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Unaudited condensed consolidated interim financial statements for the six months ended 30 November 2017
HERIOT REIT LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2017/167697/06)
JSE share code HET ISIN ZAE000246740
(Approved as a REIT by JSE)
("Heriot" or "the Company" or "the Group")
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS FOR THE
SIX MONTHS ENDED 30 NOVEMBER 2017
COMMENTARY
Introduction
Heriot, a property holding and investment company, listed in the "Diversified REITs" sector on the Alternative
Exchange ("AltX") of the JSE on 24 July 2017. Heriot is invested in industrial, retail, office and specialised
properties situated in areas with high growth potential. The Group's primary objective is to identify value-
enhancing opportunities in South Africa to create a stable and diverse portfolio of assets capable of generating
secure and escalating net rental income.
Financial results
Heriot has declared a maiden distribution of 35,09000 cents per share for the six months ended
30 November 2017. Heriot is on track to deliver on the forecast distribution of 71,67 cents per share forecast for
the year ending 31 May 2018 as reflected in the pre-listing statement issued on 17 July 2017 ("PLS"). The net
asset value at 30 November 2017 is R10,90 per share, an increase of 92 cents from the net asset value of R9.98 at 31 May
2017 disclosed in the PLS.
No comparative figures have been presented as the Company was incorporated on 18 April 2017 and only
commenced trading on 5 June 2017.
Property portfolio
As at the reporting date, Heriot's property portfolio comprised 39 investment properties. The properties, which
were internally valued by the directors at the reporting date, were valued at R4,14 billion. This valuation
represents an increase of 3,7% compared to the valuations disclosed in the PLS.
The Group further owns the Heriot offices, comprising 717 m(2) A Grade office space in Melrose Arch, which has
been accounted for as property, plant and equipment in terms of the accounting standard relating to owner
occupied property.
Subsequent to the reporting date, Heriot has taken transfer of a 50% undivided share in two office properties
located in Bruma, Johannesburg, at an average yield of 9.3%. The properties, having a total GLA of 5,340 m(2),
were acquired for R34,5 million in terms of sale and leaseback agreements with Imperial Holdings Limited. The
properties, which are valued at R37,8 million, are underpinned by leases with an annual escalation of 7.5% and
an average lease term of 9 years.
On 13 December 2017, Heriot took transfer of the Absa building, a 9,998 m(2) office building in the Cape Town
CBD, at a cost of R87,2 million. The property, currently tenanted by Absa, is considered to have excellent
redevelopment potential and Heriot is considering the feasibility of conversion of the property into residential
space that will be held for rental.
On 19 December 2017, the company disposed of an industrial property, with a GLA of 5,400 m(2). The selling
price was in excess of carrying value.
Vacancies and arrears
As at the reporting date, Heriot had negligible vacancies amounting to 0.25% of retail GLA and 0.08% of
total GLA. No bad debts were recorded during the period under review.
Sectoral analysis
GLA Value Revenue Property Net income
expenses
m(2) R'000 R'000 R'000 R'000
Retail 150,360 2,181,853 113,206 (29,222) 83,984
Industrial 331,513 1,652,193 76,739 (7,609) 69,130
Office 7,105 214,133 13,853 (3,948) 9,905
Specialised # 92,063 3,242 (41) 3,201
Net property income 488,978 4,140,242 207,040 (40,820) 166,220
Dividend from associate 1,500
Other income 4,577
Administrative and
corporate costs (14,114)
Net finance charges (65,930)
Taxation (535)
Attributable to minorities (2,015)
Distributable earnings 89,703
# The specialised property comprises of 8 382ha(2) of industrial farms and the inclusion of this, measured by hectare,
in the analysis by GLA would not provide meaningful analysis of the portfolio as a whole.
Funding
Heriot's borrowings of R1,51 billion as at the reporting date equate to a gearing ratio of 33,8%. The average
cost of borrowing was 9.1% for the period under review and 48% of borrowings have fixed interest rates.
The average remaining term of the debt is 2,4 years. At the reporting date, the Group has unutilised facilities
of R186,8 million.
Related parties
The loan to the related party of R54,5 million is an amount due by a company owned by SB Herring. The
amount is repayable within 12 months and bears interest at 9,1% per annum.
Shares
Pursuant to its listing, the Company issued 251,437,235 shares at R10 each for the acquisition of the Group's
assets together with 4 200 000 shares in terms of the employee share purchase plan. These shares, issued to employees at
R10 per share, are funded by Heriot. The debt bears interest at Heriot's average cost of debt and distributions
are for the benefit of employees.
On 14 December 2017, 658,623 shares were issued at R10 per share as part settlement for the acquisition of a
non-controlling interest in a portfolio of three retail assets based in the Western Cape. The balance of the
purchase price of R16,6 million was settled in cash. The shares issued rank for distribution number 1,
as detailed below, and the acquisition is earnings neutral.
Distribution declaration
Distribution number 1 of 35,09000 cents per share for the six months ended 30 November 2017 will be paid to
shareholders in accordance with the timetable set out below:
2018
Last date to trade cum dividend Tuesday, 27 February
Shares trade ex dividend Wednesday, 28 February
Record date Friday, 2 March
Payment date Monday, 5 March
Share certificates may not be dematerialised or rematerialised between Wednesday, 28 February 2018 and
Friday, 2 March 2018, both days inclusive. The dividend will be transferred to dematerialised shareholders'
CSDP/broker accounts on Monday, 5 March 2018. Certificated shareholders' dividend payments will be posted
on or paid to certificated shareholders' bank accounts on or about, Monday, 5 March 2018.
An announcement informing shareholders of the tax treatment of the dividends will be released separately
on SENS.
Basis of preparation
These results have been prepared in accordance with International Financial Reporting Standards (IFRS), IAS
34, Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council,
JSE Listings Requirements and the requirements of the Companies Act of South Africa. The accounting policies
are consistent with those disclosed in the PLS. These financial results have been prepared under the supervision
of the Chief Financial Officer, JA Finn, CA(SA). The unaudited results for the six months ended 30 November
2017 have not been reviewed or reported on by the company's independent auditors, Grant Thornton
Johannesburg Partnership.
The directors are not aware of any matters or circumstances arising subsequent to 30 November 2017
that require any additional disclosure or adjustment to the financial statements, other than as disclosed
in this announcement.
Directors
On 18 August 2017, Steven Bernard Herring resigned as chief executive officer of the company but remains on
the board as a non-executive director. Richard Lawrence Herring was appointed as chief executive officer on
that date.
Prospects
The board is confident that Heriot is well-positioned to achieve the forecast distribution of 71.67 cents per share
as disclosed in the PLS issued on 17 July 2017.
By order of the Board
6 February 2018
COMPANY SECRETARY: CIS Company Secretaries Proprietary Limited (G Prestwich)
REGISTERED OFFICE: Suite 1, Ground Floor, 3 Melrose Boulevard, Melrose Arch, Johannesburg, 2196
PO Box 652737, Benmore, 2010
DIRECTORS: SD Friend (Chairperson) *, RL Herring (CEO), JA Finn (CFO), SJ Blieden *†, T Cohen *†,
SB Herring*, N Ngale *†
*Non-executive † Independent
TRANSFER SECRETARIES: Computershare Investor Services Proprietary Limited
SPONSOR: Java Capital
Heriot REIT
Condensed Consolidated Statement of Financial Position
Unaudited
30 Nov 2017
R'000
Assets
Non-current assets
Investment property 4 140 242
Property, plant and equipment 26 099
Investment in associate 13 192
Other financial assets 43 456
4 222 989
Current assets
Trade and other receivables 16 831
Prepayments 47 992
Loan to related party 54 455
Current tax receivable 1 901
Cash and cash equivalents 112 525
233 704
Total assets 4 456 693
Equity and liabilities
Equity
Stated capital 2 551 062
Retained earnings 235 280
2 786 342
Non-controlling interests 59 851
Non-current liabilities
Interest-bearing liabilities 1 507 820
Derivative instrument 1 536
Deferred taxation 54 645
1 564 001
Current liabilities
Trade and other payables 43 634
Interest-bearing liabilities 2 865
46 499
Total equity and liabilities 4 456 693
Net asset value per shares (cents) 1 089.96
Net tangible asset per share (excluding deferred taxation)
(cents) 1 111.34
Condensed Consolidated Statement of Profit and Loss and Other Comprehensive Income
Unaudited
6 months ended 30
Nov 2017
R'000
Rental income 199 092
Contractual rental income and recoveries 207 040
Straight line rental income (7 948)
Property expenses (40 820)
Net property income 158 272
Income from associate 3 543
Other income 4 577
Administrative expenses and corporate costs (14 114)
Profit from operations 152 278
Finance income 3 581
Finance charges (69 511)
Profit before fair value adjustments 86 348
Fair value adjustments 155 497
Investment properties 154 227
Derivative instruments 1 270
Profit before taxation 241 845
Taxation (535)
Net profit after taxation 241 310
Attributable to:
Equity holders of the Company 235 280
Non-controlling interests 6 030
241 310
Reconciliation of earnings and headline earnings
Profit attributable to equity holders 235 280
Change in fair value of investment properties (154 227)
Headline earnings attributable to equity holders 81 053
Share Metrics:
Number of shares in issue at reporting date 255 637 235
Weighted average number of shares in issue 255 637 235
Basic and diluted earnings per share (cents) 31.71
Basic and diluted headline earnings per share (cents) 31.71
Distribution per share (cents) 35.09
Condensed Consolidated Statement of Changes in Equity
Non controlling
Stated capital interests Retained earnings Total equity
R'000 R'000 R'000 R'000
Issue of shares on listing 2 556 371 87 112 2 643 483
Share issue expenses (5 309) (5 309)
Acquisition of minority share (33 291) (33 291)
Profit for the period 6 030 235 280 241 310
2 551 062 59 851 235 280 2 846 193
Condensed Consolidated Statement of Cash Flows
Unaudited
6 months ended 30
Nov 2017
R'000
Cash generated from operations 202 188
Finance cotsts (69 511)
Finance income 3 581
Dividends received 1 500
Taxation paid (82)
Cash flows from operating activities 137 676
Acquisition of investment property (207 681)
Acquisition of property, plant and equipment (52)
Cash from investing activities (207 733)
Proceeds from the issue of share capital 29
Share issue expenses (5 309)
Acquisition of non-controlling interest (33 291)
Decrease in loan to related party 50 022
Increase in interest bearing liabilities 157 439
Net cash generated from financing activities 168 890
Net movement in cash and cash equivalents 98 833
On acquisition of subsidiaries 13 692
Cash and cash equivalents at the end of the period 112 525
Date: 07/02/2018 11:48:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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