Wrap Text
Summarised Audited Results For The Group For The Year Ended 30 June 2018
ORION REAL ESTATE LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1997/021085/06)
Share Code: ORE ISIN: ZAE000201695
("Orion Real Estate” or “the Company” or “the Group”)
SUMMARISED AUDITED RESULTS FOR THE GROUP
FOR THE YEAR ENDED 30 JUNE 2018
Condensed Group Statement of Financial Position as at 30 June 2018
Audited Restated Restated
Figures in Rand 30-Jun 30-Jun 30-Jun
2018 2017 2016
ASSETS
Investment property 741 000 000 733 984 000 802 883 351
Property, plant and equipment 4 996 496 5 561 364 5 489 604
Deferred tax asset - 651 151 -
Total non-current assets 745 996 496 740 196 515 808 372 955
Loans to related parties 264 696 1 147 196 12 271 910
Loans to shareholders 47 347 803 38 832 525 10 959 262
Consumables - 7 017 7 017
Trade and other receivables 18 025 697 29 432 459 60 271 664
Cash and cash equivalents 1 861 951 2 729 167 10 684 674
Total current assets 67 500 147 72 148 364 94 194 527
Investment properties held for sale - 8 400 000 4 500 000
Total assets 813 496 643 820 744 879 907 067 482
EQUITY AND LIABILITIES
Capital and reserves
Issued capital 114 336 674 114 336 674 114 336 674
Retained earnings 494 152 797 482 853 056 507 278 659
Total equity attributable to owners of the parent 608 489 471 597 189 730 621 615 333
Non-controlling interest (289 732) (291 068) (287 431)
Total equity 608 199 739 596 898 662 621 327 902
Borrowings 11 960 985 47 055 436 151 148 521
Deferred tax liabilities 1 189 515 - 1 006 350
Total non-current liabilities 13 150 500 47 055 436 152 154 871
Current income tax liabilities 14 918 211 12 486 565 8 269 251
Loans from directors 18 508 18 508 403 529
Loans from related parties - 20 096 21 264
Tenant deposits 6 720 520 6 984 890 6 994 110
Trade and other payables 50 329 487 54 440 417 100 101 583
Borrowings 118 240 470 100 841 039 14 764 174
Bank overdraft 1 919 208 1 999 266 3 030 798
Current liabilities 192 146 404 176 790 781 133 584 709
Total liabilities 205 296 904 223 846 217 285 739 580
Total equity and liabilities 813 496 643 820 744 879 907 067 482
Condensed Statement of Comprehensive Income
Audited Restated Restated
Figures in Rand 30-Jun 30-Jun 30-Jun
2018 2017 2016
Revenue 87 982 847 90 311 864 81 995 484
Other income 13 997 302 6 952 559 2 472 052
Administration expenses (36 725 509) (43 380 174) (3 451 509)
Property related expenses (46 286 125) (35 086 034) (82 984 066)
Impairment on Investment in Elma Park - (30 424 170) -
Fair value adjustment 8 707 165 19 626 093 22 944 906
Operating profit before interest 27 675 680 8 000 138 20 976 867
Finance income 6 608 776 9 898 165 6 785 165
Finance costs (15 341 374) (19 014 512) (25 192 635)
Profit before taxation 18 943 082 (1 116 209) 2 569 397
Taxation (4 176 963) (3 146 407) 316 450
Profit for the year 14 766 119 (4 262 617) 2 885 847
Other comprehensive income - - -
Total comprehensive income for the year 14 766 119 (4 262 617) 2 885 847
Profit/(Loss) and total comprehensive income/(loss) for the year attributable to:
Owners of the parent 14 764 783 (4 258 980) 2 886 345
Non-controlling interest 1 336 (3 637) (498)
14 766 119 (4 262 617) 2 885 847
Earnings per share
Basic earnings per share (cents) 2.35 (0.68) 0.46
Diluted earnings per share (cents) 2.35 (0.68) 0.46
Headline earnings per share (cents) 1.48 0.97 (2.65)
Condensed Statements of Changes in Equity
Non-
Retained
Figures in Rand Issued capital Total controlling Total equity
earnings
Interest
Balance at 30 June 2015 114 336 674 504 392 314 618 728 988 (286 933) 618 442 055
Prior period error - 811 798 811 798 - 811 798
Total comprehensive
- 2 074 547 2 074 547 (498) 2 074 049
income for the year
Balance at 30 June 2016 114 336 674 507 278 659 621 615 333 (287 431) 621 327 902
Prior period error - 2 815 360 2 816 350 - 2 816 350
Total comprehensive
- (7 074 340) (7 074 340) (3 637) (7 077 977)
income for the year
Dividends paid - (20 167 613) (20 167 613) - (20 167 613)
Balance at 30 June 2017
114 336 674 482 853 056 597 189 730 (291 068) 596 898 662
as restated
Prior period error - (3 465 042) (3 465 042) - (3 465 042)
Dividends declared * - - - - -
Total comprehensive
- 14 764 783 14 764 783 1 336 14 766 119
income for the year
Balance at 30 June 2018
114 336 674 494 152 797 608 489 471 (289 732) 608 199 739
as restated
* In line with IAS10 events after reporting period, the declaration of the dividend occurred after the end of the reporting
period, resulting in a non-adjusting event that is not recognised in the financial statements. The dividends meet the
requirements of a REIT "qualifying distribution" for purposes of section 25BB of the Income Tax Act, as amended.
Condensed Statement of Cash Flows
Audited Restated Restated
Figures in Rand 30-Jun 30-Jun 30-Jun
2018 2017 2016
Cash inflow from operating activities 17 427 810 35 192 583 18 168 177
Cash generated from operations 27 416 009 45 369 625 38 334 464
Finance income (15 341 374) (19 014 513) (25 192 635)
Finance cost 6 608 776 9 899 155 6 785 165
Taxation paid (1 255 601) (1 061 684) (1 758 817)
Cash (outflows) from investing activities (540 044) (23 714 154) (23 753 371)
Loans (advanced to)/repaid by related parties 882 500 11 124 715 7 651 596
Loans (advanced to)/repaid by shareholder (9 327 076) (27 873 263) (10 959 262)
Dividends paid - (20 167 613) -
Additions to investment property - - (22 870 911)
Proceeds on sale of investment property 8 250 000 14 000 000 3 500 000
Purchases of property, plant and equipment (345 468) (797 993) (1 074 794)
Cash (outflows)/inflows from financing activities (17 674 924) (18 402 409) 13 186 271
Movement in related party loans 20 096 (1 168) 252
Loans (repaid)/raised from directors - (385 021) 385 281
Movement in interest-bearing borrowings (17 695 020) (18 016 220) 12 800 738
Net (decrease)/increase in cash, cash equivalents and (787 158) (6 923 980) 7 601 077
bank overdrafts
Cash, cash equivalents and bank overdrafts at the 729 901 7 653 876 52 799
beginning of the year
Cash, cash equivalents and bank overdrafts at the end (57 257) 729 901 7 653 876
of the year
Headline earnings reconciliation and distribution information
Basic earnings per share 2018 2017 2016
Basic earnings per share is determined by dividing profit or loss attributable to the ordinary equity holders of the parent by
the weighted average number of shares outstanding during the year. Headline earnings per share is determined by
dividing headline earnings by the weighted average number of shares during the year. Headline earnings is determined
by adjusting basic earnings by excluding separately identifiable re-measurement items. Headline earnings is presented
after tax and non-controlling interest. There are no dilutionary instruments in issue.
The earnings and weighted average number of ordinary shares used in the calculation of basic earnings per share are as
follows:
Profit for the year attributable to owners of the company 14 764 783 (4 258 980) 2 886 345
Earnings used in the calculation of basic earnings per share for 14 764 783 (4 258 980) 2 886 345
continuing operations
Weighted average number of shares used to calculate basic 627 009 822 627 009 822 627 009 822
earnings per share
Reconciliation of numerators used for basic and diluted
earnings:
Shares in issue 630 698 688 630 698 688 630 698 688
Number of shares for basic earnings 630 698 688 630 698 688 630 698 688
Less: treasury shares (3 688 866) (3 688 866) (3 688 866)
Number of shares for net asset and diluted earnings per share 627 009 822 627 009 822 627 009 822
Headline earnings reconciliation:
Basic earnings/(loss) 14 764 783 (4 258 980) 2 886 345
Fair value adjustment to investment properties (5 614 318) (19 558 748) (18 705 591)
Impairment of Elma Park - 30 424 170 -
Net (profit)/loss on disposal of investment properties 150 000 (500 000) (791 238)
Headline earnings 9 300 465 6 106 442 (16 610 484)
Reconciliation of net asset value:
Total equity attributable to equity holders of the parent 608 489 471 597 189 730 621 615 333
Total net asset value 608 489 471 597 189 730 621 615 333
Earnings per share (cents)
Basic and diluted earnings per share (cents) 2.35 (0.68) 0.46
Diluted earnings per share 2.35 (0.68) 0.46
Headline earnings per share (cents)
Headline and diluted earnings per share 1.48 0.97 (2.65)
Diluted headline earnings per share 1.48 0.97 (2.65)
Net asset value per share
Net asset value per share at year-end (cents) 97.05 95.24 99.13
COMMENTARY
1. Basis of preparation
The summarised audited consolidated results have been prepared in accordance with the Listings Requirements
of the JSE Limited (“Listings Requirements”) and the requirements of the Companies Act. The Listings Requirements
require provisional reports to be prepared in accordance with the framework concepts and the measurement and
recognition requirements of the International Financial Reporting Standards (“IFRS”) and the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by
the Financial Reporting Standards Council, and to also, as a minimum, contain the information required by IAS 34
Interim Financial Reporting. The accounting policies applied in the preparation of the financial statements, from
which the summary financial statements were derived, are in terms of IFRS and are consistent with those applied in
the annual financial statements for the year ended 30 June 2017.
The annual financial statements for the period ended 30 June 2018 have been audited by Nexia SAB&T who express
an unmodified opinion thereon. The audit report contained details of a material uncertainty related to Going
Concern, as follows:
“We draw attention to Note 39 in the consolidated financial statements and note 10 of the summarised audited results,
which describes the current situation of the group’s ability to continue as a going concern as at 30 June 2018, and,
as of that date, that the Group’s current liabilities exceeded its current assets by R124.6 million. As stated in these
notes, these events or conditions, along with other matters as set forth in these notes, indicate that a material uncertainty
exists that may cast significant doubt on the Group’s ability to continue as a going concern. Our opinion is not modified
in respect of this matter.”
The audit report contained details of reportable irregularities as detailed further below.
• During the course of the 30 June 2018 financial year, Orion Real Estate Limited provided direct financial
assistance as financial assistance as defined by subsection 45(2) to related companies. However, the
directors could not provide the necessary evidence to support adherence with the necessary requirements
as per section 45 of the Companies Act. Subsequent to year end remedial action and resolutions were taken
by the Board and approved by the shareholders to rectify this matter.
• The directors of Orion Real Estate Limited failed to prepare the annual financial statements of Orion Real
Estate Limited within six months after the end of its financial year and failed to issue the audited annual
financial statements and a notice of the annual general meeting to all holders of securities and the JSE within
four months of its financial year end as required by paragraph 3.19 (a) and (b) of the JSE Listings
Requirements. The audited annual financial statements and the notice of the annual general meeting
remain outstanding.
• The directors of Orion Real Estate Limited did not comply with the necessary JSE Listing Requirements which
resulted in the JSE terminating their group’s REIT status and the listing remains suspended on the stock
exchange.
The Reportable Irregularities have already been addressed, or will be addressed when the Annual Report is posted
to shareholders, which is expected on or about 15 May 2019. The one aspect regarding the REIT status that could
not be met was the lodgement of the Annual Compliance certificate, which is only capable of being lodged when
the Annual Report is submitted to the JSE. The Company did issue a confirmation to the JSE during 2018 that the
company met all the other REIT requirements contained in Section 13 of the JSE Listings Requirements. It should be
noted that shareholder spread is not actually a requirement in terms of Section 13 for REIT status.
The audited financial statements and the auditors’ report thereon are available for inspection at the Company’s
registered office. The summarised financial statements were prepared by the financial manager Chris Dibb CA
(SA). The directors take full responsibility for the preparation of the summarised provisional report and that the
financial information has been correctly extracted from the underlying audited annual financial statements.
The full property portfolio was valued by an independent valuer, Quadrant Properties (Pty) Ltd, and the property
values in these results are based on their valuation. Post year end, an offer had been accepted on Orion Real
Estate House for R102.5m.
Any reference to future financial performance included in these results has not been reviewed by or reported on
by the Company's auditors.
2. REIT Status
As at 30 June 2018 Orion Real Estate was a JSE-approved Real Estate Investment Trust (REIT) in accordance with
the provisions of section 13 of the JSE Listings Requirements and it remained at REIT at the date of the 2018 REIT
distribution; and the annual financial Statements have been prepared on the basis that the Company is a REIT. The
Company will try to regain REIT status before the end of the next financial year.
3. Operating performance
Orion Real Estate experienced tough operating conditions in 2018 and this resulted in a decrease of 2.58% in
revenue from R90.3 million in 2017 to R87.9 million in 2018. Despite the tough economic conditions facing South
Africa and the Property market, Orion Real Estate was able to have an increase in operating profit before tax from
R8 million in 2017 to R27.6 million before tax in 2018.
Other direct, operating and management costs were a focus area and were well controlled, reducing from R78.5
million in 2017 to R83,0 million in 2018. This represents an increase of 5.73%.
The Elma Park write off in 2017 of R30.4 million is a non-repeatable event and therefore the total comprehensive
loss for the period moved from R4.1 million loss in 2017 to a profit of R14.7 million in 2018.
Headline earnings increase to 1.48 cents per share, from a profit per share of 0.97 cents in 2017. The net asset value
has increased from 95.24 cents per share to 97.05 cents per share in 2018.
4. Investment property disposed
During the year under review the Company disposed 211 and 212 Marlboro for a capital loss of R150 000.
5. Restatement of prior year results
The Statement of Comprehensive Income for the year ended 30 June 2018 corrects an error of prior years.
Previously a number of rental agreements signed by Orion Real Estate were capitalised in the books of the
Company, but the equipment was installed in the premises of a related party and under its control.
In addition, some of these contracts were pure loan arrangements not backed by any items of equipment.
The lender and lessor on these contracts acknowledges the error and accepts that the related party is the principle
debtor for these obligations and that Orion Real Estate is merely a guarantor for the performance of the related
party. Therefore, these transactions have been taken out of the books of Orion Real Estate and are reflected
instead as a contingent liability of the company.
The results of the restatement are detailed below:
Reclassification of borrowings
The nature of the prior period year is that at the end of the 2017 financial year, there was no renewal of the
agreements by Investec and the loans were reclassified from non-current liabilities to current liabilities.
As previously
Adjustments As restated
30 June 2017 reported
Effect on the Statement of
Financial Position
Non-current liabilities
Long term portion of borrowings 133 337 025 (86 281 588) 47 055 437
Current liabilities
Short term portion of borrowings 14 559 450 86 281 588 100 841 038
A reconciliation of the
reclassification of the mortgage
bonds is below
2017 per prior
Date of year annual
Secured mortgage bonds Total 2017 restated
maturity financial
statements
Investec 31-Mar-18 58 024 499 - 58 024 499
Investec 30-Sep-17 10 394 838 - 10 394 838
Investec 01-May-17 2 472 - 2 472
Investec 01-Sep-18 856 514 856 514 856 514
Investec 30-Oct-18 7 659 966 7 659 966 7 659 966
Investec 31-Mar-16 6 972 912 6 972 912 6 972 912
Investec 31-Oct-16 21 173 346 - 21 173 346
Investec 31-Jan-21 10 546 843 10 546 843 10 546 843
Investec 30-Apr-19 4 384 908 4 384 908 4 384 908
Investec Loan 31-Aug-16 11 245 883 - 11 245 883
FNB 07-Mar-20 10 365 583 10 365 583 10 365 583
Standard Bank 01-Jul-19 3 594 936 3 594 936 3 594 936
Wartburgerhof cc - second Extended 1 500 000 1 500 000 1 500 000
mortgage bond
Total mortgaged finance 146 722 700 45 881 662 146 722 700
Total Instalment and finance lease
agreements 1 173 775 1 173 775 1 173 775
Total mortgaged and instalment
sale agreement 147 896 475 47 055 437 147 896 475
Short term portions - 100 841 038 (14 559 450)
Total value of borrowings 147 896 475 147 896 475 133 337 025
Reconciliation
Total long-term liabilities 47 055 437 133 337 025
Total short-term liabilities 100 841 038 14 559 450
Total value of borrowings 147 896 475 147 896 475
The prior period was detected through the JSE Pro-active monitoring process and is disclosed in this set of 2018
annual financial statements.
Reclassification of inventories
During the 2018 financial year it was identified that inventory of R94, 930 related to the rental of Storage units that
is owned by Star Storage Proprietary Limited was incorrectly recorded as inventory historically and not as property,
plant and equipment.
The reclassification has had no effect on the profit or loss of Orion Real Estate for 2017.
The effect of the reclassification is below:
As previously
Adjustments As restated
30 June 2017 reported
Effect on the Statement of Financial Position
Non-current assets
Property plant and equipment 5 466 434 94 930 5 561 364
Current assets
Consumables 101 947 (94 930) 7 017
Interest on shareholder loan - prior period error
During the 2018 audit it was decided to raise interest on loans to shareholder for 2016 and 2017 at repo rate plus 1%
on the year-end balance.
Effect on the Statement of Financial Position As previously reported Adjustments As restated
30 June 2016
Statement of Financial Position
Equity
Retained earnings (506 466 861) (811 798) (507 278 659)
Loans to shareholder 10 147 464 811 798 10 959 262
Net effect (496 319 397) - (496 319 397)
30 June 2017
Statement of Financial Position
Equity
Retained earnings (479 224 908) (3 628 148) (482 853 056)
Loans to shareholder 35 204 377 3 628 148 38 832 525
Net effect (444 020 531) - (444 020 531)
As previously As
Adjustments
Effect on earnings per share and headline earnings per share reported restated
2016
Basic earnings per share 0.33 0.13 0.46
Headline earning per share (2.78) (0.13) (2.65)
2017
Basic earnings per share (1.13) 0.45 (0.68)
Headline earning per share 0.52 (0.45) 0.97
The charging of the interest on shareholders loan has not had any effect on the basic or headline earnings per
share.
Impairment of Elma Park - reclassification
In 2017, the impairment of R71 058 000 was added back to the cash flow that relates to the impairment and loss of
control of Elma Park with regards to the liquidation. The R71 058 000 added back was erroneously added back
being the full carrying value of Elma Park. The impairment loss that was to be added back was meant to be R30
434 170 in the 2017 cash flow statement. The difference of R40 623 930 relates to third party liabilities and current
assets of Elma Park that were included in the working capital movements.
The effect of the error has been shown below:
30 June 2017
As previously reported Adjustments As restated
Statement of Cash Flows
Cash generated from operations
Impairment of Elma Park 71 058 100 (40 623 930) 30 434 170
Changes in Working capital
Trade and other payables (45 661 166) 44 573 479 (1 087 687)
Trade and other receivables 30 839 205 (3 949 549) 26 889 656
Net effect 56 236 139 - 56 236 139
This prior period error was identified through the JSE Pro-active Monitoring process and has been corrected to
accurately reflect the true nature of the impairment loss surrounding the liquidation of Elma Park.
6. Related party transactions and contingent liabilities
Related party transactions similar to those disclosed in the Group's annual financial statements for the year ended
30 June 2017 took place during the financial year. In more detail, these are:
Gmeiner Investment Holdings (Proprietary) Limited (“GIH”)
GIH holds interests in hotel properties and is its controlling shareholder is Franz Gmeiner (FG) who is also the
controlling shareholder of Orion Real Estate Limited (ORE). GIH operates three hotels which pay rent to Orion Real
Estate at market related rates. GIH underwrites these rents and ensures that Orion Real Estate suffers no loss on
these transactions. The annual value of these rents is:
2018 R8 824 856
2017 R7 144 544
GIH borrows money from Orion Real Estate to help with the funding of its hotel portfolio. FG applies his dividend
from ORE to reduce the loan account between GIH and ORE. The loan account with GIH bears interest at the REPO
rate applied to the annual average balance. The year balance owing by Orion Real Estate to GIH amounted to:
2018 R47 347 802
2017 R38 832 525
2016 R10 959 262
The interest paid by Orion Real Estate to GIH on the loan account amounted to:
2018 R2 851 554
2017 R2 816 350
2016 R 811 798
And the dividend applied to reduce the loan account amounted to:
2018 R14 670 274
2017 nil
Orion Real Estate Business Solutions (Proprietary) Limited (OBS) is a stand-alone company headed up by Dr.
Antoinette Gmeiner which provides business coaching services to the staff of Orion Real Estate at open market
rates. The value of these services provided to Orion Real Estate were:
2018 R302 837
2017 R253 598
Orion Real Estate Security Services (proprietary) Limited (OSS)
OSS provides security services to the Orion Real Estate properties at open market rates. The value of these services
provided to ORE were:
2018 R6 043 900
2017 R4 720 733
Guarantor on lease and loan agreements
Orion Real Estate is co-signatory and guarantor on equipment lease and instalment loan agreements on behalf of
GIH. These contingent liabilities amounted to:
2018 R20 922 972
2017 R27 373 443
And will reduce in future years as follows:
2018 2017
2018 - 6 450 471
2019 6 938 461 6 938 461
2020 6 797 606 6 797 606
2021 4 744 770 4 744 770
2022 2 284 747 2 284 747
2023 157 387 157 387
TOTAL 20 922 972 27 373 443
All related party transactions have been approved by the Shareholders and Directors of Orion Real Estate as
required by S45 of the Companies Act 2008.
It can be noted that GIH is a substantial entity in its own right and had shareholders’ equity of R559 596 843 at 30
June 2018.
7. Subsequent events
A sequence of events starting in April 2018 has given rise to a series of further subsequent events occurring after
year end and the date of these financial statements. As these events largely form a connected chain they are
presented as a timeline.
15 March 2018
In order to address its shareholders, spread as required by the JSE and to improve profitability and critical mass,
Orion Real Estate concludes four separate agreements for the acquisition of 10 income producing properties for a
total consideration of R160,3m. The deal on one of the properties for R17m did not mature, leaving a remainder of
9 properties to be acquired for R143,3m. This was to be funded as to 80% shares and 20% cash totalling 143,3m, and
introducing new shareholders into Orion Real Estate to raise the minority shareholding in Orion Real Estate to 22%.
Such shareholding would have met the shareholder spread requirements of the JSE. Orion Real Estate continued
with its monthly reports to the JSE on its endeavours to meet the JSE spread requirements.
9 April 2018
Investec declined to roll over/refinance two loans totalling R57m which automatically triggered the recall of their
remaining facilities. These amounted to R116.0m. Orion Real Estate immediately moved to replace Investec with
another credit provider.
3 May 2018
Orion Real Estate approached a previous funder of the group, Fedbond, who issued Orion Real Estate a letter of
grant in principle for a 75% loan to value, secured over selected properties in the portfolio subject to a valuation
by the lender’s approved valuer. Quadrant was appointed to undertake the valuations and they valued most of
the property portfolio of the Group.
This new funding was also intended to fund the cash portion of the R143,3m purchase consideration of an additional
9 income producing properties. The cash portion of this transaction to be funded by Fedbond was to be R28, 6m.
12 June 2018
Vendor finance of R28,6m was secured for the nine properties with the balance to be satisfied by shares and the
transfer process was initiated including securing of SARS and rates and tax clearances.
30 June 2018
Quadrant completed the valuations and arrived at a total value of R873m including the acquisition of the 9
properties. Based on this valuation, the existing mortgage loans to value amounted to only 18%.
25 July to 31 August 2018
Fedbond granted Orion Real Estate a number of facilities totalling R233,8m, sufficient to discharge the full Investec
debt, plus all other mortgage debt, most trade creditors; and leave approximately R50m of surplus capital for
further acquisitions. The process of drafting loan and surety agreements commenced.
1 September 2018
Orion Real Estate takes occupation of the nine properties to be acquired prior to transfer.
18 September 2018
Fedbond commences the issue of guarantees to various lenders, including Investec Bank, for the full outstanding
capital balances plus interest.
01 October 2018
RSM cite a fee dispute and outstanding audit evidence not provided by Orion Real Estate as a reason for
withdrawing their staff from the audit.
2 October 2018
The then auditors, RSM Incorporated, report Orion Real Estate to the Independent Regulatory Board for Auditors
(IRBA) for three reportable irregularities, namely: not filing the Annual Report within the required three-month
window; for not rectifying its shareholder spread as required by the JSE; and for not having the necessary company
resolutions in place before entering into related party transactions as contemplated in S45 of the Companies Act.
1 November 2018
The company failed to present audited financial statements within the required 3 month window and is suspended
by the JSE. Later in the month, the JSE issued notice that the REIT status of the company was under review.
20 November 2018
At an Orion Real Estate board meeting, audit committee chairman, Theuns Oosthuizen, was tasked to
communicate with RSM auditors and to negotiate a settlement with them and their return to complete the audit
with a target date of 14 December 2018.
25 November 2018
Fedbond issues its last bank guarantee.
28 November 2018
Orion Real Estate and its JSE sponsor meet with Fedbond, to explain the reasons for the suspension and the process
to unsuspend.
In the evening of the 28th, Fedbond withdraws its guarantees citing suspension of the company from the JSE.
Also, on the 28th November, Franz Gmeiner and the audit committee chairman meet with RSM at their offices in
Randburg to resolve outstanding audit issues and to arrange their return to complete the audit. RSM indicates that
the earliest that they can return to complete the audit is at the beginning of February 2019 due to leave and other
staffing commitments.
7 December 2018
Investec bank gives Orion Real Estate notice that replacement guarantees for Fedbond’s credit line are required
by 14 December 2018, failing which it will proceed with liquidation proceedings against the company and
monetary proceedings against the Orion Real Estate Property Trust and Franz Gmeiner.
13 December 2018
Investec bring application for the liquidation of Orion Real Estate to the High Court, Case No 46695/2018.
18 December 2018
Orion Real Estate announced the terms agreed for the disposal of the Promenade in Nelspruit, subject to conditions
precedent.
21 December 2018
Orion Real Estate meets with RSM and agree that RSM will re-engage the audit on 4 February 2019 and Orion Real
Estate shall, in the intervening time, prepare answers to all outstanding audit queries. No issue around outstanding
fees was raised at this meeting and Orion Real Estate is prepared to host the auditors at its premises on the 4th of
February.
28 January 2019
The deal on the Promenade falls through and an improved offer is accepted by Orion Real Estate for the amount
of R185m subject to conditions precedent.
31 January 2019
The first of the nine properties was transferred to Orion Real Estate resulting in the issue of 11,8m new shares to
minorities (1, 84% of the increased share capital).
3 February 2019
RSM notify Orion Real Estate that they will not return to complete the audit unless their demand for increased audit
fees are paid in full, two of the directors sign personal sureties for the audit fees and a revised letter of appointment
be agreed and signed by the audit committee and the Board. Orion Real Estate declines these terms and RSM do
not return to the audit.
7 February 2019
Despite a detailed motivation to retain REIT status, the JSE removed Orion Real Estate’s REIT status for failing to
submit a required compliance declaration in terms of the JSE Listings Requirements and its failure to meet the
minimum spread requirements in terms of S4.28.
12 February 2019
Orion Real Estate terminates the services of RSM and appoints Nexia SAB&T in its place.
17 February 2019
Orion Real Estate opposed the liquidation proceedings in the High Court and is currently awaiting an opposed
motion date.
26 February 2019
Orion Real Estate announces the disposal of Orion Real Estate House in Braamfontein for R102.5 million, subject to
conditions precedent.
25 April 2019
As of the date of this report, the company remains suspended on the JSE and it has lost its REIT status.
The production of this annual report removes one of the reportable irregularities lodged with (IRBA); and all related
party transactions have now been appropriately approved by company resolutions. The shareholding spread will
be remedied by the acquisition of the nine properties, the first of which has transferred on 31 January 2019.
The Investec facility has not been settled and a balance of R118,8m is due as of the last Investec statement
received by the company on 31 January 2019.
Orion Real Estate has taken the decision to extinguish the Investec debt in full either through replacement facilities
or the disposal of properties or and continues to keep Investec informed.
Following the publication of this annual report, the Company will apply for and the lifting of the company’s
suspension by the JSE. Thereafter, Orion Real Estate will take immediate steps to have its REIT status restored.
The sale of Promenade property and Orion House are still in process at the date of this report. The conditions
precedent for the disposal of Orion House have been met.
8. Distributions
The board declared a distribution of 2, 5 cents a share for the year ended 30 June 2018 (30 June 2017: 0.00 cents),
which was paid on 24 December 2018.
9. Financial Director
A SENS announcement of 19 March 2019 advised shareholders of the resignation of Mr D Dabideen, effective 15
March 2019. Until a new appointment was made, Mr F Gmeiner, a qualified Chartered Accountant, was acting in
this role. On 01 April 2019, Mr Andreas Ritzlmayr was appointed as financial director.
10. Going Concern
The directors have reason to believe that the group has adequate financial resources to continue in operation for
the foreseeable future and accordingly the Group annual financial statements have been prepared on a going
concern basis. The directors have satisfied themselves that the group is in a sound financial position and that it has
access to sufficient resources to meet its foreseeable cash requirements. The directors are not aware of any new
material changes that may adversely impact the group. The directors are also not aware of any material non-
compliance with statutory or regulatory requirements or of any pending changes to legislation which may affect
the group.
The ability of the group to continue as a going concern, is dependent on a number of factors, which may indicate
the existence of a material uncertainty. This include the following significant factor:
- The application brought by Investec for the liquidation of the company on 13 December 2018. This was brought
about firstly, by the decision of Investec not to roll over its mortgage facilities to the company and to call up its
loans; and secondly, when a deal put in place by Orion to arrange alternative facilities to settle Investec fell through
The board of directors have reviewed the group's cash flow forecast for the next 12 months, the 5 year operational
income forecast and other planned potential developments in the short and medium term and in considering the
uncertainty described above, both the directors and our legal representatives in this matter are confident that the
Investec application cannot succeed. The group has taken the decision to realise sufficient investment properties
to settle the Investec loans. The first of such sales was announced on 18 December 2018 for the sale of the
Promenade and further deals have been announced since then.
Therefore the board of directors have a reasonable expectation that the group has adequate resources to
continue operations for the foreseeable future and the board therefore continues to adopt the going concern
basis of accounting to prepare the financial statements.
The directors are not aware of any other material events which occurred after the reporting date and up to the
date of this report not already dealt with elsewhere in the financial statements.
11. Future prospects
The 2018 financial year was a year of consolidation and planning for expansion. Trading conditions were difficult
during the year and were reflective of the broader South African economy.
Paying off the Investec loans and regaining the REIT status of the Company are at the centre of focus and
management is confident of success on both fronts.
Vacancies and particularly office vacancies are an industry challenge at the moment. Whilst many new and
prestigious office developments are evident in all major office nodes in South Africa the landscape is scattered
with vacant or partially vacant office buildings. Our office space portfolio is no exception. To this end we have
been on a major initiative to correct this;
- Appointment of additional letting executives
- Creation of a BEE structure to secure government leases
- Commissioning architects to design conversions of office space to residential space
- Offering our largest office buildings to the market
- Commissioning architects to design conversion of office space to student accommodation
- Negotiations with BEE companies for the purpose of creating student accommodation
- Converting basement car parking space to storage units (Star Storage)
- Converting some office space to retail space.
- Setting up project team to redesign website, marketing collateral and widen on-line & social media exposure
We continue to evaluate our portfolio and wherever an opportunity exists we will either dispose of or re purpose properties.
We have disposed of some properties and in a creative effort to consummate selling transactions we have concluded
our first “rent to own” transaction for one of the Selby industrial buildings.
We expect these endeavours to produce positive results in the coming year.
By order of the board
Johannesburg
09 May 2019
Directors:
RS Wilkinson* DK Mthembu* AC Gmeiner** F Gmeiner (CEO)# TFJ Oosthuizen** D Dabideen (resigned 15 March 2019) #
A Ritzlmayr (appointed 01 April 2019) #
Independent non-executive ** Non-executive # Executive ***Executive,
Company secretary and registered office Transfer office
Corporate Governance Facilitators CC Computershare Investor Services Proprietary Limited
Registered office Sponsor
Registered office and business address Arbor Capital Sponsors Proprietary Limited
16th Floor, Orion Real Estate Limited House
49 Jorissen Street
Braamfontein
Johannesburg, 2017
Date: 09/05/2019 04:12:00 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.
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