ACSION LIMITED - Unaudited condensed consolidated interim results for the six months ended 31 August 2018

Release Date: 30/10/2018 17:00
Code(s): ACS
 
Wrap Text
Unaudited condensed consolidated interim results for the six months ended 31 August 2018

ASCION LIMITED
Incorporated in the Republic of South Africa
(Registration Number 2014/182931/06)
ISIN: ZAE000198289 
Share code: ACS 
("Acsion" or "the Company" or "the Group")

UNAUDITED CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 AUGUST 2018

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
                                                                     Unaudited    Unaudited        Audited
                                                                    Six months   Six months     Year ended
                                                                     31 August    31 August    28 February
                                                                          2018         2017           2018
                                                                         R'000        R'000          R'000
Assets
Non-current assets
Investment property                                                  6 642 073    5 722 995      6 468 041
Property, plant and equipment                                           79 348       64 150         76 503
Operating lease asset                                                  145 295      124 675        139 182
Goodwill                                                               625 464      625 464        625 464 
Prepayments                                                            326 429      350 744        326 429
Investment in associate                                                  1 471        1 150          1 471
Other financial assets                                                   5 372       11 786          6 847
Deferred tax                                                            32 907       10 210         23 872
                                                                     7 858 359    6 911 174      7 667 809
Current assets
Operating lease asset                                                    6 720        1 997          2 138
Loans to group companies                                                   899        1 068            899
Current tax receivables                                                 13 661          325            525
Trade and other receivables                                             27 547       37 006         24 401
Loans to shareholders                                                    4 053            -          4 053
Cash and cash equivalents                                               83 852       44 972        212 680   
                                                                       136 732       85 368        244 696
Non-current assets held for sale                                        50 697       52 001         52 418
Total assets                                                         8 045 788    7 048 543      7 964 923

Equity and liabilities
Equity
Share capital                                                        3 968 078    3 969 670      3 969 625
Retained income                                                      2 047 183    1 449 878      2 006 548 
Equity attributable to owners of the company                         6 015 261    5 419 548      5 976 173 
Non-controlling interest                                                44 516       37 510         41 122
Total equity                                                         6 059 777    5 457 058      6 017 295

Liabilities
Non-current liabilities
Deferred tax                                                         1 226 470    1 038 329      1 195 221
Other financial liabilities                                            638 970      459 012        643 861
                                                                     1 865 440    1 497 341      1 839 082
Current liabilities
Current tax payable                                                     16 725       11 194         16 282
Loans from shareholders                                                      -          506              -
Other financial liabilities                                             19 621        8 532         23 284
Provisions                                                               3 234        2 363          3 174 
Trade and other payables                                                80 958       71 037         65 773  
Dividends payable                                                           33          512             33
                                                                       120 571       94 144        108 546
Total liabilities                                                    1 986 011    1 591 485      1 947 628
Total equity and liabilities                                         8 045 788    7 048 543      7 964 923 


CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
                                                                     Unaudited    Unaudited        Audited
                                                                    Six months   Six months     Year ended
                                                                     31 August    31 August    28 February
                                                                          2018         2017           2018
                                                                         R'000        R'000          R'000
Revenue                                                                322 755      266 964        586 490
Other operating income                                                   5 822        5 356          8 215
Other operating expenses                                              (111 909)    (112 098)      (223 545)
Operating profit                                                       216 668      160 222        371 160
Investment income                                                        9 338       11 225         27 793
Finance costs                                                          (30 516)     (25 298)       (56 915)
Profit from associate                                                        -            -            321
Profit on sale of non-current assets held for sale                         151          667            783
Fair value adjustments                                                       -            -        744 785
Profit before taxation                                                 195 641      146 816      1 087 927 
Taxation                                                               (53 308)     (32 784)      (264 310)
Profit for the period                                                  142 333      114 032        823 617
Other comprehensive income                                                   -            -             -
Total comprehensive income for the period                              142 333      114 032        823 617

Profit attributable to: 
Owners of the parent                                                   138 939      112 537        814 462
Non-controlling interest                                                 3 394        1 495          9 155
                                                                       142 333      114 032        823 617
Total comprehensive income attributable to:
Owners of the parent                                                   138 939      112 537        814 462
Non-controlling interest                                                 3 394        1 495          9 155
                                                                       142 333      114 032        823 617
Reconciliation between earnings and headline earnings
Basic earnings                                                         138 939      112 533        814 462
Adjusted for:                                                                         
Fair valuation adjustment, net of taxation                                   -            -       (577 953)
Non-controlling interest relating to fair value adjustment                   -            -          6 380  
Impairment of investment property                                            -            -              -
Gain on non-current assets held for sale                                  (151)           -            420 
(Profit)/Loss on sale of plant and equipment                                 -         (517)           163
Impairment of subsidiary loan                                                -                          12
Headline earnings                                                      138 788      112 016        243 484

Earnings per share information
Basic and diluted earnings per share (cents)                              35.3         28.6          206.8
Headline earnings per share (cents)                                       35.3         28.4           61.8
Net asset value per share (cents)                                      1 528.8      1 376.7        1 518.3
Net asset value per share (excluding deferred taxation) (cents)        1 832.2      1 637.9        1 815.8
Dividend per share (cents)                                                25.0         12.5              -
Proposed dividend per share (cents)                                          -            -           25.0
Weighted number of shares                                          393 592 380  394 219 306    393 916 680


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
                                                                     Unaudited    Unaudited        Audited
                                                                    Six months   Six months     Year ended
                                                                     31 August    31 August    28 February
                                                                          2018         2017           2018
                                                                         R'000        R'000          R'000
Cash flows from operating activities
Cash generated from operations                                         229 707      159 919        376 547
Investment income received                                               9 338       11 225         23 234
Finance costs paid                                                     (30 516)     (25 298)       (56 915)
Taxation paid                                                          (43 786)     (32 775)       (73 087)
Net cash from operating activities                                     164 743      113 071        269 779

Cash flows from investing activities
Purchase of plant and equipment                                        (16 728)        (203)       (25 001)   
Proceeds on sale of plant and equipment                                  2 695            -            260
Development costs of investment property                              (174 479)    (214 259)      (384 807)
Repayment of loans to group associate companies                              -        1 069              -
Decrease in financial assets                                             1 475            -          6 008
Proceeds on sale of non-current assets held for sale                     1 871       15 305         17 204
Net cash used in investing activities                                 (185 166)    (198 088)      (386 336)

Cash flows from financing activities
Purchase of treasury shares                                             (1 547)      (4 055)        (4 100)
(Decrease)/Increase in other financial liabilities                      (8 554)     166 493        366 095
Movement in loans to group associate company                                 -         (118)            52
Dividends paid                                                         (98 304)     (48 858)       (49 337)
Net cash (used in)/from financing activities                          (108 405)     113 462        312 710

Total cash movement for the period                                    (128 828)      28 445        196 153
Cash at the beginning of the period                                    212 680       16 527         16 527
Total cash at end of the period                                         83 852       44 972        212 680


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
                                                                               Total equity                   
                                                                               attributable          Non-     
                                   Share   Treasury        Share    Retained   to owners of   controlling        Total
                                 capital     shares      capital      income    the company      interest       equity
                                   R'000      R'000        R'000       R'000          R'000         R'000        R'000
Group                                                                                         
Balance at 1 March 2017        3 979 956     (6 231)   3 973 725   1 386 711      5 360 436        36 015    5 396 451
Profit for the period                  -          -            -     112 537        112 537         1 495      114 032
Dividends paid                         -          -            -     (49 370)       (49 370)            -      (49 370)
Purchase of treasury shares            -     (4 055)      (4 055)          -         (4 055)            -       (4 055)
Balance at 31 August 2017 -                                                                   
Previously stated              3 979 956    (10 286)   3 969 670   1 449 878      5 419 548        37 510    5 457 058
Restatement of prior                                                                          
year results*                          -          -            -    (145 255)      (145 255)       (4 048)    (149 303)
Balance at 31 August 2017                                                                     
- Restated                     3 979 956    (10 286)   3 969 670   1 304 623      5 274 293        33 462    5 307 775
Profit for the period                  -          -            -     701 925        701 925         7 660      709 585
Dividends paid                         -          -            -           -              -             -            -
Purchase of treasury shares            -        (45)         (45)          -            (45)            -          (45)
Balance at 28 February 2018    3 979 956    (10 331)   3 969 625   2 006 548      5 976 173        41 122    6 017 295
Profit for the period                  -          -            -     138 939        138 939         3 394      142 333
Dividends paid                         -          -            -     (98 304)       (98 304)            -      (98 304)
Purchase of treasury shares            -     (1 547)      (1 547)          -         (1 547)            -       (1 547)
Balance at 31 August 2018      3 979 956    (11 878)   3 969 078   2 047 183      6 015 261        44 516    6 059 777

* Restatement of prior year results in the 2018 financial year as previously disclosed on SENS.

GEOGRAPHIC AND TENANT PROFILES
The existing income generating investment properties consist of nine well established, strategically located 
retail properties in Gauteng, Mpumalanga and Limpopo with an aggregate gross lettable area ("GLA") of 
256 644 m2 (2018H1: 237 800 m2). The tenant profile by GLA comprises 72% national tenants (2018H1: 73%),
18% semi-national (2018H1: 13%) and 10% line and other franchises (2018H1:14%). The tenant profile is 
separated into national and semi-national tenants to indicate the exposure Acsion has to direct head 
office leases and individual franchises. Exposure to national and semi-national tenants as a percentage 
of GLA is at 90% (2018H1: 86%). Line shops and other franchises are carefully vetted by Acsion's leasing 
division to promote maximum dwelling time and footfall in each centre, underpinning trading densities and 
the overall sustainability of tenants' lease terms.

                       Tenant profile        Tenant profile     
                               by GLA            by Revenue     
National                          72%                   65%     
Semi-national                     18%                   22%     
Line and other franchises         10%                   13%     
                                           
                       Sector profile        Sector profile       
                               by GLA            by Revenue       
Retail - metropolitan             61%                   66%        
Retail - rural                    37%                   33%        
Light - industrial                 2%                    1%        
                                           
                   Geographic profile    Geographic profile
                           by Revenue                by GLA 
Gauteng                           71%                   69%
Limpopo                           12%                   14%
Mpumalanga                        17%                   17%
 

COMMENTARY

ABOUT ACSION
Acsion ("the Group" or "the Company") is a property development company listed on the Johannesburg Stock 
Exchange ("JSE"). Acsion differs from Real Estate Investment Trusts ("REITs") in the listed property sector 
as it focuses on the delivery of double-digit net asset value ("NAV") growth cumulatively on a year on year 
basis. A few of the NAV growth drivers applied are: Sourcing development opportunities, both locally and 
internationally; upgrading the existing development pipeline; extending the existing properties to enhance 
tenant mix and operational efficiencies while applying the ethos of value engineering in every day running 
of the business. 

OPERATIONAL AND DEVELOPMENT UPDATE:
DEVELOPMENT PIPELINE:
The Acsiopolis development in Benmore, Sandton is in the process of final development. Since acquiring the 
land in 2014 Acsion has designed a mixed use project that focuses on providing the Sandton Node with luxury 
short-stay accommodation. The development will consist of a mix of approximately 1,104 hotel rooms and bespoke 
apartments, tailored for the astute business traveller that demands express check in and spacious living 
quarters. The remaining lettable area has been carefully crafted to support the apartment living, these 
include: Two private pool and bar areas, signature gym, transcendental spa, piazza living, business centre, 
24 hour concierge services, best in brand crèche, private cinema rooms and specialised medical suites. 
August 2018 saw the finalising and pouring of concrete on the 20th storey. Final completion is anticipated 
during the 2020 financial year. 

The Metropolis Mall@Larnaca is the Group's first international retail development, which will be similar in 
value to Acsiopolis. The Group has signed a leasehold over land in Larnaca, Cyprus. The lease is a 33 year 
lease with two options to renew of 33 years each. The Group intends to develop a 39 000 m2 retail centre. 
Final approvals from the Ministry and all relevant Municipal bodies have been received and development will 
commence shortly. At 39,000 m2 of GLA, it will be the dominant retail offering in Larnaca, catering for 
approximately 150,000 people. Acsion is forecasting double-digit initial yields on this project, with a 
considerable uplift to net asset value on completion. The development will also enhance geographical and 
currency diversification to Acsion’s property portfolio. 

EXISTING PROPERTY DEVELOPMENT AND EXPANSIONS:
Development planning of the additional 10,000m2 for the second phase at Mall@55 (Monavoni, Gauteng) is in 
progress. Bulk earthworks to the platforms of the new retail development, together with the widening of the 
access road to the shopping centre will incorporate the entrance slipway feeding traffic into both the 
existing phase I and II of the precinct being improved.  Building construction will commence shortly.

Construction of the KFC drive thru at Mall@Moutsiya is planned to commence in January 2019 with an 
expected opening date of July 2019.

The Burger King drive thru outlet is under construction in the parking area of the Mall@Carnival and is 
due to open in December 2018. 

FINANCIAL RESULTS
Revenue for the Group for the six months ended 31 August 2018 was R322.8 million (2018H1: R267.0 million). 
The increase of 20.9% is mostly due to additional revenues generated by the opening of Mall@55, which was 
not fully operational in the first half of the 2018 financial year.

Other rental income supplemented revenue by R5.8 million (2018H1: R5.4 million), while operating expenses 
remained similar to the prior financial year due to cost savings derived from contractual renegotiations 
with key service providers.

The group continuously seeks to find alternative supportive revenue sources to bolster the traditional 
property rental model. Since 2015, Acsion has successfully installed roof mounted photovoltaic grid tied 
solar panels to all the major malls in the portfolio. The performance of these solar plants have been 
in line with performance guarantees and continue to provide cost recovery and sustainable energy solutions 
for the ever increasing electricity burden in South Africa. 

The increase in net finance costs from R14.0 million in the first half of the 2018 financial year to 
R21.2 million during the first half of the 2019, can mainly be attributed to the ongoing development 
of Acsiopolis. Gearing for the group remains low at 8.3% (2018H1:7.1%) when compared with the rest 
of the sector.

Despite the continuous development undertaken and the dividend distribution in July 2018, gearing 
remained low which is testament to the strong cash flow generation ability of the group.

Headline earning per share increased to 35.3 cents for the period under review (2018H1: 28.4 cents).

The investment property portfolio (which includes elements of plant and equipment, and the operating 
lease asset) is carried at R6.846 billion (2018H1:R5.896 billion). Investment properties were revalued 
as at 28 February 2018. Non-current assets held for sale is carried at fair value of R50.7 million 
(2018H1: R52.0 million). Total property assets under control of the Group therefore increased in value 
by a respectable 16.0% year on year.

With regards to the proposed development of the Mall@Maputo, the directors are in constant negotiations 
with the Mozambican government and still pursue tenants and interested parties to find a viable future 
development. 

Group liquidity is considered to be adequate due to the Group's diligence in adhering to strict and 
aggressive cash management policy.

NAV per share was 1 528.8c as at 31 August 2018 (2018H1: 1 376.7c). NAV per share (excluding deferred 
taxation) for the six months ended 31 August 2018 increased by 11.9% to 1 832.2c when compared with the 
NAV per share of 1 637.9c as at 31 August 2017.

TREASURY SHARE PURCHASE
The Group repurchased 239 143 (2018H1: 580 581) Acsion shares during the six months ended August 2018 
and currently holds these as treasury shares. The decision to repurchase shares was made as the share 
price were trading significantly below the reported NAV of the Company. These shares were repurchased 
at approximately 64.7% below the reported NAV per share (excluding deferred taxation) as at 
31 August 2018.

VACANCY LEVELS AND LEASE EXPIRY PROFILE
Strategic vacancies are maintained in order to accommodate potential tenant relocations and to support 
lease optimisation. The weighted vacancy (by GLA) for the portfolio as at August 2018 was 6.3% 
(2018H1: 7.3%). The Group remains focused on reducing the vacancy rate to more acceptable levels. 
The weighted average lease expiry profile by GLA for the portfolio increased to 3.4 years (2018H1: 
3.0 years). The Group is however confident that its tenants will be retained on lease renewal.

DEVELOPED INVESTMENT PROPERTY PORTFOLIO
The developed investment properties as at 31 August 2018 consisted of the nine properties (Valued as at 
28 February 2018) detailed below: 
                                         Directors/     
                                        independent                         Value/m2     Percentage of
                                  valuation (R'mil)         GLA     (excluding bulk,   total portfolio
Property name                         February 2018        (m2)    where applicable)      by value (%)
Mall@Carnival*                                2 665      88 134               30 238              45.2
Mall@Reds                                     1 242      54 578               22 756              21.0
Mall@Emba*                                      552      24 500               22 531               9.4
Mall@Lebo                                       474      23 536               20 139               8.0
Mall@Mfula*                                     275      17 871               15 388               4.7
Mall@Moutsiya                                   212      14 506               14 580               3.6
Mall@55*                                        277      15 305               18 099               4.7
Moreleta Square                                 161       8 479               18 929               2.7
Simarlo Rainbow                                  43       6 891                6 298               0.7
Total developed 
investment portfolio                          5 901     253 800               23 251             100.0

The above properties are trading at an average annualised net operating yield of approximately 7.6% 
(2018H1: 7.4%). As at February 2018 the net operating yield was reported as 6.9%.

Properties under construction as at 31 August 2018 (Valued as at 28 February 2018) detailed below: 
                                         Directors/                         Value/m2   
                                        independent                 (excluding bulk,   
                                          valuation         GLA    where applicable)       Anticipated   
Developments nearing completion               R'mil          M2                    R           opening        
Acsiopolis*                                     701      67 000               10 468          May 2019    
Trade55*                                         60      10 000                6 000       Negotiating      
Total developments under 
construction                                    761      77 000                9 888

* Independently valued

PROSPECTS
Acsion's Board remain confident that the Group will continue to grow despite the challenging economic 
operating environment. The Group remains focused on unlocking development profits and generating annuity 
income to further capital growth for its shareholders. This is achieved through managing its developed 
portfolio in generating rental income and following a "value-engineering" approach in developing and 
completing pipeline projects.

DIVIDEND
The proposed dividend of 25 cents per share (2017: 12.5 cents) was approved after year end and was paid 
to shareholders in July 2018. No further dividends have been declared for the six months ended 
31 August 2018.

SEGMENTAL REPORTING
Due to the current investment property portfolio exposure being heavily weighted to retail, financial 
reviews are based on a single operating segment. Segment reporting as required in terms of IFRS 8: 
Operating segments are, therefore, not applicable to the Group.

BASIS OF PREPARATION AND ACCOUNTING POLICIES
The reviewed provisional condensed consolidated financial statements are prepared in accordance with the 
requirements of the JSE Listings Requirements and the requirements of the Companies Act 71 of 2008 of
South Africa. The unaudited interim results have been prepared in accordance with the framework concepts 
and the measurement and recognition requirements of International Financial Reporting Standards (IFRS),
at a minimum, IAS 34: Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the 
Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting 
Standards Council.

The accounting policies applied in the preparation of these unaudited condensed consolidated interim results 
are consistent with those applied in the 2018 unaudited condensed consolidated interim results.

These results have been prepared using the historical cost basis, except for investment properties, which 
are measured at fair value, and certain financial instruments, which are measured at either fair value 
or amortised cost.

These unaudited condensed consolidated interim results were prepared under the supervision of 
Ms S le Roux CA(SA), in her capacity as Chief Financial Officer.

CHANGE IN DIRECTORS
During the 2019 financial year Mrs S. Griesel resigned as an independent non-executive director and 
chair of the Audit Committee, effective 31 July 2018. Ms M Hlobo has been appointed in this position 
effective 29 October 2018.  

By order of the Board

Centurion, 30 October 2018

D Green            K Anastasiadis
(Chairman)        (Chief Executive Officer)


Directors: D Green (Chairman)*, K Anastasiadis (CEO), S le Roux (CFO), PD Sekete*, T Jali*, 
HN Bila*, M Hlobo* (*Independent non-executive)

Registered office: Mall@Reds, 1st Floor, Corner of Rooihuiskraal and Hendrik Verwoerd Drives, 
Rooihuiskraal, Ext 15, Centurion

Postal address: PO Box 569, Wierda Park, 0149

Registration number: 2014/182931/06 

Transfer secretaries: Computershare Investor Services Proprietary Limited, Rosebank Towers, 
15 Biermann Avenue, Rosebank 2192, Johannesburg 2001

Sponsor: Nedbank Corporate and Investment Banking Limited

JSE share code: ACS 

ISIN code: ZAE000198289

Company secretary: MWRK Accountants and Auditors Incorporated

Date: 30/10/2018 05:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
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