Wrap Text
Unaudited Condensed Consolidated Financial Results
for the Six Months Ended 31 December 2017
Texton Property Fund Limited
(Incorporated in the Republic of South Africa)
(Registration number: 2005/019302/06)
A Real Estate Investment Trust, listed on the JSE Limited
JSE share code: TEX
ISIN: ZAE000190542
(Formerly ISIN: ZAE000185872)
Unaudited condensed consolidated financial results
for the six months ended 31 December 2017
Financial highlights
- Dividends per share - 47,95 cents (December 2016: 47,95 cents)
- Revenue - R303,2 million (December 2016: R300,3 million)up 1,0%
- Net asset value* - 891,49 cents (December 2016: 977,54 cents)down 8,8%
- Net property income - R212,4 million (December 2016: R208,2 million) up 2,0%
Non-financial highlights
- Gross lettable area (GLA)** - 386 119 m2 (June 2017: 407 803 m2) down 5,3%
- National/listed/blue chip tenants (by GLA)** - 61,9% (June 2017: 61,9%)
- Vacancies (by GLA)** - 7,0% (June 2017: 4,9%) up 2,1%
- Portfolio value** - R5 457 billion - (June 2017: R5 508 billion) down 0,9%
* Net tangible asset value less deferred tax
** Including Broad Street Mall
Commentary
Nature of the business
Texton Property Fund Limited ("Texton" or "the Company" or "the Fund") is an
internally asset managed Real Estate Investment Trust ("REIT") listed on the
JSE Limited. It has a portfolio of R5,4 billion of assets with retail, office
and industrial exposure located in South Africa and the United Kingdom.
Distributable earnings and commentary on results
The board of directors of Texton ("the Board") is pleased to declare an interim
dividend of 47,95 cents per share for the six months ended 31 December 2017,
which is in line with market guidance and the prior year dividend. This was
achieved from a solid performance of the core portfolio.
The Manco Internalisation transaction was finalised in October 2017,
whereby Texton paid a fee of R180 million to cancel the asset management
agreement. Management and staff are proceeding with crafting a new
direction for Texton. As previously communicated, internalising the
external management function was likely to have a dilutionary impact
on earnings. Notwithstanding this, the property portfolio performed well,
ensuring Texton was able to deliver flat growth in distribution
to shareholders.
While the rationalisation of our portfolio has yielded pleasing results,
we continue to operate in a challenging economy with weak local property
fundamentals. Operationally, the past six months have been about changing
the way we do things and being aligned with the right service providers.
We believe the results of this change will start to show in the way we
operate and the unlocking of efficiencies. Furthermore, managing a tight
ship with arrears is important in this trading environment as that will
be the key to income protection alongside strong tenant covenants.
The Board recognises the highly attractive forward yield at which Texton
is trading and this presented an opportunity for share buybacks by the
Company, which were initiated from November 2017. Given the high forward
yield, yield accretive acquisitions are limited, however, management's
medium-term goal is to degear our balance sheet to create capacity to
pursue local and offshore opportunities.
Property portfolio
Key performance indicators
A key focus over the past six months has been cost rationalisation and
portfolio-enhancing acquisitions, which will diversify the Fund in terms
of both sector and geography. Texton continues to maintain a defensive
office portfolio, which has performed admirably considering the oversupply
and vacancies currently experienced in the major property nodes. Our
industrial portfolio has performed in line with budget other than the
vacancy at Hermanstad. Our retail portfolio has remained robust with
tenant waiting lists at Woodmead Commercial Park.
Texton's current portfolio, split by value, is 59,9% (June 2017: 61,0%)
located in South Africa and 40,1% (June 2017: 39,0%) located in the
United Kingdom (including our portion of Broad Street Mall).
There were no acquisitions in the six months to December 2017. All
properties shown as held for sale at 30 June 2017 have transferred
other than Bompas Road. This sale did not materialise and the property
was reclassified to investment property.
Vacancies
Texton has embarked on an active drive to fill its vacancies and
continues to engage with its broker network, principals and prospective
users. Vacancies have increased to 7,0% at 31 December 2017 from 4,9%
at 30 June 2017. This was mainly due to the relocation and consolidation
of a single tenant that occupied the Scott Street and St George's Mall
properties. On a like-for-like basis to 30 June 2018, we are confident
that our vacancies will remain below the South African Property Owners'
Association ("SAPOA") average.
Vacancy analysis (%)
June December June December
2016 2016 2017 2017
% % % %
Total vacancy 9,0 6,2 5,0 7,0
SA vacancy 10,6 7,6 5,4 8,3
UK vacancy 2,1 1,4 3,5 3,2
South Africa
A definitive highlight was the renewal of the Department of Public Works'
lease at the Foretrust building in Cape Town, Texton's largest South
African asset by value and gross lettable area. The renewal of 24 000 m2
was a significant win given the challenge of general market conditions
and the Department's backlog of attending to expired leases. Texton is
also reassessing its options for this property in the medium to long
term to potentially allow for a mixed-use development given the prime
location of this site. The Foretrust lease renewal has had an immensely
positive impact on Texton's lease expiry profile, which has improved
significantly since June 2017.
United Kingdom
Although all sectors across the United Kingdom have remained generally
stable, the retail sector has come under increased pressure. While we
are seeing a widely flat trend across all sectors in tenant demand,
the retail sector continues to struggle in terms of both rental growth
expectations and capital value. The office sector is broadly unchanged,
with supply and demand remaining the same; however, the value of
landlord incentives has risen. Industrial has remained an outperformer
in both investment and occupier markets and we remain keen buyers of
logistics and warehousing properties located in good nodes.
A shift towards online spending is increasing pressure on the profit
margins of non-food retailers. High-street retail experienced mixed
results during the Christmas period. For the full calendar year,
Broad Street Mall's footfall was down 0,2% against 2016. This was
a satisfying result considering our largest anchor Argos, which has
vacated, was included in the figure last year. The footfall was above
the national, regional and United Kingdom average.
We work with both new and existing tenants to explore ways to enhance
store presence, shopfronts and new signage. The former Argos space
continues to be the main priority. There have been numerous discussions
and interest in the space. A discount department store, which was
initially shortlisted and offered the space, is now showing interest.
They will want the majority of the Argos space. This discount department
store will add a retail alternative to the mall as well as attract
increased foot traffic to this section of the building. We are pleased
to report that discussions of how to fit out the store are underway. The
re-letting of the Argos space to a discount department store would be a
great addition to both Broad Street Mall and Reading. Importantly, it
would add support to the trading propositions of existing retailers as
they approach expiry dates over the next 36 months.
While terms were being discussed, an urban pop-up "unboxed" Christmas
market was set up in the vacant space during Christmas trade. This new
offering of independent start-up local traders bolstered footfall over
this key trading period.
The Broad Street Mall joint venture acquired the adjacent building,
previously a nightclub which had undergone a lease surrender. This has
allowed the demolition plans to be fast-tracked. The space will be
incorporated into the urban market concept on South Court – the Box
Park idea for which planning permission has been received. We look
forward to seeing this project progress and welcoming our new tenants.
The mall's food and beverage offering was further improved during the
last quarter, with Fernando's on Oxford Road having completed its
refit and rebranding. It has been reopened to the public and well
received.
Lease expiry profile
Between July and December 2017, Texton successfully concluded 14 new
leases amounting to 2 489 m2. In the same period, 32 existing leases
were renewed, amounting to 43 154 m2. This is pleasing given our focused
and proactive approach to tenant retention in a challenging market.
Texton's lease expiry profile has improved significantly since June 2017
when it was reported that 42% of leases (by revenue) expire in the 2018
financial year. This figure has reduced to 14,3%. The weighted average
lease expiry is 4,1 years.
Consolidated lease expiry profile: December 2017 (%)
June June June >June
2018 2019 2020 2020
Vacant % % % %
GLA 7,1 10,5 19,1 11,8 51,5
Revenue 0,0 11,3 22,9 10,9 54,9
Greening initiatives
Texton will continue to focus on sustainable business and greening
initiatives. Cape Town's water crisis means that landlords need to
prioritise water-saving measures that reduce water consumption as
Day Zero approaches. Texton has put various measures at our properties
situated in the Western Cape. Our property at 14 Loop Street is a
prime example, utilising various water-saving measures such as
grey-water tanks, waterless urinals and dual flush toilets. At this
property, water consumption is negligible. Vunani Chambers has devised
contingency plans, including the provision of bottled water and coolers
and replacing sanitaryware in the ablution facilities to limit flushing.
Texton has agreed terms with a supplier to install a solar plant at
Kempstar Mall in Kempton Park. Following the installation of SMART
meters across the portfolio in 2016 and after careful analysis, this
site was identified as a good opportunity based on the electricity
consumption and load profile. The installation will be complete by
May 2018 and savings will be funnelled towards further initiatives.
Capital management
During the interim period, we renewed facilities with Standard Bank
totalling R285 million with tenures of two and three years. We are
proactively engaging with the banks on rolling existing facilities
well in advance of expiry, and have engaged with several banks to
establish relationships to further diversify the lending portfolio.
Texton is considering the realignment of capital management so that
UK assets are financed with UK debt and South African assets are
financed with South African debt. In line with this strategy, we are
in the process of finalising a GBP10 million facility with HSBC.
Debt maturity profile
South Africa
Drawn down
Facility Fixed Floating
R'000 R'000 R'000
FY18 139 589* - 104 953
FY19 506 549* - 366 468
FY20 460 326* - 457 209
FY21 200 000* - 200 000
1 306 464 - 1 128 630
*Partly/fully hedged by interest rate swaps.
United Kingdom
Drawn down
Facility Fixed Floating
R'000 R'000 R'000
FY18 317 540 - 314 162
FY20 342 158 342 158 -
FY22 339 434* 339 434 -
999 132 681 592 314 162
*Partly/fully hedged by interest rate swaps.
Interest rate swap maturity profile
Nominal Nominal
amount amount Fixed rate
Expiry R'000 GBP'000 %
30 Apr 2018 25 000 - 10,88
16 May 2020 225 000 - 7,27
2 Nov 2020* 200 000 - 7,19
16 May 2021 225 000 - 7,40
30 Jun 2021*^ 270 000 - 7,82
12 Aug 2021 - 20 310 0,49
15 Feb 2022* 200 000 - 7,31
1 145 000 20 310
* These swaps were entered into post the reporting period.
^ Relates to an extension of previous swaps taken out.
The Board has reaffirmed the interest rate hedging strategy that
at least 80% of borrowings must be hedged against interest rate
risk. Texton is 85% hedged.
The Fund has an average cost of debt of 9,22% on its South African
debt and 3,24% on its United Kingdom debt.
Currency
The closing exchange rate at 31 December 2017 was R16,71: GBP1
(December 2016: R16,91: GBP1; June 2017: R17,04: GBP1) and the
average exchange rate for the six months ended 31 December 2017
was R17,67: GBP1 (December 2016: R17,69: GBP1; June 2017:
R17,26: GBP1).
Texton has hedged its currency exposure through various derivative
instruments. It is the Board's policy to hedge the net property income
from the UK assets for one year ahead which is in line with Texton's
budgeting period.
Cross-currency interest rate swaps
Nominal Nominal Texton Texton
amount amount received pay
Expiry R'000 GBP'000 % %
2 Sep 2021 600 000 30 801 11 3,18+LIBOR
27 Jan 2022 128 547 7 710 12 3,98+LIBOR
728 547 38 511
Put options
Texton Exchange Premium
buys rate to paid
Expiry GBP million GBP R million
27 Jun 2018 2,9 19,50 6,1
18 Dec 2018 2,9 19,25 3,5
Stated capital and shares repurchased
In considering the yield at which Texton shares have been trading,
combined with the scarcity of good quality, well-priced property
opportunities, the Board opted to buy back Texton shares. In the
period, 933 589 Texton shares were acquired at a weighted average
price of R6,40.
There are 376 066 766 ordinary shares of no par value in issue
(June 2017 and December 2016: 376 066 766). The Group holds
10 428 348 (June 2017 and December 2016: 10 428 348) treasury
shares via the staff incentive scheme trust. Treasury shares held
by Discus House Proprietary Limited, a subsidiary of Texton,
amount to 16 243 865 (June 2017: 15 310 276; December 2016:
15 310 276) shares, bringing the total treasury shares
held to 26 672 213 (June 2017: 25 738 624).
The Company's share structure is in line with international best
practice for REITs.
Texton post internalisation
The asset management agreement was cancelled at a cost of R180 million,
effective 30 September 2017. The internalisation of the asset management
function has been completed and aligns Texton with international
best practice.
Subsequent to the internalisation, management, in consultation with
the Audit and Risk Committee has performed an extensive review of
service providers and a number of changes have been made and contracts
renegotiated. Management has also implemented a cost rationalisation
strategy, however, the results of this will only be evident in the
second half of the financial year.
The total costs of the internalisation, excluding the cost to cancel
the contract, amounted to R1,9 million and are considered
non-distributable.
Strategic review
As communicated to shareholders via SENS announcements, the Board
undertook a strategic review towards the end of the 2017 financial
year and various alternatives were considered and investigated,
including a possible merger. Texton decided not to pursue the
opportunities presented to it in terms of the merger or the disposal
of various properties. Texton does not need a transaction in order
to survive and executive management and the Board are focused on
growing Texton in an organic manner.
Preparation and accounting policies
The Board takes full responsibility for the preparation of the
condensed unaudited consolidated interim financial statements.
The condensed unaudited consolidated interim financial statements
for the six months ended 31 December 2017 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, Financial
Reporting Pronouncements as issued by the Financial Reporting Standards
Council, the listings requirements of the JSE Limited ("the JSE Listings
Requirements") and the requirements of the Companies Act of South Africa.
The condensed consolidated interim financial statements should be read
in conjunction with the annual financial statements for the year ended
30 June 2017, which have been prepared in accordance with IFRS. These
results were prepared under the supervision of the Financial Director,
Inge Pick CA(SA).
The accounting policies applied in the preparation of the condensed
consolidated interim financial statements are consistent with the
accounting policies applied in the preparation of the previous
consolidated financial statements. The Group has adopted all the new,
revised or amended accounting pronouncements as issued by the
International Accounting Standards Board ("IASB"), which were effective
for the Group from 1 July 2017, none of which had a material impact
on the Group.
The Group's investment properties are valued internally using the
capitalisation of net income method at interim reporting periods and
externally by an independent valuer for year-end reporting. In terms
of IAS 40: Investment Property and IFRS 7: Financial Instruments:
Disclosure, investment properties are measured at fair value and are
categorised as level 3 investments.
The revaluation of investment property requires judgement in the
determination of future cash flows from leases and an appropriate
capitalisation rate which varies between 6,59% and 9,21%.
Changes in the capitalisation rate attributable to changes in market
conditions can have a significant impact on property valuations. A 50
basis points increase in the capitalisation rate will decrease the value
of investment property by R306 million. A 50 basis points decrease in the
capitalisation rate will increase the value of investment property by
R345 million.
In terms of IAS 39: Financial Instruments: Recognition and Measurement and
IFRS 7, the Group's currency and interest rate derivatives are measured
at fair value through profit or loss and are categorised as level 2 investments.
The fair value of the currency derivatives was R109,8 million (June 2017:
R82,9 million; December 2016: R63,1 million) and the fair value of the
interest rate derivative net liability derivatives was R3,9 million
(June 2017: R1,8 million; December 2016: R4,0 million). These fair values
were determined using valuation techniques that present value the net cash
flows. These cash flows are based on observable market data.
There were no transfers between levels 1, 2 and 3 during the period. The
valuation methods applied are consistent with those applied in preparing
the previous consolidated financial statements.
The Board is not aware of any matters or circumstances arising subsequent
to December 2017 that require any additional disclosure or adjustment to
the financial statements.
The condensed consolidated interim financial statements have not been audited
or reviewed by Texton's auditors.
Prospects
Low economic growth associated with the current South African environment
coupled with economic uncertainty in the UK has perpetuated a challenging
operating environment for Texton. While the Company is defensively
positioned, downward pressure on rentals, combined with a sluggish economy
impacting tenants, has resulted in a low growth environment for Texton.
Texton continues to focus on active asset management to ensure tenant
retention and improved efficiencies as well as the filling of our vacancies.
Texton continues to explore possibilities to increase exposure to prime
industrial assets in South Africa and reduce the office exposure because
we recognise that, from an acquisition perspective, high-yield assets in
the industrial sector are limited. We have continued the disposal of
smaller assets, below the R50 million threshold, which are management
intensive.
With Texton's lease expiry profile for the 2018 financial year having
reduced significantly to 14,3%, it remains the core focus of the asset
management team to proactively engage with tenants and finalise lease
renewals.
Cash dividend
Notice is hereby given of the declaration of the gross interim dividend
number 13 of 47,95 cents per share for the interim six-month period to
31 December 2017. The dividend has been declared from income reserves.
The dividend for the period represents no growth compared to the prior
year interim dividend.
Texton's income tax reference number is 9353785158.
Issued shares as at 5 March 2018: 376 066 766.
Salient dates
Declaration date: Monday, 5 March 2018
Last day to trade: Monday, 26 March 2018
Ex dividend date: Tuesday, 27 March 2018
Record date: Thursday, 29 March 2018
Payment date: Tuesday, 3 April 2018
Share certificates may not be dematerialised or rematerialised between
Tuesday, 27 March 2018 and Thursday, 29 March 2018, both dates inclusive.
An announcement informing shareholders of the tax treatment of the
dividends will be released on SENS on 5 March 2018.
Changes to the Board and Company Secretary
In compliance with paragraph 3.59 of the JSE Listings Requirements,
the Board hereby notifies its shareholders of the following changes
which occurred during the period:
- Kyansambo Vundla resigned on 23 November 2017;
- Trurman Zuma was appointed on 23 November 2017 as an independent
non-executive director and as a member of the Audit and Risk Committee
and the chairman of the Remuneration and Nomination Committee; and
- Nqaba Sokabo has been appointed as the Company Secretary for Texton,
with effect from 1 February 2018.
Summary of financial performance
for the six months ended 31 December 2017
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2017 2016 2017
Shares in issue and used for
dividend calculation ('000) 349 395 350 328 350 328
Weighted average number of
shares in issue ('000) 350 223 355 121 351 633
Net asset value per share
(cents) 891,49 977,54 948,08
Net tangible asset value less
deferred tax per share (cents) 894,40 978,57 952,34
Basic and diluted earnings per
share (cents) 2,99 67,65 86,70
Headline and diluted headline
earnings per share (cents) 2,99 68,52 117,54
Dividend per share (cents) 47,95 47,95 102,80
Share price (cents) 640,00 783,00 790,00
Loan-to-value ratio (%)* 41,8 37,6 40,1
IFRS
Gross property cost to income
ratio (%) 29,9 31,7 25,7
Net property cost to income
ratio (%) 13,4 16,2 9,1
Gross total cost to income
ratio (%) 38,0 27,1 28,4
Net total cost to income
ratio (%) 23,4 16,4 15,7
Management accounts**
Gross property cost to income
ratio (%) 29,9 31,4 26,9
Net property cost to income
ratio (%) 14,6 17,1 11,9
Gross total cost to income
ratio (%) 37,3 27,1 34,7
Net total cost to income ratio
(%) 23,7 17,0 21,5
* The loan-to-value ratio is calculated by dividing total bank debt by the
total property assets and investment in joint venture.
** Refer to the basis of preparation.
Distributable earnings
for the six months ended 31 December 2017
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2017 2016 2017
R'000 R'000 R'000
Revenue 303 931 291 180 589 165
Property expenses (90 830) (92 050) (158 068)
(Loss)/profit from joint
venture (472) 1 288 (1 613)
Non-cash items included in loss 847 - 5 217
from joint venture
Other income 37 5 443 5 581
Administrative expenses (14 556) (8 912) (17 623)
Asset management fees (6 139) (12 653) (25 610)
Net finance cost (29 149) (30 028) (58 801)
- finance income 51 834 48 281 97 665
- finance cost (80 983) (79 895) (159 520)
- amortisation of structuring fees* - 1 586 3 054
Taxation (859) - -
Distribution of foreign
exchange gain 4 763 13 714 22 586
Dividends on treasury shares 12 789 12 342 25 767
Total distributable income 180 362 180 324 386 601
Less: Distribution to
shareholders (interim) - - (180 324)
Available for distribution 180 362 180 324 206 277
* Subsequent to the adoption of the SA REIT best practice recommendations
it was decided that this item is distributable and thus should not be
added back.
Condensed consolidated statement of financial position
as at 31 December 2017
Unaudited Unaudited Audited
as at as at as at
31 December 31 December 30 June
2017 2016 2017
R'000 R'000 R'000
Assets
Non-current assets 5 252 318 5 392 393 5 237 499
Investment property 4 829 708 5 028 186 4 836 757
Property, plant and equipment 16 469 12 509 13 660
Investment in joint venture 251 442 237 316 247 906
Other non-current assets 9 290 7 981 10 319
Other financial assets 102 530 63 171 72 565
Restricted cash 42 879 43 230 56 292
Current assets 166 248 198 512 310 193
Restricted cash 8 944 25 119 5 153
Trade and other receivables 46 389 41 009 46 031
Non-current assets classified
as held for sale - - 100 750
Other financial assets 12 516 - -
Income tax receivable 5 887 3 819 3 835
Cash and cash equivalents 92 512 128 565 154 424
Total assets 5 418 566 5 590 905 5 547 692
Equity and liabilities
Equity 3 114 834 3 424 607 3 321 374
Stated capital 2 842 473 2 848 404 2 848 404
Retained earnings 561 379 846 405 743 054
Foreign currency translation
reserve (289 065) (271 276) (270 131)
Share-based payment reserve 47 1 074 47
Liabilities 2 303 732 2 166 298 2 226 318
Non-current liabilities 1 769 521 1 566 800 1 415 849
Other financial liabilities 1 759 361 1 563 185 1 400 896
Deferred tax 10 160 3 615 14 953
Current liabilities 534 211 599 498 810 469
Other financial liabilities 456 017 512 140 720 742
Trade and other payables 78 194 87 358 89 727
Total equity and liabilities 5 418 566 5 590 905 5 547 692
Condensed consolidated statement of comprehensive income
for the six months ended 31 December 2017
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2017 2016 2017
R'000 R'000 R'000
Investment property income 303 931 291 180 589 165
Straight-line rental adjustment (712) 9 083 9 664
Revenue 303 219 300 263 598 829
Property expenses (90 830) (92 050) (158 068)
Net property income 212 389 208 213 440 761
Other income 37 127 980 5 581
Administrative expenses (14 556) (8 912) (17 623)
(Loss)/profit from joint
venture (472) 1 288 (1 613)
Foreign exchange gains 5 879 26 453 35 711
Asset management fees (6 139) (12 653) (25 610)
Operating profit 197 138 342 369 437 207
Finance income 51 834 48 281 97 665
Finance costs (80 983) (79 895) (159 520)
Fair value adjustments 21 626 (70 525) (47 642)
Capital items (3 806) - (8 522)
Cancellation of asset
management contract (180 102) - -
Profit before tax 5 707 240 230 319 188
Taxation expense 4 773 - (14 326)
Profit for the period 10 480 240 230 304 862
Other comprehensive income
Items that may be reclassified
to profit or loss
Exchange differences on
translation of foreign
operations (18 934) (168 697) (167 552)
Total comprehensive income for
the period (8 454) 71 533 137 310
Profit and total comprehensive
income for the period
attributable to:
Equity holders of the Company (8 454) 71 533 137 310
Headline earnings
Earnings attributable to
shareholders 10 480 240 230 304 862
Revaluation of investment
property - 3 115 108 450
Goodwill impairment - - -
Headline earnings attributable
to shareholders 10 480 243 345 413 312
Weighted average number of
shares in issue ('000) 350 223 355 121 351 633
Basic and diluted earnings per
share (cents) 2,99 67,65 86,70
Headline and diluted headline
earnings per share (cents) 2,99 68,52 117,54
Interim dividend 47,95 47,95 47,95
Final dividend 54,85
Texton has no dilutionary instruments in issue.
Condensed consolidated statement of cash flows
for the six months ended 31 December 2017
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2017 2016 2017
R'000 R'000 R'000
Cash flows from operating activities
Cash (utilised in)/generated
from operations (3 393) 377 861 554 858
Finance income received 34 457 39 542 72 745
Finance costs paid (68 471) (75 860) (144 468)
Dividends paid (192 155) (188 171) (350 714)
Income tax paid (1 889) (44) (3 047)
Net cash (outflow)/inflow from
operating activities (231 451) 153 328 129 374
Cash flows from investing
activities
Additions to property,
plant and equipment (5 364) (4 624) (8 232)
Additions to investment property (10 223) (3 056) (6 841)
Proceeds on disposal of
investment property 87 250 163 400 163 400
Additions to other non-current (964) (1 475) (5 545)
assets
Acquisition of business
combinations net of cash
acquired - (282 139) (282 692)
Loans advanced to joint venture - - (16 345)
Repayments from joint venture - - 13 191
Net cash inflow/(outflow) from
investing activities 70 699 (127 894) (143 064)
Cash flows from financing
activities
Treasury shares acquired (5 931) (58 519) (58 519)
Premiums paid on hedging
instruments (3 523) (1 871) (11 681)
Repayments of other financial
liabilities (397 431) 12 561 851 745
Advance of other financial
liabilities 498 046 - (772 835)
Net cash inflow/(outflow) from
financing activities 91 161 (47 829) 8 710
Decrease in cash and cash
equivalents (69 591) (22 395) (4 980)
Cash and cash equivalents at
the beginning of the period 154 424 (7 933) 123 995
Effect of exchange rate
movement on cash and cash
equivalents (1 265) 34 898 (6 945)
Release of restricted cash 8 944 123 995 42 354
Cash and cash equivalents at
the end of the period 92 512 128 565 154 424
Condensed consolidated statement of changes in equity
for the six months ended 31 December 2017
Foreign Share-
currency based
Stated translation payment Retained
capital reserve reserve earings Total
R'000 R'000 R'000 R'000 R'000
Balance at
30 June 2016 2 906 923 (102 579) 1 074 788 906 3 594 324
Treasury shares
acquired (58 519) - - - (58 519)
Total comprehensive
income for the
period - (168 697) - 240 230 71 533
- Profit for
the period - - - 240 230 240 230
- Exchange
differences on
translation
of foreign
operations - (168 697) - - (168 697)
Transactions with
shareholders
recognised directly
in equity - - - (182 731) (182 731)
- Dividends paid - - - (182 731) (182 731)
Balance at
31 December 2016 2 848 404 (271 276) 1 074 846 405 3 424 607
Treasury shares
acquired
Share-based payments
transaction - - (1 027) - (1 027)
Total
comprehensive
income for the
period - 1 145 - 64 632 65 777
- Profit for the
period - - - 64 632 64 632
- Exchange
differences on
translation
of foreign
operations - 1 145 - - 1 145
Transactions with
shareholders
recognised
directly in
equity - - - (167 983) (167 983)
- Dividends paid - - - (167 983) (167 983)
Balance at
30 June 2017 2 848 404 (270 131) 47 743 054 3 321 374
Treasury shares
acquired (5 931) - - - (5 931)
Total
comprehensive
income for the
period - (18 934) - 10 480 (8 454)
- Profit for the
period - - - 10 480 10 480
- Exchange
differences on
translation
of foreign
operations - (18 934) - - (18 934)
Transactions
with
shareholders
recognised directly
in equity - - - (192 155) (192 155)
- Dividend paid - - - (192 155) (192 155)
Balance at
31 December 2017 2 842 473 (289 065) 47 561 379 3 114 834
Segmental analysis
South Africa
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2017 2016 2017
R'000 R'000 R'000
Segmental revenue - rental revenue
Office 183 715 186 375 365 844
Retail 35 294 32 420 70 326
Industrial 24 648 24 927 51 341
243 657 243 722 487 511
Profit/(loss) for the period
Office 119 578 129 032 177 427
Retail 22 052 6 214 25 076
Industrial 15 288 13 847 25 218
Corporate (189 670) 78 677 71 448
(32 752) 227 770 299 169
Total assets
Office 2 596 896 2 677 862 2 632 492
Retail 470 351 476 879 478 738
Industrial 305 562 325 878 343 671
Corporate 133 031 324 022 411 987
3 505 840 3 804 641 3 866 888
UK
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2017 2016 2017
R'000 R'000 R'000
Segmental revenue - rental revenue
Office 28 313 26 064 51 507
Retail 12 946 13 084 25 237
Industrial 18 303 17 393 34 574
59 562 56 541 111 318
Profit/(loss) for the period
Office 20 752 9 825 (33 303)
Retail 8 408 (345) 9 159
Industrial 14 366 2 980 29 837
Corporate (294) - -
43 232 12 460 5 693
Total assets
Office 721 566 835 578 736 125
Retail 634 082 393 310 385 725
Industrial 556 532 557 376 558 954
Corporate 546 - -
1 912 726 1 786 264 1 680 804
Total
Unaudited Unaudited Audited
six months six months year
ended ended ended
31 December 31 December 30 June
2017 2016 2017
R'000 R'000 R'000
Segmental revenue - rental revenue
Office 212 028 212 439 417 351
Retail 48 240 45 504 95 563
Industrial 42 951 42 320 85 915
303 219 300 263 598 829
Profit/(loss) for the period
Office 140 330 138 857 144 124
Retail 30 460 5 869 34 235
Industrial 29 654 16 827 55 055
Corporate (189 964) 78 677 71 448
10 480 240 230 304 862
Total assets
Office 3 318 462 3 513 440 3 368 617
Retail 1 104 433 870 189 864 463
Industrial 862 094 883 254 902 625
Corporate 133 577 324 022 411 987
5 418 566 5 590 905 5 547 692
Management accounts
Consolidated statement of financial position
As at 31 December 2017
Inclusion
of 50% Removal Management
Per AFS BSM1 of JV2 accounts
R'000 R'000 R'000 R'000
Assets
Non-current assets 5 252 318 602 700 (251 442) 5 603 576
Investment property 4 829 708 601 771 - 5 431 479
Property, plant and
equipment 16 469 929 - 17 398
Investment in joint
venture 251 442 - (251 442) -
Other non-current
assets 9 290 - - 9 290
Other financial
assets 102 530 - - 102 530
Restricted cash 42 879 - - 42 879
Current assets 166 248 24 704 - 190 952
Restricted cash 8 944 - - 8 944
Trade and other
receivables 46 389 14 100 - 60 489
Non-current assets
classified
as held for sale - - - -
Other financial
assets 12 516 - - 12 516
Income tax receivable 5 887 - - 5 887
Cash and cash
equivalents 92 512 10 604 - 103 116
Total assets 5 418 566 627 404 (251 442) 5 794 528
Equity and liabilities
Equity 3 114 834 (4 358) (3 087) 3 107 389
Stated capital 2 842 473 119 (119) 2 842 473
Retained earnings 561 379 (3 334) (2 968) 555 077
Foreign currency
translation reserve (289 065) (1 143) - (290 208)
Share-based payment
reserve 47 - - 47
Liabilities 2 303 732 631 762 (248 355) 2 687 139
Non-current
liabilities 1 769 521 619 434 (248 355) 2 140 600
Other financial
liabilities 1 759 361 617 810 (248 355) 2 128 816
Deferred tax 10 160 1 624 - 11 784
Current liabilities 534 211 12 328 - 546 539
Other financial
liabilities 456 017 - - 456 017
Trade and other
payables 78 194 12 328 - 90 522
Total equity and
liabilities 5 418 566 627 404 (251 442) 5 794 528
As at 31 December 2016
Inclusion
of 50% Removal Management
Per AFS BSM1 of JV2 accounts
R'000 R'000 R'000 R'000
Assets
Non-current assets 5 392 393 585 892 (237 316) 5 740 969
Investment property 5 028 186 585 563 - 5 613 749
Property, plant and
equipment 12 509 329 - 12 838
Investment in joint
venture 237 316 - (237 316) -
Other non-current
assets 63 171 - - 63 171
Other financial
assets 7 981 - - 7 981
Restricted cash 43 230 - - 43 230
Current assets 198 512 23 935 - 222 447
Restricted cash 25 119 - - 25 119
Trade and other
receivables 41 009 17 155 - 58 164
Non-current assets
classified
as held for sale - - - -
Other financial
assets - - - -
Income tax receivable 3 819 - - 3 819
Cash and cash
equivalents 128 565 6 780 - 135 345
Total assets 5 590 905 609 827 (237 316) 5 963 416
Equity and liabilities
Equity 3 424 607 (4 037) (6 459) 3 414 111
Stated capital 2 848 404 119 (119) 2 848 404
Retained earnings 846 405 (3 305) (6 340) 836 760
Foreign currency
translation reserve (271 276) (851) - (272 127)
Share-based payment
reserve 1 074 - - 1 074
Liabilities 2 166 298 613 864 (230 857) 2 549 305
Non-current
liabilities 1 566 800 595 113 - 2 161 913
Other financial
liabilities 1 563 185 594 399 - 2 157 584
Deferred tax 3 615 714 - 4 329
Current liabilities 599 498 18 751 (230 857) 387 392
Other financial
liabilities 512 140 - (230 857) 281 283
Trade and other
payables 87 358 18 751 - 106 109
Total equity and
liabilities 5 590 905 609 827 (237 316) 5 963 416
As at 30 June 2017
Inclusion
of 50% Removal Management
Per AFS BSM1 of JV2 accounts
R'000 R'000 R'000 R'000
Assets
Non-current assets 5 237 499 603 885 (247 906) 5 593 478
Investment property 4 836 757 602 901 - 5 439 658
Property, plant and
equipment 13 660 984 - 14 644
Investment in joint
venture 247 906 - (247 906) -
Other non-current
assets 10 319 - - 10 319
Other financial
assets 72 565 - - 72 565
Restricted cash 56 292 - - 56 292
Current assets 310 193 24 223 - 334 416
Restricted cash 5 153 - - 5 153
Trade and other
receivables 46 031 18 023 - 64 054
Non-current assets
classified
as held for sale 100 750 - - 100 750
Other financial
assets - - - -
Income tax receivable 3 835 - - 3 835
Cash and cash
equivalents 154 424 6 200 - 160 624
Total assets 5 547 692 628 108 (247 906) 5 927 894
Equity and liabilities
Equity 3 321 374 (4 955) (3 559) 3 312 860
Stated capital 2 848 404 119 (119) 2 848 404
Retained earnings 743 054 (3 968) (3 440) 735 646
Foreign currency
translation reserve (270 131) (1 106) - (271 237)
Share-based payment
reserve 47 - - 47
Liabilities 2 226 318 633 063 (244 347) 2 615 034
Non-current
liabilities 1 415 849 617 379 - 2 033 228
Other financial
liabilities 1 400 896 615 724 - 2 016 620
Deferred tax 14 953 1 655 - 16 608
Current liabilities 810 469 15 684 (244 347) 581 806
Other financial
liabilities 720 742 - (244 347) 476 395
Trade and other
payables 89 727 15 684 - 105 411
Total equity and
liabilities 5 547 692 628 108 (247 906) 5 927 894
1 Refer to adjustment 1.
2 Refer to adjustment 2.
Condensed consolidated statement of comprehensive income
For the six months ended December 2017
For the six months ended 31 December 2017
Inclusion
of 50% Removal Management
Per AFS BSM1 of JV2 accounts
R'000 R'000 R'000 R'000
Investment property
income 303 931 20 606 - 324 537
Straight-line rental
adjustment (712) (523) - (1 235)
Revenue 303 219 20 083 - 323 302
Property expenses (90 830) (6 138) - (96 968)
Net property income 212 389 13 945 - 226 334
Other income 37 832 - 869
Administrative
expenses (14 556) (31) - (14 587)
(Loss)/profit from
joint venture (472) - 472 -
Foreign exchange
gains/(losses) 5 879 - - 5 879
Asset management fees (6 139) - - (6 139)
Operating profit 197 138 14 746 472 212 356
Finance income 51 834 - - 51 834
Finance costs (80 983) (15 824) - (96 807)
Fair value
adjustments 21 626 - - 21 626
Capital items (3 806) - - (3 806)
Cancellation of asset
management contract (180 102) - - (180 102)
Profit before tax 5 707 (1 078) 472 5 101
Taxation expense 4 773 83 - 4 856
Profit for the period 10 480 (995) 472 9 957
For the six months ended 31 December 2016
Inclusion
of 50% Removal Management
Per AFS BSM1 of JV2 accounts
R'000 R'000 R'000 R'000
Investment property
income 291 180 21 372 - 312 552
Straight-line rental
adjustment 9 083 (544) - 8 539
Revenue 300 263 20 828 - 321 091
Property expenses (92 050) (6 053) - (98 103)
Net property income 208 213 14 775 - 222 988
Other income 127 980 1 555 - 129 535
Administrative
expenses (8 912) (40) - (8 952)
(Loss)/profit from
joint venture 1 288 - (1 288) -
Foreign exchange
gains/(losses) 26 453 - - 26 453
Asset management fees (12 653) - - (12 653)
Operating profit 342 369 16 290 (1 288) 357 371
Finance income 48 281 - - 48 281
Finance costs (79 895) (15 316) - (95 211)
Fair value
adjustments (70 525) - - (70 525)
Capital items - - - -
Cancellation of asset
management contract - - - -
Profit before tax 240 230 974 (1 288) 239 916
Taxation expense - (230) - (230)
Profit for the period 240 230 744 (1 288) 239 686
For the year ended 30 June 2017
Inclusion
of 50% Removal Management
Per AFS BSM1 of JV2 accounts
R'000 R'000 R'000 R'000
Investment property
income 589 165 41 513 - 630 678
Straight-line rental
adjustment 9 664 (554) - 9 110
Revenue 598 829 40 959 - 639 788
Property expenses (158 068) (11 896) - (169 964)
Net property income 440 761 29 063 - 469 824
Other income 5 581 2 743 - 8 324
Administrative
expenses (17 623) (65) - (17 688)
(Loss)/profit from
joint venture (1 613) - 1 613 -
Foreign exchange
gains/(losses) 35 711 - - 35 711
Asset management fees (25 610) - - (25 610)
Operating profit 437 207 31 741 1 613 470 561
Finance income 97 665 - - 97 665
Finance costs (159 520) (29 673) - (189 193)
Fair value
adjustments (47 642) (3 842) - (51 484)
Capital items (8 522) - - (8 522)
Cancellation of asset
management contract - - - -
Profit before tax 319 188 (1 774) 1 613 319 027
Taxation expense (14 326) (393) - (14 719)
Profit for the period 304 862 (2 167) 1 613 304 308
1 Refer to adjustment 1.
2 Refer to adjustment 2.
Basis of preparation
In order to provide information of relevance to investors these management
accounts, which comprise financial information extracted from the unaudited
interim financial statements for the six months ended 31 December 2017, have
been prepared and are presented below to provide users with the position had
the Group accounted for its share of the assets, liabilities and results of
the joint venture in which Broad Street Mall is held on a proportionately
consolidated basis instead of equity accounting for it.
The pro forma financial information (management accounts) has been prepared
in terms of the JSE Listings Requirements and the SAICA Guide on pro forma
financial information.
This pro forma financial information has not been reviewed or reported on by
Texton's auditors.
Directors' responsibility statement
The preparation of the management accounts is the sole responsibility of the
directors and they have been prepared on the basis stated, for illustrative
purposes only, to show the impact on the condensed consolidated unaudited
statement of financial position and the condensed consolidated unaudited
statement of comprehensive income. Due to their nature the management accounts
may not fairly present the financial position and results of the Group in terms
of IFRS.
Management account adjustments
Adjustment 1
This adjustment proportionately consolidates Texton's interest in Broad Street
Mall, accounted for using the equity method. It effectively discloses the
Group's interest in the assets, liabilities and results of operations by
disclosing the consolidated management accounts for the six months ended
December 2017 on a line-by-line basis. Texton is satisfied with the quality
of the financial information contained in the management accounts of
Broad Street Mall.
Adjustment 2
This adjustment removes the equity accounting entries for Broad Street Mall.
Corporate information
Physical and registered address
Block C, Investment Place
10th Road, Hyde Park, 2196
PO Box 653129, Benmore, 2010
Board of directors
PD Naidoo (Chairperson)
NV Balfour* (Chief Executive Officer)
IF Pick* (Chief Financial Officer)
JR Macey (Lead independent)
KR Collins (Alternative director)
JA Legh
S Mia
P Ntshalintshali
MJ van Heerden
JD Wiese
TMZ Zuma
* Executive director
Company secretary
Nqaba Sokabo
Block C, Investment Place
10th Road, Hyde Park, 2196
PO Box 653129, Benmore, 2010
Auditor
SizweNtsalubaGobodo Inc.
20 Morris Street East Woodmead, 2191
Sponsor
Merchantec Capital
2nd Floor North Block
Hyde Park Office Tower
Cnr 6th Road and Jan Smuts Avenue
Hyde Park, 2196
PO Box 41480, Craighall, 2024
Transfer secretary
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue
Rosebank, 2196
PO Box 61051, Marshalltown, 2107
Investor relations
Instinctif Partners
The Firs, 302 3rd Floor
Cnr Cradock and Biermann Avenue
Rosebank, 2196
www.texton.co.za
Date: 05/03/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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