Wrap Text
Condensed unaudited consolidated interim financial results for the six months ended 30 June 2018
SA Corporate Real Estate Limited
(“SA Corporate” or “the Group”)
Incorporated in the Republic of South Africa
Share Code: SAC; ISIN Code: ZAE000203238
(Registration number 2015/015578/06)
CONDENSED UNAUDITED CONSOLIDATED INTERIM FINANCIAL RESULTS
FOR THE SIX MONTHS ENDED 30 JUNE 2018
Interim distribution
- 3.1% lower than H1 2017
Capital structure
- Discount to NAV of 16.9%
- Effective fixed debt of 74.1%
- LTV of 33.1%
Portfolio activity
- Completed and committed developments of R1 408,4m
- Acquisitions and contracted and unconditional acquisitions of R1 472,0m
Property performance
- Total like-for-like NPI growth of 2.4%
- Afhco like-for-like NPI growth of 4.1%
- Traditional portfolio vacancy by GLA of 2.2%
INTRODUCTION
SA Corporate Real Estate Limited is a JSE-listed Real Estate Investment Trust (“REIT”) which owns a diversified portfolio of industrial, retail, commercial,
storage and residential buildings located primarily in the major metropolitan areas of South Africa with a secondary node in Zambia.
REVIEW OF FINANCIAL RESULTS AND PORTFOLIO PERFORMANCE
Distribution
SA Corporate's distribution per share decreased for the six months to June by 3.1% compared to the same period in the prior year. This amounts to a distribution
of 21.70 cps (June 2017: 22.38 cps). The decline in distribution arose from non-recurring income and base effects in the prior year and additional re-financing
costs excluding which distribution growth per share would have been circa 2%. The latter reflects challenging trading conditions negatively impacting rental reversions.
Portfolio Performance
Total net property income (“NPI”), excluding the non-controlling interest, increased by 7.8%, with the like-for-like increasing by 2.4%.
The Afhco portfolio responded positively to proactive initiatives instituted in 2017 with NPI increasing by 43.3% supported by a greater contribution from acquisitions
and developments. The like-for-like growth of 4.1% was underpinned by reduced residential vacancies by GLA from 8.9% to 5.6% (excluding the units in tenanting up phases
in respect of the joint initiative with Calgro M3).
Retail NPI growth of 3.7%, excluding the impact of disposals, was the result of tenant retentions of 86.2%, weighted average lease escalations of 7.6% and positive reversions
of 2.6%. The retail like-for-like NPI grew by 3.8% amid challenging market conditions. There continues to be focus on green initiatives to reduce the impact of increased municipal costs.
Industrial like-for-like portfolio growth of 2.3% was supported by weighted average rental escalations of 7.9%, tenant retentions of 70.8% and a 0.4% reduction in vacancies by GLA.
The performance of this sector was adversely impacted by negative reversions of 3.1%.
Income from the Zambian Joint Ventures (“JV’s”) amounted to R29,7m (June 2017: R30,7m) for the 6 months to June 2018. The Zambian JV’s current year income before guarantees
increased by 9.5% and after the impact of guarantees 3.4% over the same period in US Dollar. This amounts to a 3.2% reduction in ZAR relative to June 2017 as the Rand strengthened against
the US Dollar.
Net Finance Cost
Net funding cost increased by 24.5% arising from an increase in debt of R945,5m as a result of increased investment activity at a weighted average marginal rate of 1.95% above the 3-month Jibar.
The R1,2bn of debt that expired in December 2017 was refinanced at a rate 45bps higher than the expiring marginal rate further increasing the funding cost.
DISTRIBUTION STATEMENT
6 months 6 months Year
ended ended ended
30.06.2018 30.06.2017 31.12.2017
DISTRIBUTABLE EARNINGS (R000) Unaudited Unaudited Audited
Rent (excluding straight line rental
adjustment) 834,188 724,983 1,509,933
Net property expenses (98,186) (51,028) (138,909)
Property expenses (390,293) (324,333) (711,433)
Recovery of property expenses 292,107 273,305 572,524
Net property income attributable to
non-controlling interest (9,591) - (508)
Net property income 726,411 673,955 1,370,516
Investment in joint ventures 29,736 30,728 58,960
Taxation on distributable earnings - (260) (260)
Dividends from investments in listed
shares 6,900 370 23,783
Net finance cost (190,755) (153,246) (308,443)
Interest income 47,125 35,604 78,263
Interest expense (247,780) (188,850) (386,706)
Interest attributable to
non-controlling interest 9,900 - -
Distribution related expenses (23,254) (21,197) (45,506)
Distribution related income - 10,669 11,631
Antecedent distribution - - 26,029
Distributable earnings 549,038 541,019 1,136,710
Interim 549,038 541,019 566,355
Final - - 570,355
Shares in issue (000) 2,530,689 2,417,482 2,530,689
Weighted number of shares in
issue (000) 2,530,689 2,417,482 2,473,310
Distribution (cps) 21.70 22.38 44.92
Interim 21.70 22.38 22.38
Final - - 22.54
PROPERTY VALUATIONS
The Group's independently valued property portfolio increased by R0,7bn (4.0%) to R17,5bn as at June 2018 (December 2017: R16,8bn). This excludes our share of the Zambian portfolio of
R978,0m, converted at the closing rate of R13.81 (December 2017: R12.36), that has been equity accounted but includes the net investment of R448,5m in respect of acquisitions, developments,
capex and disposals. The like-for-like portfolio held for the full 6 months to June 2018 increased by R202,7m (1.9%) from December 2017.
The capitalisation and discount rates in the Group's like-for-like portfolio at 30 June 2018 calculated on a weighted average basis were:
Sector Capitalisation Discount rate (%) Growth in like-for
rate (%) -like portfolio (%)
30.06.2018 31.12.2017 30.06.2018 31.12.2017 30.06.2018
Industrial 9.3 9.3 15.3 15.3 0.7
Retail 8.7 8.7 14.7 14.7 3.7
Commercial 9.0 9.0 15.0 15.0 0.0
Afhco 10.3 10.3 * * 2.1
Weighted average 9.3 9.3 15.0 15.1 1.9
* Afhco properties are not valued on a discounted cash flow basis, but on the basis of capitalisation of the net income earnings, due to the short term nature of residential leases.
The NAV per share (526 cps) increased by 2.4% (December 2017: 514 cps). The increase is attributable to property valuations, the revaluation of the investment in the JV’s and the swap
revaluation of 2.0%, 0.8% and 0.3%, respectively. Further, the increase of 2.4% is reduced by the foreign adjustments of 0.5% and the incremental dividend of 0.2%.
PROPERTY PORTFOLIO
The portfolio comprised 199 properties (December 2017: 196 and June 2017: 188) which excludes the 3 Zambian properties held as a 50% investment in the JV’s. The sectoral and geographic
spread by value as at 30 June 2018 are set out below.
Sectoral Spread
Retail
R7,3bn
360,605 m2
26 properties
43%
Industrial
R4,8bn
733,992 m2
85 properties
28%
Commercial
R1,0bn
58,327 m2
12 properties
6%
Afhco
R3,7bn
356,405 m2
62 properties
22%
Storage
R0,1bn
23,423 m2
14 properties
1%
Geographic Spread
Gauteng
R10,5bn
961,026 m2
136 properties
62%
KwaZulu-Natal
R5,2bn
409,676 m2
49 properties
31%
Western Cape
R0,7bn
72,501 m2
9 properties
4%
Other
R0,5bn
89,549 m2
5 properties
3%
The above excludes:
1. Development bulk across the Traditional, Afhco and Storage portfolios measuring 183,525m2 comprising 12 properties and valued at R0,4bn.
2. Listed investments of R168,9m.
3. Zambian investment in JV’s valued at R978,0m.
4. Excluding non-controlling interest.
Redevelopment Completed:
Property Total Completion Yield Sector Region
development date forecast
cost(Rm) 1st 12
months
(%)
Cullinan Jewel Shopping 14,5 01/2018 9.0 Retail Gauteng
Centre, Pretoria
Total 14,5 9.0
Committed Redevelopments:
Properties Total Forecast Yield Sector Region
development completion forecast
cost(Rm) date 1st 12
months
(%)
57 Sarel Baard Crescent, 391,0 10/2018 7.9 1 Industrial Gauteng
Centurion
North Park Mall 141,7 03/2019 10.0 Retail/ Gauteng
Residential, Pretoria Residential
252 Montrose Avenue, 92,0 04/2019 10.5 Residential Gauteng
Randburg
Kempton Park Shoprite, 70,9 07/2019 10.5 Retail/ Gauteng
Kempton Park Residential
Cnr Old Pretoria and 140,0 12/2019 10.5 2 Residential Gauteng
Alexandra Roads, Midrand
Afhco pipeline 3 558,3 04/2019 10.8 Retail/ Gauteng
-12/2019 Residential
Total 1 393,9 9.9
Spent to 30 June 2018 271,9
Total unspent 1 122,0
1 Yield of 7.9% based on the pre-development valuation using market rental, which is a negative 40% reversion on the closing rental of
a prior initial 5 year lease renewed for a further 7 year period.
2 Development cost net of proceeds from sale of units.
3 In addition to the above, Afhco's development bulk represents a pipeline of R0,5bn in the next 4 years.
Acquisitions:
Properties Cost Acquisi- Yield Sector Region
(Rm) tion forecast
date 1st 12
months
(%)
Northgate Heights Phase 1E, 6,2 01/2018 10.0 Residential Gauteng
Northgate
Calgro M3 Developments 45,9 02/2018 10.0 Residential Gauteng
- Fleurhof 31, Randburg 1
Calgro M3 Developments 10,7 02/2018 10.0 Residential Western
- Scottsdene Erf 3833 Cape
Buildings 5 & 6,
Scottsdene 1
Calgro M3 Developments 71,7 02/2018 10.0 Residential Gauteng
- South Hills Blocks 1, 3, -05/2018
5, 10-13 & 15, South
Hills 1
The Oaks, Ermelo 105,0 03/2018 10.7 Retail Mpumalanga
Calgro M3 Developments 6,9 04/2018 10.0 Residential Western
- Scottsdene Erf 3837 Cape
Building 11, Scottsdene 1
Northgate Heights Phase 6,8 04/2018 11.0 Residential Gauteng
2A - B, Northgate -05/2018
Calgro M3 Developments 17,0 04/2018 10.0 Residential Gauteng
- Jabulani Lifestyle -05/2018
Phases 1 & 2, Soweto 1
African City Mall Final 32,9 04/2018 11.6 Retail Gauteng
phase, Johannesburg CBD -06/2018
Total 303,1 10.4
1 Represents 51% ownership in the joint initiative.
Contracted and Unconditional Acquisitions:
Properties Cost Acquisi- Yield Sector Region
(Rm) tion forecast
date^ 1st 12
months
(%)
Northgate Heights Phase 2C, 3,4 07/2018 1 11.0 Residential Gauteng
Northgate
Calgro M3 Developments 16,5 07/2018 1 10.0 Residential Gauteng
- South Hills Block 8,
South Hills 3
Calgro M3 Developments 14,1 07/2018 1 10.0 Residential Gauteng
- Jabulani Lifestyle Phase
3, Soweto 3
Calgro M3 Developments 13,8 08/2018 1 10.0 Residential Gauteng
- South Hills Block 9,
South Hills 3
Calgro M3 Developments - 13,3 08/2018 1 10.0 Residential Gauteng
Jabulani Lifestyle Phases
4-5, Soweto 3
Calgro M3 Developments - 30,3 08/2018 1 10.0 Residential Gauteng
South Hills Blocks 6-7 &
14, South Hills 3
Calgro M3 Developments - 8,9 09/2018 10.0 Residential Gauteng
Jabulani Lifestyle Phase
6, Soweto 3
Long Street Precinct bulk 12,2 09/2018 # Residential Gauteng
(Parcels 5-7), Jeppestown
Northgate Heights Phases 11,4 09/2018 11.0 Residential Gauteng
2D - H, Northgate -01/2019
Calgro M3 Developments - 37,7 09/2018 10.0 Residential Gauteng
South Hills Blocks 2, 4 & -10/2019
16, South Hills 3
M&T Development - Etude 165,3 10/2018 10.0 Residential Gauteng
Phases 4-6, Midrand -12/2018
Calgro M3 Developments 228,1 10/2018 10.7 Residential Western
- Belhar 3 -11/2019 Cape
M&T Development - 285,9 02/2019 9.5 Residential Gauteng
Founders Hill 2 -06/2020
Calgro M3 Developments - 116,4 08/2019 10.0 Residential Gauteng
Fleurhof 37, Randburg 3
M&T Development - Menlyn 211,6 06/2021 10.0 Residential Gauteng
East End Development 2,4
Total 1 168,9 10.0
^ Acquisition date represents the expected effective date of the transaction.
# Land/Bulk acquired for development.
1 Transferred during July and August 2018.
2 Represents 60% ownership in the joint initiative.
3 Represents 51% ownership in the joint initiative.
4 SA Corporate has also secured an option to participate in phases 2 & 3 of the development, with an estimated value of R793m and R529m respectively (based on 2020 pricing).
Disposals:
Properties Transfer Gross Exit Sector Region
date selling yield
price on sale
(Rm) price
(%)
Atterbury Décor, Pretoria 01/2018 86,8 8.5 Retail Gauteng
Rhodesdene Shopping Centre, 03/2018 52,0 8.8 Retail Northern
Kimberley Cape
22 Voortrekker Road, 05/2018 78,5 8.8 Commercial Western
Vredenburg Cape
Lebombo Road, Garsfontein 06/2018 12,0 6.2 Commercial Gauteng
(Portion)
21 Pomona Road, Pomona 06/2018 18,3 8.0 Industrial Gauteng
Total 247,6 8.5
Contracted Disposals:
Properties Expected Gross Exit Sector Region
transfer selling yield
date price on sale
(Rm) price
(%)
9/15 Lanner Road, New 07/2018 1 36,0 7.9 Industrial KwaZulu-
Germany # Natal
6 Cedarfield Close, 09/2018 57,0 12.1 2 Industrial KwaZulu-
Springfield Park # Natal
28 Durham Street, 09/2018 86,5 8.8 Commercial Eastern
Mthatha # Cape
1/5 Stockville Road, 09/2018 53,6 7.7 Industrial KwaZulu-
Westmead # Natal
Hotel at Cullinan Jewel 09/2018 2,7 9.0 Retail Gauteng
Shopping Centre, Pretoria
11 Coconut Grove, 09/2018 2,4 7.6 Industrial KwaZulu-
Shakashead # Natal
1 Marconi Street, Montague 09/2018 45,0 8.2 Industrial Western
Gardens Cape
24 Westmead Road, 09/2018 26,0 6.7 Industrial KwaZulu-
Westmead # Natal
40 Electron Avenue, 10/2018 59,7 9.0 Industrial Gauteng
Isando #
Table Bay Industrial Park, 10/2018 118,4 8.3 Industrial Western
Paarden Eiland # Cape
14/24 Mahoganyfield Way, 11/2018 36,0 8.0 Industrial KwaZulu-
Springfield Park Natal
The Mall, Vanderbijl 12/2018 13,6 10.0 3 Afhco Gauteng
Park # Retail
Total 536,9 8.7
# Contracted and unconditional.
1 Transferred.
2 Exit yield in year 2 is 6.8% due to a negative reversion.
3 Exit yield based on head lease rental.
VACANCIES AND LEASE EXPIRIES
Vacancies in terms of rentable area and rental income were as follows:
Sector Vacancy as % of GLA* Vacancy as % of rental income
30.06.2018 30.12.2017 30.06.2017 30.06.2018 30.12.2017 30.06.2017
Traditional
Portfolio:
Industrial 1.2 1.5 1.6 0.9 1.0 1.1
Retail 3.5 3.1 3.9 3.4 3.0 3.2
Commercial 5.7 6.4 6.7 5.5 6.0 5.5
Traditional
Portfolio
total 2.2 2.3 2.6 2.6 2.4 2.5
Storage
Portfolio:
Storage 13.4 16.5 - 20.8 22.9 -
Afhco
Portfolio:
Residential 1 9.4 7.3 8.9 12.1 9.2 8.3
Retail /
Commercial 2 4.5 2.1 1.4 2.6 1.7 2.8
Rest of Africa
Portfolio:
Retail 2.9 2.7 5.5 1.7 1.7 3.3
Commercial 8.6 3 10.7 4.7 6.3 8.0 3.4
Rest of Africa
Portfolio
total 4.1 4.3 5.3 2.7 3.0 3.3
* GLA=Gross lettable area
1 Vacancy calculated on number of units and includes 376 units vacant in the tenanting up phase of the joint initiative with Calgro M3. Excluding the latter, the vacancy would be 5.6%.
2 1.5% of the 4.5% GLA vacancy is low yielding basement and upper level space.
3 Vacancy reduced to 0.0% with tenanting of 4,730m2 to a tier 1 bank from 1 August 2018.
The lease expiry profile and vacancies (by GLA) are set out below:
Sector Vacancy (%) Expiries (%)
Monthly 2018 2019 2020 2021 Thereafter
Traditional Portfolio:
Industrial 1.2 3.3 13.2 18.4 13.3 21.3 29.3
Retail 3.5 10.8 6.6 14.1 17.4 14.2 33.4
Commercial 5.7 9.9 7.5 18.3 20.5 30.0 8.1
Traditional Portfolio
total 2.2 6.0 10.9 17.1 14.9 19.7 29.2
Afhco Portfolio:
Residential 9.4 46.9 21.9 21.8 - - -
Retail / Commercial 4.5 7.2 6.7 14.2 20.5 17.9 29.0
Rest of Africa
Portfolio:
Retail 2.9 - 1.5 33.0 13.1 18.5 31.0
Commercial 8.6 - 4.0 52.6 17.7 10.8 6.3
Rest of Africa
Portfolio total 4.1 - 2.0 36.9 14.0 16.9 26.1
The expiry profile of the Storage sector is not disclosed due to the short term nature of the leases.
TENANT RETENTION, RENTAL REVERSIONS AND ESCALATIONS
The table below reflects the Group's retention ratio, rental reversions and escalations per sector for a rolling 6 month period ending June 2018:
Sector Expiries Retention Retention Rental Escalations
(m2) (m2) (%) reversions (%)
(%)
Traditional Portfolio:
Industrial 81,724 57,850 70.8 (3.1) 7.9
Retail 34,536 29,761 86.2 2.6 7.6
Commercial 3,756 3,212 85.5 (8.5) 7.9
Traditional Portfolio
total 120,016 90,823 75.7 (0.2) 7.8
Afhco Portfolio:
Retail / Commercial 2,977 1,907 64.1 7.9 8.9
No retentions and reversions have been disclosed for the Residential and Storage sectors due to the short term nature of their leases.
BORROWINGS
The debt profile as at 30 June 2018 is detailed below:
Facility Maturity date Value (Rm) Interest Rate (%)
Fixed 5 13.08.2018 200 8.92
Fixed 5 13.08.2018 270 8.87
Fixed 5 13.08.2018 30 8.87
Term revolver 1 29.12.2018 255 8.78
Term revolver 2 24.03.2019 - 8.73
Term revolver 3 01.11.2019 - 8.85
Fixed 15.12.2019 848 9.04
Fixed 03.01.2020 500 8.97
Fixed 13.06.2020 950 9.02
Fixed 4 01.11.2020 373 3.59
Fixed 11.12.2020 500 9.06
Fixed 11.12.2021 500 9.19
Fixed 13.12.2021 550 9.09
Fixed 11.12.2022 1,000 9.25
Amortising 15.04.2024 102 6.88
Total/weighted average 6,078 8.69
1 R750m revolving credit facility partly drawn
2 R200m revolving credit facility undrawn
3 R300m revolving credit facility undrawn
4 $27m US Dollar denominated loan
5 Subsequent to the reporting period, the maturity date was extended to 13 November 2018.
The loan to value (“LTV”) has increased from 32.4% at 31 December 2017 to 33.1% as at 30 June 2018.
The weighted average cost of debt, excluding and including the cross currency swaps, was 8.69% and 8.46%, respectively. The weighted average swap margin was 0.25% and a weighted
average debt margin is 1.70%.
The weighted average tenor of loans including the cross currency swaps is 2.2 years. This includes debt expiring in 2018, without which the tenor would be 2.6 years.
STRATEGY AND PROSPECTS
With pedestrian South African economic growth prospects, SA Corporate will be focusing on the following activities to ensure sustainable distribution growth into the future:
- Consolidating a quality industrial property portfolio. The Company will continue to dispose of those properties that do not meet investment criteria whilst investing in
existing properties providing superior logistics space to tenants with covenant strength.
- Divesting from its remaining commercial properties given the continued weak prospects for this sector.
- Concentrating the Company's retail property portfolio on food services and convenience to be defensive against the rising competition to “bricks and mortar” retail emanating from e-commerce.
- Establishing a quality residential rental portfolio to offer investors diversification to other South African property sectors.
The Company has experienced more challenging trading conditions than those forecast at the beginning of 2018. In particular these have included an almost doubling of the ground rentals
payable to Transnet in respect of leasehold properties in Maydon Wharf, renewal of historic long leases to blue chip logistics tenants with greater negative reversions than expected,
downscaling by a large national retail tenant, reduced retail turnover rental and greater than forecast municipal charges in the Johannesburg residential portfolio. Based on the
aforementioned the Board's view is that the distribution growth forecast for the second half of 2018 will not be realised and a similar negative decline in distribution growth can be
anticipated in the second half of 2018 as has been the case in the first half of the financial year.
As at As at As at
CONDENSED CONSOLIDATED STATEMENT 30.06.2018 30.06.2017 31.12.2017
OF FINANCIAL POSITION (R000) Unaudited Unaudited Audited
Assets
Non-current assets 18,718,734 16,324,376 17,340,262
Investment property 16,712,130 15,074,677 15,712,340
Letting commissions and tenant
installations 44,188 51,941 48,187
Investment in joint ventures 978,012 830,403 847,033
Property, plant and equipment 15,408 10,148 16,703
Intangible assets 81,904 81,904 81,904
Swap derivatives 278,252 14,017 138,849
Rental receivable - straight line
adjustment 252,985 219,862 191,348
Listed shares 168,920 - 170,260
Other financial assets 61,679 41,424 2,611
Loans to developers 125,132 - 131,027
Deferred taxation 124 - -
Current assets 1,041,980 1,241,201 1,160,363
Trade and other receivables 423,940 428,762 351,250
Other financial assets 109,969 11,795 215,795
Swap derivatives 26,821 5,394 12,609
Rental receivable - straight line
adjustment 40,495 47,603 40,509
Loans to developers 271,887 589,056 263,894
Taxation receivable 1,055 837 852
Cash and cash equivalents 167,813 157,754 275,454
Non-current assets held for sale 537,116 283,340 890,271
Properties classified as held for
disposal 535,221 282,400 888,736
Letting commissions and tenant
installations 1,895 940 1,535
Total assets 20,297,830 17,848,917 19,390,896
Share capital, reserves and liabilities
Share capital and reserves 13,313,092 12,350,973 13,008,861
Non-current liabilities 5,762,235 3,990,988 4,821,772
Interest bearing borrowings - Local 5,220,951 3,860,009 4,481,806
Interest bearing borrowings - Foreign 83,634 103,823 93,605
Swap derivatives 292,486 19,748 154,554
Loan from non-controlling shareholder 165,164 - 90,191
Deferred taxation - 7,408 1,616
Current liabilities 1,222,503 1,506,956 1,560,263
Trade and other payables 425,124 327,799 349,073
Interest bearing borrowings - Local 755,314 1,152,000 1,175,357
Interest bearing borrowings - Foreign 18,481 17,019 17,019
Swap derivatives 23,584 10,138 18,474
Taxation payable - - 340
Total share capital, reserves and
liabilities 20,297,830 17,848,917 19,390,896
6 months 6 months Year
ended ended ended
CONDENSED CONSOLIDATED STATEMENT 30.06.2018 30.06.2017 31.12.2017
OF COMPREHENSIVE INCOME (R000) Unaudited Unaudited Audited
Revenue 1,170,441 1,043,350 2,113,844
Income 1,226,425 1,089,993 2,225,341
Rent 834,188 724,983 1,509,933
Straight line rental adjustment 44,146 45,062 31,387
Recovery of property expenses 292,107 273,305 572,524
Interest income 47,125 35,604 78,263
Dividends from investments in listed
shares 8,859 370 16,138
Other group income - 10,669 17,096
Expenses (676,546) (545,787) (1,166,172)
Audit fees (1,671) (1,517) (3,276)
Administrative fees (33,605) (29,404) (60,631)
Depreciation (3,197) (1,683) (4,126)
Interest expense (247,780) (188,850) (386,706)
Property expenses (341,069) (287,595) (628,377)
Property administration fees (49,224) (36,738) (83,056)
Operating income 549,879 544,206 1,059,169
Capital (loss)/profit on disposal of
investment properties and property,
plant and equipment (3,664) 2,058 (8,430)
Foreign exchange adjustments (61,351) 17,974 37,176
Profit from joint ventures 37,290 58,234 121,333
Revaluation of investment properties
and listed shares 213,905 273,077 372,925
- Revaluations 258,051 318,139 404,312
- Straight line rental adjustment (44,146) (45,062) (31,387)
Revaluation of swap derivatives 34,202 (41,286) (52,380)
Profit before taxation 770,261 854,263 1,529,793
Taxation 1,740 (9,166) (3,656)
Profit after taxation 772,001 845,097 1,526,137
Other comprehensive income, net of
taxation - - -
Items that may be reclassified to
profit or loss
Foreign exchange adjustments on
investment in joint ventures 102,402 (43,141) (88,018)
Total comprehensive income 874,403 801,956 1,438,119
Profit attributable to:
Owners of the company 772,310 845,097 1,525,629
Non-controlling interest (309) - 508
Profit after taxation 772,001 845,097 1,526,137
Earnings and diluted earnings per share 30.51 34.96 61.68
6 months 6 months Year
ended ended ended
CONDENSED CONSOLIDATED STATEMENT OF 30.06.2018 30.06.2017 31.12.2017
CHANGES IN EQUITY (R000) Unaudited Unaudited Audited
Share capital and reserves at the
beginning of the period 13,008,861 12,070,009 12,070,009
Total comprehensive income for the
period 874,403 801,956 1,438,119
Shares issued - - 568,569
Treasury shares repurchased (1,971) (10,072) (10,071)
Vesting of treasury shares - 8,207 -
Antecedent distribution - - 26,029
Share-based payment reserve 2,155 2,654 4,340
Distribution attributable to
shareholders (570,356) (521,781) (1,088,134)
Share capital and reserves at the
end of the period 13,313,092 12,350,973 13,008,861
6 months 6 months Year
ended ended ended
CONDENSED CONSOLIDATED STATEMENT 30.06.2018 30.06.2017 31.12.2017
OF CASH FLOWS (R000) Unaudited Unaudited Audited
Operating profit before working
capital changes 735,650 661,670 1,374,678
Working capital changes 11,344 (19,032) 17,230
Cash generated from operations 746,994 642,638 1,391,908
Operating activities changes (791,293) (700,471) (1,450,793)
Interest received 44,981 35,650 78,415
Interest paid (265,375) (214,091) (440,868)
Taxation paid (543) (249) (206)
Distributions paid (570,356) (521,781) (1,088,134)
Net cash outflows from operating
activities (44,299) (57,833) (58,885)
Net cash outflows from investing
activities (407,792) (524,276) (1,736,245)
Net cash inflows from financing
activities 344,450 548,483 1,879,204
Increase in borrowings 271,448 550,348 1,204,486
Issue of new shares - - 594,598
Treasury shares repurchased (1,971) (10,072) (10,071)
Loan from non-controlling shareholder 74,973 - 90,191
Vesting of treasury shares - 8,207 -
Net (decrease)/increase in cash and
cash equivalents (107,641) (33,626) 84,074
Cash and cash equivalents at the
beginning of period 275,454 191,380 191,380
Cash and cash equivalents at the end
of period 167,813 157,754 275,454
NOTES
The condensed consolidated interim financial statements are prepared in accordance with the JSE Limited Listings Requirements, IAS 34 Interim Financial Reporting, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council and the requirements of the Companies
Act of South Africa. The accounting policies applied in the preparation of these interim financial statements are in terms of International Financial Reporting Standards and are
consistent with those applied in the previous annual financial statements. In the current year the Group has adopted all of the revised Standards and Interpretations issued that are
relevant to its operations and effective for accounting periods beginning on or after 1 January 2018. The adoption of these Standards and Interpretations has not resulted in any
adjustment to the amounts previously reported for the year ended 31 December 2017. The results and prospects have been compiled under the supervision of AM Basson CA(SA), the
financial director, but have not been audited nor reviewed by the Group's auditors, Deloitte & Touche.
1. Reconciliation of profit after tax to headline earnings and distributable earnings attributable to shareholders
6 months 6 months Year
ended ended ended
30.06.2018 30.06.2017 31.12.2017
Unaudited Unaudited Audited
R 000 cps R 000 cps R 000 cps
Profit after taxation
attributable to
shareholders 772,310 30.52* 845,097 34.96* 1,525,629 61.68*
Adjustments for:
Capital loss/(profit) on
disposal of investment
properties and property,
plant and equipment 3,664 (2,058) 8,430
Revaluation of
investment properties
and joint ventures (220,870) (317,111) (475 794)
Headline earnings 555,104 21.93* 525,928 21.76* 1,058,265 42.79*
Antecedent distribution - - 26,029
Taxation on
distributable income (1,740) 8,906 3,396
Depreciation 3,197 1,683 4,126
Foreign exchange
adjustments 61,833 (17,974) (37,176)
Dividend from
investment in listed
shares not yet declared (1,959) - 7,645
Revaluation of listed
shares 1,340 13,860 34,540
Non-distributable expenses 9,341 12,010 18,401
Revaluation of swap
derivatives (34,202) 41,286 52,380
Straight line rental
adjustment (44,146) (45,062) (31,387)
Non-distributable
expenses on investment
in joint ventures 270 382 491
Distributable earnings
attributable to
shareholders 549,038 21.70 541,019 22.38 1,136,710 44.92
Interim 549,038 21.70 541,019 22.38 566,355 22.38
Final - - - - 570,355 22.54
* calculated on weighted number of shares in issue and excludes non-controlling interest.
2. Primary operational segments for the 6 months ended 30.06.2018 (R000)
Business Industrial Retail Commer- Afhco Storage Group
segment cial
Revenue 345,465 470,889 59,660 283,644 10,783 1,170,441
Rental income
(excluding
straight line
rental
adjustment) 259,211 281,616 47,577 235,033 10,751 834,188
Net property
expenditure (15,994) (3,560) (9,961) (62,517) (6,154) (98,186)
Property
expenses (73,214) (176,048) (24,040) (110,805) (6,186) (390,293)
Recovery of
property
expenses 57,220 172,488 14,079 48,288 32 292,107
Net property
income 243,217 278,056 37,616 172,516 4,597 736,002
Straight line
rental adjustment 29,034 16,785 (1,996) 323 - 44,146
Net interest
expense - - - - - (200,655)
Dividends from
investments in
listed shares - - - - - 8,859
Foreign exchange
adjustments - - - - - (61,351)
Group expenses - - - - - (38,473)
Profit from
investments in
joint ventures - - - - - 37,290
Revaluation of
investment
properties 37,555 111,983 (1,448) 65,529 1,626 215,245
Investment
properties 66,589 128,768 (3,444) 65,852 1,626 259,391
Straight line
rental
adjustment (29,034) (16,785) 1,996 (323) - (44,146)
Revaluation of
swap derivatives - - - - - 34,202
Revaluation of
investment in
listed shares - - - - - (1,340)
Capital loss on
disposal of
investment
properties and
property, plant
and equipment - - - - - (3,664)
Taxation - - - - - 1,740
Profit after
taxation 309,806 406,824 34,172 238,368 6,223 772,001
Other
comprehensive
income, net of
taxation - - - - - 102,402
Total
comprehensive
income 309,806 406,824 34,172 238,368 6,223 874,403
Profit after
taxation
attributable to:
Owners of the
company 309,806 406,824 34,172 238,677 6,223 772,310
Non-controlling
interest - - - (309) - (309)
Total profit
after taxation 309,806 406,824 34,172 238,368 6,223 772,001
Other Industrial Retail Commer- Afhco Storage Group
information cial
Properties
(excluding
straight line
rental
adjustment): 4,832,171 7,360,575 999,900 4,228,850 119,335 17,540,831
Non-current
investment
property 4,292,889 7,209,406 894,489 4,196,011 119,335 16,712,130
At valuation 4,086,059 6,623,275 858,300 3,864,650 119,335 15,551,619
Straight line
rental
adjustment (105,161) (150,169) (18,911) (19,239) - (293,480)
Under
development 311,991 736,300 55,100 350,600 - 1,453,991
Non-current
investment
property held
for sale 429,456 1,000 85,426 13,171 - 529,053
Classified as
held for
disposal 434,121 1,000 86,500 13,600 - 535,221
Straight line
rental
adjustment (4,665) - (1,074) (429) - (6,168)
Other assets 184,777 359,475 51,999 80,915 12,617 3,056,647
Total assets 4,907,122 7,569,881 1,031,914 4,290,097 131,952 20,297,830
Total
liabilities 67,096 147,862 25,330 419,103 6,348 6,984,738
Acquisitions and
improvements 17,585 211,707 15,744 449,469 1,641 696,146
Segmental Industrial Retail Commer- Afhco Storage1 Group
growth rates cial
(%)
Rental income
(excluding straight
line rental
adjustment) 1.9 3.7 (0.6) 55.4 n/a 15.1
Property expenses 7.7 13.4 (1.3) 44.5 n/a 20.3
Recovery of
property expenses 23.0 4.1 (8.0) 5.4 n/a 6.9
Net property
income 4.5 (1.4) (3.1) 43.3 n/a 9.2
Above table reflects the position inclusive of the non-controlling interest.
1 The Storage portfolio has no comparatives as it became operational on 1 July 2017.
3. Fair value measurement
The swap derivatives are valued based on the discounted cash flow method. Future cash flows are estimated based on forward exchange and interest rates (from observable yield curves
at the end of the reporting period) and contract interest rates, discounted at a rate that reflects the credit risk. The investment in listed shares is valued at the quoted market
price. The investment in JV’s is valued at the ownership of the underlying JV’s net asset value. The fair value of the investment property is determined by an independent registered valuer.
The fair value of the industrial, retail, commercial and storage portfolio of investment properties, excluding properties subject to unconditional contracted sales, is based on the
discounted cash flow method. The fair value of the inner-city retail, residential and commercial investment properties is based on the capitalisation of the net income earnings.
The discounted cash flow method is not appropriate due to the short term nature of the portfolio's leases.
The financial instruments are grouped into levels 1 to 3 based on the degree to which the fair value is observable. The table below analyses assets that are measured at fair value.
Investments in listed shares Level 1
Swap derivatives Level 2
Investment in JV’s Level 3
Investment property Level 3
There were no transfers between the levels.
4. Capital commitments
The Group had capital commitments of R 2 372,2m (December 2017: R2 619,6m).
5. Dividends and events after the reporting period
The Company has declared a distribution of 21.70 cps on 4 September 2018. The directors are not aware of other significant events between the end of the financial period under review and
the date of this report.
DISTRIBUTION DECLARATION AND IMPORTANT DATES
Notice to shareholders resident South Africa
Notice is hereby given of the declaration of distribution no.7 in respect of the income distribution period 1 January 2018 to 30 June 2018. The distribution amounts to 21.70 cps. The source
of the distribution comprises net income from property rentals and interest earned on cash investments. Please refer to the statement of comprehensive income for further details. As SA Corporate
has REIT status, shareholders are advised that the distribution 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 distributions on SA Corporate shares will be deemed to be dividends, for South African tax purposes, in terms of section 25BB of the Income Tax Act. The distributions received by or accrued to South
African tax residents must be included in the gross income of such shareholders and are not 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 they are dividends distributed by a REIT, with the effect that the distribution is taxable in the hands of the shareholder.
These distributions are, however, exempt from dividend withholding tax in the hands of South African tax resident shareholders, provided that the South African resident shareholders have provided the
following forms to their CSDP or broker, as the case may be, in respect of uncertificated shares, or the transfer secretaries, in respect of certificated shares: a) a declaration that the distribution
is exempt from dividends tax; and b) a written undertaking to inform the CSDP, broker or the transfer secretaries, as the case may be, should the circumstances affecting the exemption change or the
beneficial owner ceases to be the beneficial owner, both in the form prescribed by the Commissioner for the South African Revenue Service. SA Corporate shareholders are advised to contact the CSDP,
broker or transfer secretaries, as the case may be, to arrange for the abovementioned documents to be submitted prior to payment of the distribution, if such documents have not already been submitted.
Notice to non-resident shareholders
Distributions 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. It should be noted that until 31 December 2013 distributions received by non-residents from a REIT were not subject to dividend withholding tax.
From 22 February 2017, any distribution received by a non-resident from a REIT is 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.
Assuming dividend withholding tax will be withheld at a rate of 20%, the net dividend amount due to non-resident shareholders is 17.3600 cps. A reduced dividend withholding rate, in terms of the applicable
DTA, may only be relied on if the non-resident shareholders has provided the following forms to the CSDP or broker, as the case may be, in respect of uncertificated shares, or the transfer secretaries,
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 the CSDP, broker or the transfer secretaries, as the case may be,
should the circumstances affecting the reduced rate change or the beneficial owner ceases 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 the CSDP, broker or the transfer secretaries, as the case may be, to arrange for the abovementioned documents to be submitted prior to payment of the
distribution if such documents have not already been submitted, if applicable. 2,530,689,337 SA Corporate shares are in issue at the date of this distribution declaration and SA Corporate's income tax
reference number is 9179743191.
Last date to trade cum distribution Tuesday, 2 October 2018
Shares will trade ex-distribution Wednesday, 3 October 2018
Record date to participate in the distribution Friday, 5 October 2018
Payment of distribution Monday, 8 October 2018
Share certificates may not be dematerialised or re-materialised between Wednesday, 3 October and Friday, 5 October 2018 both days inclusive.
By order of the Board
DIRECTORATE AND STATUTORY INFORMATION
Registered office
South Wing, First Floor
Block A
The Forum
North Bank Lane
Century City
7441
Tel 021 529 8410
Registered auditors
Deloitte & Touche
1st Floor
The Square
Cape Quarter
27 Somerset Road
Cape Town
8005
Transfer secretaries
Computershare Investor Services (Pty) Ltd
Rosebank Towers
15 Biermann Avenue
Rosebank
2196
Sponsor
Nedbank Corporate and Investment Banking, a division of Nedbank Limited
135 Rivonia Road
Sandton
2196
Directors: J Molobela (Chairman), TR Mackey (Managing)*, AM Basson (Finance)*, RJ Biesman-Simons, A Chowan, GP Dingaan, EM Hendricks, MA Moloto, ES Seedat
* Executive
Kilgetty Statutory Services Proprietary Limited
Company Secretary
4 September 2018
Date: 04/09/2018 05:10:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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