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HERIOT REIT LIMITED - Unaudited condensed consolidated interim financial statements for the six months ended 30 November 2017

Release Date: 07/02/2018 11:48
Code(s): HET     PDF:  
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Unaudited condensed consolidated interim financial statements for the six months ended 30 November 2017

(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")


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
                                                       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.

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.

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:

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.

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.

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                       
                                                                                            30 Nov 2017
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                             
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

                                                                                      6 months ended 30
                                                                                               Nov 2017
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

                                                                                      6 months ended 30
                                                                                               Nov 2017
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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