purposes. The guarantees provided by Safari to Sanlam in terms
of the financial assistance approved by shareholders triggered the IFRS 2
charge. The IFRS 2 charge was measured at fair value, using a Monte Carlo
option pricing model on the effective date of the transaction. The
assumptions used in this model include:
a. A closing spot price of R6,80 per Safari share as at 28 August 2017;
b. Volatility of 31,94% (based on historical trends in the Safari share
price); and
c. Three year term guarantee.
Consequently, reserves were increased due to the share-based payment transaction
taking place.
6. Trade and other receivables fluctuated between the comparative periods,
mainly due to the Value Added Tax ("VAT") receivable from the Namibian Revenue
Services for the financial period under review. Trade receivables increased
mainly due to deposits being raised for the new Nkomo development currently
under construction and outstanding debtor balances.
Trade and other payables consists of tenant deposits held, income received in
advance and accrued expenses.
7. The bulk of current and non-current liabilities relate to the banking
facility being utilised to finance the project development of the Platz am
Meer, the construction of the Nkomo property and expansions at existing
properties as mentioned in note 1 above. The capital raising mentioned in
note 4 above resulted in a significant decrease in interest bearing
borrowings which also resulted in a significant decrease in finance cost
for the 2018 financial year, compared to the 2017 financial year.
8. The property revenue increased by 18% compared with the previous year.
The increase is a result of annual rental escalations and the fact that the
Platz am Meer shopping centre generated rental income for twelve months compared
to six months in the previous year.
9. Operating expenses as a percentage of revenue was 29% compared to 30% in the
previous year's results. This is as a result of stringent budgeting and
continuous monitoring of expenses.
10. Deferred tax is no longer calculated on the straight-line rental income
accrual or on the operating lease asset, as the rental accrual will form part
of the group's distribution in the future. Given the conversion to a REIT,
such distributions are fully deductible for tax purposes and hence no tax
liability will arise on straight-line rental income accruals or operating
lease assets. Safari Investments Nambia Proprietary Limited will however
still incur deferred tax on the above as this subsidiary company is
not a REIT.
Financial statements
The consolidated financial statements for the year have been audited by
Deloitte & Touche and an unmodified report issued, and is available for
inspection at the group's registered office or in electronic format on
the website: www.safari-investments.com.
The abridged consolidated financial statements are extracted from the
audited financial information but are not themselves audited. Information
included under the headings "2018 Performance overview" and "Director's
report" has not been audited or reviewed. Shareholders are advised that
in order to obtain a full understanding of the nature of the auditors'
engagement they should obtain a copy of the report with accompanying
financial statements from the group's registered offices. The directors
take full responsibility for the preparation of the abridged results
and all financial information has been correctly extracted from the
underlying financial statements.
The consolidated annual financial statements were approved by the Board
of Directors on 20 June 2018 and published on 27 June 2018.
New standards and interpretations
The accounting policies of the group have been applied consistently to
the policies as presented in the consolidated financial statements for
the year ended 31 March 2018.
Events subsequent to the reporting period
Notice was received that a cross-default was triggered on the senior
facility (Southern Palace Capital Proprietary Limited share subscription
transaction) where Safari Investments RSA Limited is the guarantor for
the interest and capital portions of the facility provided to Southern
Palace Capital Proprietary Limited for the purchase of Safari Investments
RSA Limited shares during August 2017. The cross-default arose from
Southern Palace Capital Proprietary Limited not settling a facility
held by them for the own equity portion of this transaction on time.
This was due to a delay in processes to release funds by a third party
which is currently being addressed by Southern Palace Capital Proprietary
Limited. The guarantees provided by Safari Investments RSA Limited on
the senior facility have not been called on at the time of this report.
At the board meeting held on 20 June 2018 a final cash distribution of
33 cents per share was declared and will be paid to shareholders during
July 2018. The directors are not aware of any other material reportable
events which occurred during and subsequent to the reporting period.
Related-party transactions
All related-party transactions are as per approved agreements.
Cosmos Management CC (Cosmos) provided bookkeeping and property portfolio
management services to Safari and is a related party due to the common
directorship. The services rendered by Cosmos amounted to R6,9 million
(2017: R6,4 million).
Safari Retail Proprietary Limited (Retail) provided marketing and
letting service for existing centres to Safari and is a related party
due to the common directorship. The services rendered by Retail amounted
to R1,3 million (2017: R2,8 million).
Board commentary
Profile
Safari Investments RSA Limited (Safari), with a total asset base of
R2,94 billion, is a retail-focused Real Estate Investment Trust
(REIT) listed on the Johannesburg Stock Exchange Limited (JSE)
main board under the property sector.
Safari invests in quality income-generating property; revenue is
generated through sustainable rental income. There were no changes
to the nature of the business during the financial period
under review.
Property portfolio
The property portfolio consists of 19 properties. Six of the
properties are established retail centres, of which four are
serving as regionals in their areas. The Soweto Day Hospital,
operational since January 2016, also forms part of the Safari
property portfolio. The above-mentioned properties are the
income-generating assets in the Safari portfolio. These include
Denlyn in Mamelodi (43 450m2); Atlyn (41 200m2) and Mnandi
(10 550m2) in Atteridgeville; Thabong in Sebokeng (43 100m2);
The Victorian in Heidelberg (15 400m2); Platz am Meer in
Swakopmund (29 500m2) and the Soweto Day Hospital (2 817m2).
The retail centres are anchored by national retailers such as
Shoprite /Checkers, Super Spar and Pick n Pay. Safari's current
rental portfolio is 91% retail based.
Phase 2 of the Platz am Meer development, being the residential
apartments, has been completed in the 2018 financial year. The
units are currently being marketed by Seeff with whom Safari
entered into a mandate agreement during April 2018.
Letting activity
Safari's vacancy factor in its portfolio as at 31 March 2018 was 2%
(2017: 2%) of the total income-generating retail space which consisted
of 88% (2017: 87%) national tenants.
Current projects
Construction of the Nkomo Village Shopping Centre is in process and
the project is set for completion during quarter 4 of 2018. The centre
will be anchored by Pick n Pay and Boxer and bringing other national
tenants such as McDonalds and Builders Warehouse to the
Atteridgeville community for the first time.
The following capital expenditure to the Platz am Meer development
was approved by the board of Safari during the 8 November 2017 board
meeting:
- Mooring facilities in the small boat harbour to the amount of
N$6,2 million; and
- N$5,0 million to upgrade the roads adjacent to the centre and
adding a taxi rank and bus parking area to ease access to the centre.
Prospects
The development and extension as detailed above ensures that Safari
will maintain its attractive portfolio growth. Above-inflation increases
in utility cost and continued financial market volatility are expected
to continue. The Board is committed to maximising the rental income streams
with the proactive letting strategy focused on national tenants, and
minimising the operating expenditure. The Board will focus on opportunities
in order to achieve sustainable long-term, recurring distributable earnings.
Any forecast in the results has not been reviewed or reported on by the
independent external auditors and is the responsibility of the Board.
By order of the Board
27 June 2018
Notice of Annual General Meeting
Notice is hereby given that the annual general meeting of shareholders
of Safari ("AGM") will be held at 14:00 on Tuesday, 31 July 2018, at Menlyn
Boutique Hotel, 209 Tugela Road, Ashlea Gardens, Pretoria.
Corporate information
Safari Investments RSA Limited
(Registration number: 2000/015002/06)
JSE code: SAR
ISIN: ZAE000188280
Country of incorporation: Republic of South Africa (7 July 2000)
Auditors
Deloitte & Touche
Riverwalk Office Park, Block B
41 Matroosberg Road, Ashlea Gardens, Pretoria 0081
Commercial banker
Absa Bank Limited
(Registration number: 1986/004794/06) Absa Towers East
170 Main Street, Johannesburg 2001
PO Box 7735, Johannesburg 2000
Group Company Secretary
Dirk Engelbrecht BCom LLB
342 The Rand Street, Lynnwood, Pretoria
Postal: 420 Friesland Lane, Lynnwood Pretoria 0081
Corporate adviser
Fanus Kruger Consulting Proprietary Limited
(Registration number 2015/324537/07)
67 Brink Street, Rustenburg 0299
Directors of Safari Investments RSA Limited
Dr JP Snyman (Independent non-executive chairman)
FJJ Marais (Chief executive officer)
WL Venter (Executive financial director)
K Pashiou (Executive: operations director)
DC Engelbrecht (Executive: legal services director and
group company secretary)
FN Khanyile (Independent non-executive director)
LL Letlape (Independent non-executive director)
Dr M Minnaar (Independent non-executive director)
CR Roberts (Independent non-executive director)
AE Wentzel (Lead independent non-executive director)
Independent valuer
Mills Fitchet (Tvl) CC
(Registration number CK 89/40464/23)
No 17 Tudor Park, 61 Hillcrest Avenue Oerder Park, Randburg 2115
PO Box 35345, Northcliff 2115
Legal advisers
Weavind & Weavind Incorporated
Block E, Glenfield Office Park
361 Oberon Street, Faerie Glen
Pretoria 0081
Tel: +27 (0) 12 346 3098
Sponsor
PSG Capital
(Registration number 1951/002280/06)
1st Floor, Ou Kollege Building
35 Kerk Street, Stellenbosch 7599
PO Box 7403, Stellenbosch 7599
Transfer secretaries
Computershare Investor Services Proprietary Limited
(Registration number 2004/003647)
Rosebank Towers, 15 Biermann Avenue
Rosebank 2196
PO Box 61051, Marshalltown 2107
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