Wrap Text
Summarised group results for the year ended 31 December 2020
LIBERTY TWO DEGREES LIMITED
(Registration number: 2018/388906/06)
JSE share code: L2D
ISIN: ZAE000260576
("L2D" or "the Company")
SUMMARISED GROUP RESULTS
for the year ended 31 December 2020
Consistently applied prudent capital management strategy, supported by quality assets, delivers value
DISTRIBUTION PAY-OUT OF
32.33 cents per share
(FY19: 60.43 cents per share)
AFTER MATERIAL COVID-19 IMPACT
BALANCE SHEET STRENGTH
Loan-to-value
20.5% (FY19: 16.1%)
SANDTON CITY RECEIVED A 6-STAR GREEN RATING
FIRST GREEN STAR RATED RETAIL PORTFOLIO
IN SOUTH AFRICA
RETAIL OCCUPANCIES HIGH AT
95.3%
ABOVE TOLERANCE LEVEL OF 95%
RECOVERY IN Q4 2020 IS ENCOURAGING
Q1 2020 Q2 2020 Q3 2020 Q4 2020
FOOTCOUNT -7% -61% -33% -21%
TURNOVER -6% -54% -22% -9%
Financial results Audited Audited
31 December 31 December
R'000 2020 2019 % Change
Revenue 878 769 999 189 (12.1%)
Net property income 377 272 693 552 (45.6%)
Profit from operations 342 355 668 814 (48.8%)
Net interest expense (146 909) (145 048) 1.3%
Profit before fair value adjustments 195 446 523 766 (62.7%)
(Loss)/profit before tax (1 524 440) 534 676 >100%
Headline earnings 227 083 523 581 (56.6%)
Basic and diluted (loss)/earnings per share (cents) (164.59) 58.96 >100%
Headline earnings per share (cents) 25.04 57.76 (56.6%)
Distribution per share (cents) 32.33 60.43 (46.5%)
Net asset value per share (Rand)(1) 7.71 9.65 (20.1%)
(1) R1.7 billion of property valuation write-downs in 2020, (approximately 16.3% of our portfolio value)
contributed to the 20.10% decrease in the net asset value.
Introduction
COVID-19 has undoubtedly changed many aspects of our lives permanently.
In a year unlike any we have faced before, we are pleased to report that L2D
was able to deliver value to stakeholders despite the challenging context.
The strength of our balance sheet, the premium quality of our assets and the
passion of our people are the ingredients that have helped us contain and
mitigate the risks.
Good progress was made on our long-term strategic commitment to
value-accretive Environmental, Social and Governance (ESG) practices
designed to support our recovery and growth, now and into the future.
In 2020, our portfolio turnover reflected the effects of the lockdowns, with
good performance in January and February 2020, followed by minimal
trading activity during the hard lockdown in the second quarter, and a
gradual recovery in quarter three as the lockdown restrictions eased.
Encouragingly, quarter four demonstrated a strong resurgence, with our
portfolio turnover only 9% less than turnover recorded prior to COVID-19
(for the three months ended December 2019). Sandton City's turnover in
December 2020 was down only 1.5% compared to the same period in 2019.
This highlights the relevance of quality super regional centres in optimal
locations, complemented by an appropriate and diverse tenant mix
addressing customer needs and supporting customer experience. It also
illustrates that consumer spend was not only captured by neighbourhood
centres as a shopping format. This was also further substantiated by the fact
that although footfall for the year was down approximately 30%, the total
amount spent by customers was down 20% which indicates the increased
spend per customer.
The Board has approved a full year distribution of 32.33 cents per share
(31 December 2019: 60.43 cents per share) despite the material impact of
the COVID-19 lockdown on revenue, in particular amongst our hospitality
tenants, and rental relief and additional provisioning for expected
credit losses.
Prospects
Our focus going forward will be on positioning L2D for a sustainable
recovery through volatile circumstances. While it will take time to recover,
we believe we are well positioned to leverage these opportunities with
agility. In a challenging environment, we have quality fundamentals in place,
with strong assets, sufficient liquidity and headroom in our loan-to-value
(LTV) ratio.
Our robust portfolio has contributed to retail occupancies remaining high
at 95.3%, in excess of the 95% tolerance level in pre-COVID-19 times.
We are encouraged by the early signs of recovery in tenant turnover levels
as lockdown restrictions eased. We remain focused on understanding the
operating context and consumers' preferences, deftly adapting to change.
As we navigate the current crisis, we know that long-term investments
that protect value must be maintained. We believe that our commitment
to invest in our assets underpins and enables our financial and operational
performance by ensuring our portfolio remains relevant. The business
focus remains on the "new ABC of rebuilding for growth" elements which
are agility, back to basics in building strong property fundamentals and
continue to invest in the communities in which we operate.
Balance sheet strength
As at 31 December 2020, L2D remains well capitalised, with sufficient
liquidity and well within bank covenants with an LTV of 20.5% (31 December
2019: 16.1%) reflecting our prudent approach towards capital management,
and the underlying quality of our portfolio. Our interest cover ratio remains
healthy at 3.9x, with 82% of debt effectively hedged. Furthermore, our
average cost of debt remains low at 7.89%. The total unutilised revolving
credit facilities amount to R509 million as at 31 December 2020.
Net interest expense is up in comparison to the prior year and was impacted
by an additional R200 million of term debt introduced. Proceeds from the
sale of the Century City offices had been applied toward our revolving
credit facilities.
Tenant support
Throughout the crisis, our focus has remained on responding with empathy,
balancing the need to support our tenants who have been severely affected
by the crisis, with the need to protect the sustainability of our business.
Our goal is to ensure our assets remain fully let and trading, while we do
everything in our power to keep our spaces safe for our stakeholders.
As such, rental relief has been provided on a pragmatic basis in line with the
Property Industry Group guidelines.
The tenant arrears have increased to R96.4 million as at 31 December 2020
(31 December 2019: R30.8 million). Given the environment our default
percentages for credit loss provisions have increased, coupled with larger
arrears positions the Expected Credit Loss (ECL) provision has increased to
R57.5 million as at 31 December 2020 (31 December 2019: R9.8 million).
Positively, rental collections have progressively improved in the latter half of
the year with gross collections, based on contractual monthly billings before
rental relief, at 97% for November 2020 and 120% for December 2020.
This is as a result of the collection of arrears due that were settled following
the finalisation of rental relief agreements.
The approach to tenant support has allowed us to not only respond
with agility in the short term, but to plan and respond to the longer term
consequences of the pandemic, and its effects on consumer behaviour.
Operational performance
Footfall and parking performance remain two key indicators to
understanding the behaviour of our customers. In reviewing the quarterly
footfall experience at L2D malls, it is evident how the lockdown levels
impacted the customer return rate. The overall footcount for 2020 was
30.2% down from 2019, with the last quarter improving from a 60.8%
decrease in quarter two (when the most severe lockdown was in place) to a
21.4% decrease from 2019.
From the outset, our focus has remained on ensuring our malls remained
safe and secure for our stakeholders - upholding the highest standards of
hygiene, care and security. We have been awarded COVID-19 compliant
ratings for all our malls by the SAFE asset group. In addition, all our malls
received gold excellence status for overall operational performance, and
Sandton City achieved a 93.8% rating for security, which is now the highest
in the world. Following our commitment to have all our malls Green Star
rated, we are pleased to confirm that Sandton City received a 6-star rating;
with Eastgate Complex, Nelson Mandela Square, Promenade Shopping
Centre and Midlands Mall receiving a 5-star rating, and Botshabelo Mall
achieving a 4-star rating - the first retail portfolio in South Africa to
achieve this.
L2D's reported revenue and net property income (NPI) decreased by
12.1% and 45.6% respectively in comparison to the prior year. The NPI of
R377.2 million for the year ended 31 December 2020 (31 December 2019:
R693.6 million) was significantly impacted by COVID-19 related rental relief
of R112 million provided to tenants, the impact of the hotels and convention
centre operations being suspended for a large part of the year, lower
parking revenue and additional provisioning for an increase in tenant arrears
as well as the expected non-recovery of certain debtor balances most
notably related to Edcon.
Profit from operations decreased by 48.8%. Operating costs have
increased by R2.6 million compared to the prior year due to an increase in
professional fees and employee costs which was partially offset by a saving
of R3.6 million in relation to staff shares that will not vest as a result of
performance conditions not being met as well as a reduction in the bonus
provision. The write down in the property valuations as well as the negative
mark to market adjustment on the interest rate swap of R43.5 million
has resulted in the loss before taxation of R1.5 billion for the year ended
31 December 2020 (2019: profit before taxation of R534.7 million).
At 31 December 2020, L2D's 100% South African property portfolio was
valued at R8.5 billion (2019: R10.1 billion) and the net asset value per share
has decreased from R9.65 as at December 2019 to R7.71 as at December
2020. Our risk management remains strong, and we believe that we have the
necessary management actions in place to continue to mitigate and manage
our risks sufficiently. With regard to our property valuations, independent
valuations were performed and write-downs of R1.7 billion were recognised
in 2020, approximately 16.3% of our portfolio value, contributing to the
20.10% decrease in the net asset value. The property valuations have
been negatively impacted by inter alia, the negative effect of COVID-19 on
current year rentals and growth assumptions for the forecasted period,
higher vacancies, the likelihood of negative reversions for lease renewals
and the expectation that letting currently vacant space will take a longer
time period.
While our commitment to quality predates the pandemic, we have long
maintained that the superiority of our assets and offering are key drivers in
fostering customer loyalty, and is thus a determinant in whether customers
will return to the malls.
Declaration of cash distribution
The Board has approved and notice is hereby given of a distribution
of 32.33 cents per share for the year ended 31 December 2020
(the distribution).
The distribution is payable to L2D shareholders in accordance with the
timetable set out below.
2021
Last date to trade cum dividend Tuesday, 16 March
Shares trade ex dividend Wednesday, 17 March
Record date Friday, 19 March
Payment date Tuesday, 23 March
L2D uses distribution per share as a relevant measure of financial
performance.
Share certificates may not be dematerialised or rematerialised between
Wednesday, 17 March 2021 and Friday, 19 March 2021, both days inclusive.
Payment of the distribution will be made to shareholders on Tuesday,
23 March 2021. In respect of dematerialised shares, the distribution will
be transferred to the Central Securities Depository Participant (CSDP)
accounts/broker accounts on Tuesday, 23 March 2021. Certificated
shareholders' dividend payments will be posted on or about Tuesday,
23 March 2021.
Shares in issue at the date of declaration of this distribution: 908 443 335.
L2D's income tax reference number: 9178869237.
In accordance with L2D's status as a REIT, 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 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 distribution 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 distribution distributed by a REIT. This distribution
is, however, exempt from dividend withholding tax in the hands of South
African tax resident shareholders, provided that the South African resident
shareholders provide 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 declaration that the distribution is exempt from dividends tax; and
- a written undertaking to inform the CSDP, broker or the company, as the
case may be, should the circumstances affecting the exemption change
or the beneficial owner 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 abovementioned documents to be
submitted prior to payment of the distribution, if such documents have
not already been submitted.
Distributions received by non-resident shareholders will not be taxable as
income and instead will be treated as an ordinary dividend which is exempt
from income tax in terms of the general dividend exemption in section 10(1)
(k)(i) of the Income Tax Act.
Assuming dividend withholding tax will be withheld at a rate of 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, the net dividend amount due to non-resident
shareholders is 25.8640 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 declaration that the distribution is subject to a reduced rate as a result
of the application of a DTA; and
- 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 abovementioned
documents to be submitted prior to payment of the distribution if such
documents have not already been submitted, if applicable.
Any forward looking statements have not been reviewed or reported on by
L2D's auditors.
On behalf of the Board of Directors
Angus Band Amelia Beattie Jose Snyders
Chairman Chief Executive Financial Director
22 February 2021
The full long-form announcement is available at: https://senspdf.jse.co.za/documents/2021/jse/isse/l2de/FY_20.pdf
The annual financial statements including the audit opinion which sets out the key audit matters and the basis
for the unqualified opinion is available at: https://www.liberty2degrees.co.za/investors/results-centre/
The contents of this short-form announcement are the responsibility of the Board of Directors of L2D.
This short-form announcement is only a summary of the information in the full announcement and does not
contain full or complete details. Any investment decisions made by investors and/or shareholders should
be based on consideration of the full announcement as a whole. Shareholders are encouraged to review the
full announcement which is available on SENS and on L2D's website. The full announcement is also available
on request at: investors@liberty2degrees.co.za or from the sponsor at: JSESponsor@standardbank.co.za from
Monday, 22 February 2021.
Sponsor
The Standard Bank of South Africa Limited
Date: 22-02-2021 08:00:00
Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct,
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
information disseminated through SENS.
Sharenet Sites 
